OFPP sets deadline for plan to increase use of performance-based contracts

Agencies have until Oct. 1 to submit a plan to the Office of Federal Procurement Policy on how they will increase the use of performance-based contracting over each of the next five years.

In a recent memo from Robert Burton, OFPP's associate administrator, the White House is asking agencies to describe the steps they will take in 10 areas including management support, policy and guidance, acquisition process and training.

In addition to the management plan, OFPP has set a goal of having 40 percent of all contracts performance based. The memo points out that this is not a quota, but rather something 'designed to encourage acquisition professionals to use performance-based acquisition methods to achieve results.'

Under such acquisitions, agencies describe their needs in terms of performance objectives'desired results'rather than explaining how they want contractors to perform the work. Performance-based contracts include measurable performance standards such as response time or customer satisfaction. The contracts may include monetary and nonmonetary incentives to the vendors.

OFPP reports that many agencies reached or surpassed the 40 percent goal in fiscal 2005 for contracts worth more than $25,000.

The goal has been a subject of much debate among procurement executives.

In September 2004, OFPP loosened the definition of what 'performance based' means. The new definition is: 'If more than 50 percent of the requirement is performance-based, as measured in dollars, the services action may be coded as a performance-based services acquisition.'

While OFPP has gone to extra effort not to have a quota, that has not always been the case. In March 2001, then-OMB deputy director Sean O'Keefe directed agencies to award contracts using performance-based techniques for at least 20 percent of services contracting dollars by 2002.

By November 2003, an interagency taskforce suggested changing the quota to a goal of having no less than 50 percent of all contracts performance based. OFPP has since settled on the 40 percent goal. Other agencies, however, have internal goals. The Department of Defense and the General Services Administration have each set a goal of 50 percent performance-based contracts.

'As agencies work to achieve their targets, the focus should be on proper acquisition planning, clear definition of requirements and effective management of performance based acquisitions to achieve results,' Burton said in the recent OFPP memo.

OFPP said the reports would be reviewed every fiscal year to evaluate agencywide and governmentwide progress, but the plans only need to be updated every five years. The chief acquisition officer or the senior procurement executive must sign off on the plan.

'Agencies should continue to report performance-based acquisition data into the Federal Procurement Data System at www.fpds.gov and carefully examine FPDS data to ensure performance-based acquisitions are properly coded into the system,' Burton said.


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