The Key Is What Gets Done, Not How

t sounds so simple. Tell the contractor what you want done, not how to do the work. And be able to measure the results. It's what most of us do all the time when we buy services in the commercial sector. If you pick up a taxi to go to the airport, you ordinarily don't tell the cabby how to get there. You expect he's made this trip many times and knows the best route to take.

Let's take another example. If you need a plumber for a major repair job, what you'd likely do is ask for three estimates, question each firm on how it plans to proceed and then decide which seems most likely to meet your needs.

Will you tell the plumber how to do the job? Probably not. What's the outcome you are looking for? A safe, reliable, fully functioning plumbing system. What are the factors you will consider in awarding the contract? They may include the following: How soon will they be able to do the work? What will it cost? What warranties do they provide? How have they performed for neighbors or others on similar jobs? Are they licensed, bonded and insured to do this type of work?

In none of these cases are you laying out the process and the materials to be used in carrying out the task. What you are establishing is the result you are looking for, the time frame for performing the work and the standard you will use to measure the contractor's performance.

The focus of performance-based contracting is on results and on letting the contractor use its ingenuity to accomplish the task. Whether calling a plumber or putting a government task in a performance-based context, the following template offers a useful methodology for thinking through the process:

• Desired outcome: a safe, reliable, fully functioning plumbing system.
• Required service: repairing a broken pipe.
• Performance standard: All materials used must be up to code code and the pipe must be repaired by a specific time and at a specific cost.
• Acceptable quality level (AQL): An extra two hours is allowed if unexpected problems are encountered. The AQL establishes a permissible deviation from the standard.
• Surveillance or monitoring plan: The time of completion must be documented, and water must be run through the pipe to see that it is working.
• Positive or negative incentive: If the repair is urgent, then it might be worthwhile to reward the contractor for completing the job significantly ahead of schedule.

Admittedly, not everyone is comfortable with this hands-off approach. Take the taxicab example above. You may have lived in Washington for 30 years, and you'd prefer to get to Reagan National Airport from your Arlington home by using Ridge Road, not the George Washington Parkway. From your experience, the road is less frequented, and tie-ups are less likely. Moreover, that's the way you usually go-you're comfortable with the route, and after all, it's your money. The cabby may favor an alternative that is even faster and cheaper, since his overall profits depend on good time management, but he'll follow your lead. What's the harm? In this case, perhaps not much. Your route might take a little longer than his might, so if the fare is based on mileage, it may cost you a little more.

How might this template apply to a government task? Perhaps a contractor is cleaning up hazardous waste at an Energy Department site. The firm has a proven technology for performing the work and a successful past performance record. However, you are more comfortable in maintaining previous performance approaches than in focusing on the level of cleanup required, the cost of the effort and the completion date. Therefore, you lay out the equipment he must use, the work schedule he must follow, and micromanage each step he must take. The effect: a project that will likely take longer and cost more than if the contractor employed its own best practices. The Energy Department has been contending with these issues over the last decade. Its focus has been on using performance-based management approaches to major waste removal projects at former nuclear weapons sites. These tend to be large cost-reimbursable contracts rather than fixed price. Nevertheless, Energy has sought to define outcomes and negotiate with the contractor the performance standards it must meet.

Energy's challenge, in DOE procurement executive Richard Hopf's view, is to use performance-based approaches "in such a way that the contractor is concerned about what the agency is concerned about." For some of these efforts, as in the areas of environment, safety and health, the contractor's entire fee is at risk if it fails to perform.

The difficulty with such billion-dollar facilities management contracts is recognizing the most important outcomes to focus the contractor on. However, limiting the number of objectives poses a risk that something critical will not be covered, so flexibility is needed as well. Continuing dialog and negotiation become the order of the day.

As Hopf says, "These types of interactions with the contracting community will occur more and more frequently as the government continues to downsize and promotes a strategic outsourcing philosophy."

Allan V. Burman, a former Office of Federal Procurement Policy administrator, is president of Jefferson Solutions in Washington.