Rules are major shift for agencies

New acquisition rules proposed this month by the Clinton administration mark a major shift in federal procurement policy from a focus on detailed work specifications to an emphasis on results.

Five years in the making the proposed rules document a central tenet of acquisition reform: that agencies should concern themselves less with precisely how a job is done than with what their contractors deliver. The traditional approach is so ingrained within the government contracting community that most federal and industry officials agree it will take more than regulations to instill this new "performance-based" philosophy.

Steven Kelman administrator of the Office of Federal Procurement Policy said agencies particularly need to be trained in and experiment with the best ways to use performance-based contracting techniques in information technology services procurements. "The traditional home of performance-based contracting has been in lower-tech kinds of operations " he said.

The proposed rules which were published in the Federal Register Aug. 1 require agencies to use performance-based contracting methods for service contracts "to the maximum extent practicable." In statements of work for example they would be required to describe what work is to be done rather than how vendors should do it and how they plan to measure whether vendors have achieved contract or task-order goals.

The regulations advise agencies not to bundle service requirements into one acquisition that is "too broad for the agency or a prospective contractor to manage effectively."

Agencies would be allowed to offer vendors incentives to meet performance goals such as tying profits or fees to the accomplishment of specific tasks. Vendors like this approach because it is used commonly in the private sector and gives them more flexibility to deploy their resources as they see fit industry representatives said.

Nevertheless both federal vendors and government officials will need to learn new ways to do their work."In many cases people are going to have to be psychologically rewired to do business much differently than they have done it " said Bert Concklin executive director of the Professional Services Council which helped to shape the proposal.

"My guess is we're now at a point where people are ready to move to this level " said Stan Soloway a spokesman for the Contract Services Association. "It's still relatively new but the timing is good."In 1991 when OFPP introduced the idea of performance-based contracting in a policy letter agencies particularly the Defense Department were not enthusiastic about the approach. An attempt to incorporate the policy into the Federal Acquisition Regulation was abandoned in 1992.

Soloway said that even two years later when industry and agencies pledged to experiment with performance-based contracts "I'm not sure how many people took it all that seriously."

But after several years of procurement reform there are many signs that times - and the culture of federal contracting - are changing. Earlier this month DOD announced it would train customers of its upcoming Defense Enterprise Integration Services II procurement how to write performance-based work statements.

Meanwhile NASA is adopting a performance-based approach with two existing technology services contracts at the Goddard Space Flight Center and the Energy Department is experimenting with such methods as well. Kelman expects the Transportation Department to use performance goals when buying services from vendors through the Information Technology Omnibus Procurement program and the National Institutes of Health to apply this strategy to its Chief Information Officer Solutions and Partners buy.DOT and NIH officials could not be reached for comment.

Kelman said it could be five months before the new rules are in place. In the interim he said agencies should start planning how they will carry them out.

"The good procurement people...already have a performance-based philosophy " he said adding that there are "a few rules of thumb" agencies can begin to use to determine whether their work statements conform to the new approach.

"One telltale sign of non-performance-based requirements is to write into contracts lots of experience or educational requirements for people on a contract " he said. "If you feel that the only way for the government to have a chance of getting something good out of the task order is to require certain levels of experience that is probably a warning sign that the contract is not performance-based." Detailed design requirements or demands that vendors supply a specific number of workers with a specific level of experience are common to IT services contracts Kelman said.

Concklin said the proposed rules are fairly explicit regarding what agencies should include in their work statements but he added that vendors also want more detailed regulations to focus on IT services. "Things like past performance draft RFPs selection and application of evaluation factors debriefs - all those elements in the chain of activity from beginning to end should be in there " he said.

Kelman said he does not want the FAR to be "too prescriptive." Detailed guidance for technology services contracts also could be provided through training or best-practices guides he suggested.

The Goddard deals with Computer Sciences Corp. and Allied Signal Corp. would be a test for buying and managing IT services he said. "I'm hopeful we'll get a lot of lessons learned."