Performance-Based Acquisition (PBA) – formerly Performance-Based Contracting (PBC) – is a technique for structuring all aspects of an acquisition around the purpose and outcome desired as opposed to the process by which the work is to be performed. It’s a concept based on reforms mandated to all Federal Agencies by the President’s Management Agenda, the Government Performance and Results Act of 1993, and the Federal Acquisition Streamlining Act of 1994. Using this approach, the government no longer develops a prescriptive Statement of Work (SOW) dictating how the contractor will achieve project milestones. Instead, the government develops a Statement of Objectives (SOO) or Performance Work Statement that describes the overall outputs and objectives but does not specify how to achieve those outputs. This approach allows private firms more flexibility to conduct operations in a manner that is cost-effective for their company while ensuring that required milestones are achieved.
Guidebook: Performance-Based Acquisitions
To be considered performance-based, an acquisition should contain, at a minimum, the following elements:
- Statement of Objectives (SOO): Describes the requirement in terms of measurable outcomes rather than by means of prescriptive methods.
- Measurable Performance Standards: To determine whether performance outcomes have been met, defines what is considered acceptable performance.
- Remedies: Procedures that address how to manage performance that does not meet performance standards. While not mandatory, incentives should be used, where appropriate, to encourage performance that will exceed performance standards. Remedies and incentives complement each other following elements
- Performance Assessment Plan: Describes how contractor performance will be measured and assessed against performance standards. (Quality Assurance Plan or Quality Assurance Surveillance Plan)
By describing requirements in terms of performance outcomes, agencies can help achieve the following objectives:
- Maximize performance: Allows a contractor to deliver the required service by following its own best practices. Since the prime focus is on the end result, contractors can adjust their processes, as appropriate, through the life of the contract without the burden of contract modifications provided that the delivered service (outcome) remains in accordance with the contract. The use of incentives further motivates contractors to furnish the best performance of which they are capable.
- Maximize competition and innovation: Encouraging innovation from the supplier base by using performance requirements maximizes opportunities for competitive alternatives in lieu of government-directed solutions. Since PBSA allows for greater innovation, it has the potential to attract a broader industry base.
- Encourage and promote the use of commercial services: The vast majority of service requirements are commercial in nature. The use of FAR Part 12 (Acquisition of Commercial Items) procedures provides great benefits by minimizing the reporting burden and reducing the use of government-unique contract clauses and similar requirements, which can help attract a broader industry base.
- Shift in risk: Much of the risk is shifted from the government to industry since contractors become responsible for achieving the objectives in the work statement through the use of their own best practices and processes. Agencies should consider this reality in determining the appropriate acquisition incentives.
- Achieve savings: Experience in both government and industry has demonstrated that the use of performance requirements results in cost savings.
AcqLinks and References:
- Guidebook for Performance-Based Acquisitions
- Seven Steps to Performance-Based Acquisitions
- FAR Subpart 37.6 “Performance-Based Acquisition”