Consultant urges performance-based contracting

When Chip Mather first set up contracts for the Air Force, he considered it his job to point out flaws in contractors' performance. He didn't pay attention when contractors exceeded expectations, but was quick to reduce award fees for shortcomings.

Then he had a revelation: He should do everything he could to help contractors do a good job, because that meant better outcomes for the Air Force. "The contractors' success was our success--it wasn't 'we-they' anymore," he said.

Now, as co-founder of Acquisition Solutions Inc., a consulting company based in Oakton, Va., he's trying to teach government acquisition officials that lesson. At a seminar in Crystal City, Va., on Monday, he explained how to set up performance-based contracts, which provide incentives for contractors to meet the government's needs. Proponents of performance-based contracts believe they align the contractors' interests with the agencies' goals.

While the government has used performance-based contracts for decades, they have received more attention in recent years as agencies increase their spending on goods and services. According to a presentation by Allan Burman, president of the federal arm of Jefferson Consulting Group, during the Services Acquisition Reform Act Advisory Committee meeting last week, the Office of Management and Budget set a governmentwide goal of having 40 percent of contracts be performance-based.

Mather said he thinks agencies are increasingly using performance-based contracts. "I know it's happening because industry's starting to complain," he said.

He walked the audience through what he called the seven steps to performance-based acquisition, which he said align the goals of contracting officers and contractors. A contracting officer's happiest day, he said, should be when he is giving a contractor a check for the maximum award for good performance.

First, acquisition personnel must form a team to work on the desired contract, he said. Second, the team should conduct market research, which involves talking to vendors individually to develop the proposal idea and researching commercial best practices. Holding preproposal conferences is not helpful, he said, in large part because contractors hesitate to ask questions in front of their competition.

Third, said Mather, agencies should develop a statement of objectives, instead of the traditional statement of work. If the agency lists its goals and objectives and contractors are free to approach the project in the way they think is best, then the agency is likely to get innovative solutions, he said.

Mather recommends that contracting officers then work on developing likely candidates for the work. Instead of wasting time by soliciting proposals from hundreds of unqualified contractors, Mather recommends slimming down the number of candidates through a process such as advisory downselect, which allows agencies to tell contractors whether or not they are likely to win the contract before the actual bidding process.

"We're not here to train contractors," said Mather. In other words, contracting officers shouldn't spend time working with vendors that are unable to provide the work needed.

The fifth step involves helping contractors learn as much as they can about the agencies' goals and how the agency works. Mather said contracting officers should give contractors as much access as possible to government officials, because it will help them design better proposals. He noted one extreme situation where the Coast Guard paid contractors to spend three years learning about its needs to prepare them to bid on a 30-year contract.

Next, the agency selects the best proposal. Mather said this task should fall to someone in charge of the mission, and not the contracting officer. The last step involves monitoring the contractor as it performs the contract.

The whole process involves close interaction between acquisition officials and contractors, Mather said, echoing his realization decades ago that he and contractors shared the same goals. "There's no way you can be successful without working together," he said.

Some members of the audience expressed concern that it would be difficult to convince other members of their agencies to engage in performance-based contracting. Mather recommended that they initiate one such contract as an experiment, and said people soon will see its benefits. "Then," he said, "you won't be able to stop others from doing it."