Management/Administration of a
Performance Based Contract
Management/Administration of a
Performance Based Contract
Susan Thibodeaux
Asst General Manager/Contract Administration Manager
IAP Worldwide Services
Session #1, 12:05pm-12:35pm ET
NCMA’s 1st Performance-Based Service Acquisition
Community of Practice - Virtual Conference
Wednesday, March 31, 2010 12:00pm - 4:00pm ET
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Brief Refresher –
Performance Based Contracting
• What – a method of contracting where the
results are defined rather than the process.
– Includes measurements
– Incentives
• Why – FAR 37.102 Policy. (a)
Performance-based acquisition (see
Subpart 37.6) is the preferred method for
acquiring services (Public Law 106-398,
section 821).
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PBC Refresher cont.
• Benefits
– Better performance
• Results oriented
– Better price
• Best and commercial practices and less
mandated “how to’s” reduces costs
– Contractor has flexibility and incentive to
be innovative
• Contractor motivated to save money
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FAR
• FAR 37.106 and 37.602-4
– Ensure that performance-based contracting used
to the maximum extent practicable.
– Use contract types that best fits the work and likely
to motivate contractors.
– Use positive or negative performance incentives to
the maximum extent practicable.
– Quality assurance surveillance plan shall contain
measurable inspection and acceptance criteria
corresponding to the performance standards of
the SOW.
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Refresher cont.
• Key Elements
– PWS or SOO
• What, where, when, how many
• Not HOW!
– Performance Standards
– Quality Assurance Plan
– Metrics
– Incentives/penalties
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Key Elements of a PWS
• A statement of the required services in terms
of outcome
• A measurable performance standard for each
outcome
• An Acceptable Quality Level (AQL) for each
outcome.
• The PWS draws its information from the Work
Breakdown Structure (WBS)
• PWS is written concurrently with the Quality
Assurance Surveillance Plan (QASP)
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Results orientation
• The standards of measurement are resultsoriented:
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quality of work or product
quantity of work or product
accessibility
timeliness
accuracy
customer satisfaction
not unduly burdensome.
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Example
• Provide taxi service
• Old type SOW: drive to passenger pickup, pull over to curb, put
vehicle in park, wait for passenger, open door, drive to
destination.
• New PWS: pickup passengers on time
– better > pickup passengers within five minutes of an agreed upon
time
• Standard could be 95% on time (within the five minutes)
• Metrics would be percentage of pickups that comply with the
standard (or the percent that don’t)
• Failure to perform within the standard would result in a contract
price reduction.
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Performance Standards
According to the GAO, its important
“…that standards are not set so high that
they could drive up the cost of service
or too low that they may act as a
disincentive to good contract
performance.”
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Metrics – more later
• Performance indicators and standards
– Collect, track, and share data
– Conduct surveillance systemically
– Document results
– Review periodically and jointly with the
contractor
• “Are we measuring the right things?”
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Plans used in PBSC Mgt
• Quality assurance surveillance plans (QASP)
– Details how and when the Government will survey, observe, test,
sample, evaluate, and document contractor performance according
to the Performance Work Statement (PWS).
• Performance requirements summaries (PRS)
– Reflect the relationship of the PWS and QASP
– Details each critical task, the performance standard, the Acceptable
Quality Level (AQL), the surveillance method, and the
incentives/disincentives in an easy to use matrix format.
• Acceptable quality levels (AQL)
– A quality standard that allows a prespecified number of defects
– Worst case quality level
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QASP
• Quality Assurance and Surveillance Plan
– Government's QASP and the contractor's Quality Control Plan work
together to ensure project performance standards are met.
• Is the primary contract administration tool
– directly corresponds to a contract’s specified performance standards,
– is used to measure contractor performance
– ensures that the Government receives the quality of services called
for under the contract and
– pays only for the acceptable level of services received.
– Living document
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QASP
• A good QASP includes:
– measurable inspections
– acceptance criteria
– Surveillance schedule
– Surveillance method
– corresponds to the performance standards
of the SOW
– Documentation and records requirements
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QASP cont.
A NASA study found that many service contracts were
missing QASPs. QASPs apply even if it’s a(n):
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Award fee contract
Research & Development (R&D) contracts
Contract where the services are performed off-site
Small dollar value contract
Contract with a small business contractor
Contract where the contractor has an established
internal quality control plan
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Quality Assurance Surveillance Plans
 According to the GAO: “The plan should
focus on the quality, quantity, and
timeliness of the performance outputs to
be delivered by the contractor, among
other things, and not on the steps
required or methods used to produce
the service.”
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Using the QASP
•
Meet with all concerned parties on a regular basis to
address issues
• Track performance and assess progress against the
QASP
• Address performance risks or deficiencies early
• Update the CMP as necessary
• Update the QASP as substantive changes to the
contract requirements, performance, or contract
surveillance approaches occur.
