OMB releases guidelines for performance-based contracts

Eighteen months after they began experimenting with performance-based service contracts, federal agencies are finding that this procurement strategy saves time and money and has improved contractor performance, according to a new "best practices" guide distributed by the Office of Management and Budget.

OMB now wants to expand the use of performance-based contracting techniques in the government. The guide offers agencies advice on how to structure their solicitations around goals for service delivery and how to encourage vendors to meet performance targets.

The guidelines suggest that:

* Before writing a solicitation, agencies should define what the end result of their contractors' work will be, which tasks are necessary to achieve those results and what level of performance is acceptable.

* Agencies should write work statements that describe the results they are looking for rather than specifying procedures for how tasks are to be done. For example, the guide says, a contract for lawn mowing might describe "that the lawn must be maintained [at] two to three inches" rather than that it should be mowed weekly.

* Officials should have a plan for monitoring work quality, offer vendors incentives to meet performance standards and rely less on litigation to settle contract disputes.

Steven Kelman, administrator of the Office of Federal Procurement Policy, said the techniques "are not rocket science," but "many agencies might not think about them if they had experience doing business otherwise."

The guide notes that agencies might have to spend more time on a procurement before issuing the solicitation, in order to develop performance-based work statements, but that later savings will offset the up-front costs.

"The easiest thing for agencies to do [when they recompete a contract] is just put it out again," without changing the original solicitation, Kelman said, but OMB wants agencies to "do something that is not the path of least resistance."

"I think it's a very good start," said Bert Concklin, executive director of the Professional Services Council. "It should be helpful to agencies who are less sophisticated and less experienced."

Concklin said that, in the past, agencies have been "content" to "buy capability to perform tasks rather than to buy end results," but increased competition and demands for service by the public are now "putting a huge premium on what you are getting for your money."

Agencies plan to develop a reference guide that includes model statements of work for contracting officials to use in developing performance-based procurements. Examples expected, among others, are for information processing, ADP maintenance, local-area network support, software development and computer operations contracts.

OMB is coordinating the project, a draft of which is expected to be available this summer. In addition, OMB plans to offer agencies training in performance-based contracting practices.

Concklin said model statements of work are important, but training is "a critically important step" because agency officials must gain experience defining their contracting objectives in new ways.

As yet, OMB has not defined any goals for how widely agencies should use performance-based contracting. Kelman said an OMB-wide team would convene today to discuss strategies for propagating the practice more widely.