Kelman: Let the vendor perform

By now most people know the performance-based contracting mantra: Tell the vendors what results you want and let them decide how to achieve those results.

The mantra makes sense. One important reason the government awards contracts is to tap the expertise of outside experts who specialize in meeting customers’ requirements for, say, database technology, military aircraft or cafeteria management. The government is — or should be — good at knowing what it wants. Vendors are good at figuring out how to meet those needs. If the government tells a vendor what to do and that solution doesn’t work, the vendor has an excuse for not delivering. The vendor can say, “I did what you told me to do.” But if the government tells the vendor what results it wants, the vendor is on the hook for finding a way to deliver those results.

All this sounds logical, and the Homeland Security Department did exactly that earlier this year in its request for proposals for the Secure Border Initiative’s SBInet, a program to build a protective virtual border around the country. DHS recently awarded the SBInet contract to Boeing. In the RFP, DHS presented a statement of objectives explaining the results it sought and asked vendors to bid a technical solution and performance metrics to achieve those objectives.

DHS has been criticized for that approach. For example, DHS’ inspector general wrote that “the RFP’s broadly defined statement of objectives approach, coupled with undefined requirements, leaves programs vulnerable to failure and cost overruns.” And the Federal Times quotes a sociology professor who said, “Homeland Security is abdicating its responsibility. Where is the vision and leadership? They’re tossing it to contractors and saying, ‘You come up with the solutions.’ It’s unheard of.”

Hold on a moment. One might worry about a statement of objectives approach if there were only one vendor proposal and only one proposed solution. However, the SBInet contract was bid competitively. It attracted five proposals, each representing a different solution to the problem that DHS needed to solve.

DHS officials picked the vendor whose solution they believed represented the best value. The multiple bids kept the government in the driver’s seat.

Interestingly, DHS resisted the temptation to choose the whiz-bang futuristic technology that some of Boeing’s competitors offered in favor of a less expensive, lower-tech and, therefore, lower-risk alternative.

Boeing’s technical approach has been incorporated into its contract, so it is inaccurate to suggest that the contract has no technical requirements. In this case, the government didn’t develop its own technical requirements — the vendor did. The SBInet contract, we’re told, includes performance metrics to which the vendor is committed, although DHS hasn’t disclosed what those are.

The success of this contract is by no means guaranteed. Much could go wrong in the execution of the contract, on the part of the government and the vendor. But its performance-based approach has positioned DHS for a greater chance of success than would have been possible otherwise.

The approach that DHS’ IG advocates would return contracting to the Dark Ages in which, to use the phrase of Chip Mather of Acquisition Solutions, “Government contracted for compliance, not results.” Maybe that’s the way IGs like contracting to be, but it’s not so good for government.

Kelman is professor of public management at Harvard University’s Kennedy School and former administrator of the Office of Federal Procurement Policy. He can be reached at steve_kelman@harvard.edu