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Surveillance Methods
• Measure the outputs not the method
• 100 % inspection
– Only when risk to life, safety or health
• Periodic inspection
– Requires planning
• Random sampling
– Used for production or recurring requirements
• Customer feedback
– Random
– Surveys
• Contractor self-reporting
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Incentives
• Use to force compliance with standard
or encourage better performance
• Can be positive or negative (or both)
• Use incentives for priority/important
tasks
– Should be challenging but achievable
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Incentives cont.
• Must be defined in solicitation/contract
• Incentives can be monetary or nonmonetary
• Deducts should be somewhat
equivalent to value of task or value of
the output
• There must be specific formulas for
calculating payment due for deductions
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Contract Management
• Starts early
• Begins during the acquisition planning phase
– Recognizes the performance-based elements of
the contract
– The Contract Management Plan is in place before
or shortly after the time of award
– Takes a team
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Contract Specialist
Program Manager/technical representative
Representative from the customer
Contractor
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Contracting Officer’s Role
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Ensures performance of all necessary actions for
effective contracting (FAR Part 42),
Ensures compliance with contract terms
Safeguards the interests of the contractual
relationships
–Govt customer
–Contractor
Accepts deliverables
Monitors performance
Enforces the Government’s rights when necessary
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Contracting Officer’s role cont.
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Modify contracts.
Assist in monitoring contractor performance.
Claims and REAs
Disputes and litigation,
Partnering agreements and MOUs
Records management
Process invoices – provide funding as required
Process deductions
Terminate contract if necessary
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Contracting’s role
 KO is responsible for receiving the contract

performance reports, approving changes to the
contract, and generally ensuring that the contract
requirements are being met
The KO relies on subject matter experts for advice
 Technical, legal, financial, etc
 The KO is responsible for enforcing the terms of
the contract and requesting corrective action as
necessary
• Manage the contract not the people or
the process
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Contracting Officer’s Technical
Representative (COTR)
• Must be competent and familiar with technical
requirements
• Monitor contractor performance
• Must be detailed
– Record keeping
• Complete and accurate
• Use the contract as the base
• Track deliverables
• Professional working relationship with the contractor
• KNOW the contract!
– Build checklist for monitoring performance
• Per inspection and acceptance guidelines in contract
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After contract award
• Post Award Meeting
– Meet with the contractor
– Stakeholders
• Review
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Requirements
Communications
Deliverables
Performance monitoring/QASP
Partnering
Incentives/penalties
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Contractor’s role
• Adhere to contract's terms and conditions
• Establish Quality Plan
– Measurements and metrics
• Monitor and measure performance
– Documentation
– Process improvements
• Communications with team members
– Open and honest
– Suggestions
• "to deliver on a timely basis the best value
product or service to the customer”
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Documentation
• Inspection/surveillance results
– Detailed notes and records
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Minutes of meetings
Formal working agreements
Joint processes
Informal agreements – capture in writing
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The New Paradigm
• FAR 1.102(c) provides:
• The Acquisition Team consists of all
participants in Government acquisition
including not only representatives of the
technical, supply, and procurement
communities but also the customers they
serve, and the contractors who provide the
products and services.
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PBSC Leads to Partnering
• Seven Steps To Performance Based Acquisition
states “The integrated project team should plan to rely less on
management by contract and more on management by
relationship. At its most fundamental level, a contract is much
like a marriage. It takes work by both parties throughout the life
of the relationship to make it successful. “
• Common characteristics of successful partnering
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Trust and open communication
Strong leadership on both sides
Ongoing, honest self-assessment
Ongoing interaction
Creating and maintaining mutual benefit or value throughout
the relationship
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Partnering
• Meet with the contractor to identify ways to
improve efficiency and reduce the effect of
the "cost drivers."
• The contractor and government work together
to identify more effective and efficient ways to
measure and manage the program.
• Establish a Customer Process Improvement
Working Group that includes contractor,
program, and contracting representatives.
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Performance reviews
• Performance reviews should take place regularly
• ALL performance should be documented, whether it is
acceptable or unacceptable
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Contract management performance reviews,
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Assessment - not for formal reporting and rebutting,
Review performance levels and metrics
Monthly or bi-monthly performance reviews
Contracts, technical, customers and contractor
• Require improvement plan if downward trend
– Joint actions
• Meet more often if necessary
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Contract Management is Vital
Poor performance monitoring, sporadic
quality assurance, and little effort
expended into managing changes or
settling disputes results in damages to
both government and contractor.
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Re-Cap
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Culture change
Start early with planning
Manage performance not process
Manage the contract not the people
Use the QASP
Partner
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