Performance-based contracting still baffles agencies

Performance-based contracting still befuddles federal agencies. And industry isn't much better either, according to a panel of procurement experts.

'The biggest impact of performance-based contracting has been confusion,' said Mike Sade, the Commerce Department's senior procurement executive, at a lunch in Washington sponsored by the Young Armed Forces Communications and Electronics Association's Bethesda, Md., chapter. 'Performance-based contracting raised three questions: What does the government really want? What were they thinking when they wrote the requirements? And how will they pick the winner with all the different solutions that vendors propose?'

Sade added that the issue is as much about culture change and getting to think about metrics and outcomes than anything else.

Joann Underwood, a contracting officer with the Army Contracting Agency, said the government is forced to determine what problem they want to solve and they are not very good at that.

'We work with industry early on to focus on outcomes,' she said. 'We like to have industry propose metrics and we would evaluate them. That way we can tell if they really understand our needs.'

Sade said help for industry is on the way. The Office of Management and Budget said it would put redacted versions of agency business cases online after the president submits the fiscal 2008 budget in February.

'Industry doesn't have the ammo to ask the right questions,' Sade said. 'Once the 300s are public, less of that will happen.'

Carol Dunn, president of Red Team Consulting LLC of Reston, Va., said contractors must go into a proposal or meeting with federal program managers asking a simple question: What are they trying to accomplish?

Underwood said vendors need to understand the requirements and how much risk the agency is willing to assume. She added that vendors need to understand agency concerns and address them in the proposal and come up with realistic metrics focused on outcomes.

'The risk aversion aspect is very important,' Sade added. 'You must know the culture of the organization and its goals.'

All the panelists agreed that coming up with metrics is the most important part of performance-based contracting. Sade said having the correct metrics leads to accountability for both government and industry.

Dunn said financial incentives, including award fees and contract extensions, also work well, especially if the agency flows them down to the program manager.

'We need to train contracting officers and program managers to have outcome expectations,' Sade said. 'Too many people fear not doing the process right instead of not coming up with the correct outcomes.'

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