Purchasing results

Performance matters to Office of Federal Procurement Policy officials. In a memo last month, OFPP's associate administrator, Rob Burton, asked federal officials to use performance-based acquisition methods in fiscal 2005 for at least 40 percent of procurements for services valued at $25,000 or more.

Officials at the General Services Administration are imposing an even tougher performance-based acquisition goal of 50 percent, said Bob Suda, assistant commissioner for information technology solutions at GSA's Federal Technology Service. That figure, however, applies only to contracts that FTS officials award on behalf of other agencies.

Performance-based acquisitions allow contractors to figure out the best way to meet an agency's needs, and they give vendors discretion over the best approach to take or the technologies needed to solve the customer's problem. It's an alternative to more conventional contracts, in which agency officials spell out every detail of a project, leaving contractors with little flexibility.

Procurement experts who work with federal agencies said OFPP officials' commitment to performance-based acquisition is important, but they said agencies are only slowly taking up the challenge.

"I think OFPP continues to show a good level of commitment to performance-based [acquisition], but there's been a high-level commitment for a long time," said Steve Kelman, former OFPP administrator and now a professor at Harvard University.

The push toward performance-based acquisition took off under President George H.W. Bush's administration. But despite more than a decade of high-level support, progress within individual agencies has been steady but slow, Kelman said.

"We're in better shape now than we were 10 years ago," he said. "My guess is, we will continue to have steady progress, which is good, but we still have a long way to go."

A training program on performance-based acquisition that Acquisition Solutions Inc. offers has grown rapidly, said Chip Mather, the company's senior vice president.

"We've trained [more than] 1,000 government people since January," he said. Only about 250 people took the course through all of 2003, he added.

Mather predicted that performance-based acquisition will take hold slowly, like the notion of best-value contracting — awarding contracts based on factors other than lowest price — did in the past.

Today, he said, people may argue about whether officials are determining best value in effective ways, but "nobody argues about whether you should be doing it."

Enforcing Burton's goal will be difficult, however. Mather, a former Air Force procurement official, warned against malicious compliance rather than real compliance, something he saw often in the late 1990s. The term means simply labeling a contract "performance-based," regardless of whether it is.

In a 1998 study, federal officials found that only one out of a number of contracts labeled "performance-based" really was, said Stan Soloway, president of the Professional Services Council.

"It's gotten better since then, but it's still hard to do it from soup to nuts," he said. "You see individual pieces done well in a lot more places than ever before," but acquisitions that are performance-based from start to finish are still relatively rare, he said.

Soloway emphasized the importance of conducting performance-based acquisitions rather than awarding performance-based contracts. Although the semantic difference may seem trivial, it can be significant. To be done effectively, contracts must be designed from the earliest stages to be performance-based, he said.

"If you consider it just a contracting activity, that means the requirements just get thrown over to a contracting officer who has to go execute it," he said. "This is something that involves the whole acquisition stream, the whole process."

***

What to expect

Office of Federal Procurement Policy officials have issued the following performance-based acquisition rules for federal agencies in fiscal 2005:

Conduct performance-based acquisitions for at least 40 percent of eligible "actions" for services that are worth $25,000 or more. Actions refer to new contracts, task orders, contract modifications or the exercise of options.

Recognize and reward employees and teams that successfully develop and use performance-based acquisitions for services.

Submit information about performance-based acquisitions to the Federal Procurement Data System.

Consider requiring a performance-based action if more than 50 percent of the action is performance-based.