[Federal Register Volume 59, Number 98 (Monday, May 23, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-12483]


[[Page Unknown]]

[Federal Register: May 23, 1994]


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OFFICE OF MANAGEMENT AND BUDGET

Office of Federal Procurement Policy

 

Performance-Based Contracting for Services

AGENCY: Executive Office of the President, Office of Management and 
Budget (OMB), Office of Federal Procurement Policy (OFPP).

ACTION: OFPP is requesting comments and suggestions with regard to the 
establishment of a pilot program to increase the use of performance-
based contracting methods in the acquisition of services.

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BACKGROUND: A major contract reform initiative of OFPP is to reform the 
manner by which the government contracts for services by introducing 
performance-based contracting methods. Performance-based contracting 
means structuring all aspects of an acquisition around the purpose of 
the work to be performed, as opposed to either the manner by which the 
work is to be performed or the use of broad and imprecise statements of 
work.
    Numerous internal agency evaluations and investigations, General 
Accounting Office Reports, and congressional hearings have documented 
significant and systemic service contracting problems (i.e., cost 
overruns, performance delays, and performance problems). To correct 
these problems, OFPP published Policy Letter 91-2, Service Contracting 
(Federal Register Vol. 56, No. 72, p. 15113) on April 15, 1991, which 
requires the use of performance-based contracting to the maximum extent 
practicable when acquiring services. This approach provides the means 
to ensure that the appropriate quality level of performance is 
achieved, and that payment is made only for services that meet contract 
standards.
    Performance-based contracting methods include: statements of work 
comprised of objective, measurable performance standards; quality 
assurance surveillance plans and objective positive and negative 
incentives based on the statement of work criteria; selection 
procedures which include publishing draft solicitations for comment and 
requiring quality-related evaluation factors, including cost realism 
and past performance; and conversion from cost reimbursement to fixed 
price contracts.
    To stimulate the government's conversion to performance-based 
service contracting, OFPP has developed a government-wide pilot project 
which relies on voluntary pledges by individual agencies to convert 
specified contracts for services to performance-based contracting 
methods. Agencies will be encouraged to limit their pledged contracts 
to recurring requirements to facilitate before and after measurement 
and assessment of results. Agencies will also be asked to consider 
breaking up large level-of-effort umbrella contracts in order to 
increase competition and convert to completion-type contracts where 
possible, thereby generating more innovation and cost effective 
proposals.
    Agency pledges are also expected to include: Endorsement of the 
project by the agency head; establishment of a high-level agency task 
force to oversee the effort; agreement to share lessons learned and 
best practices with other agencies; and measurement of the results of 
the project using predetermined project measurement criteria. The 
proposed project measurement criteria are: contract price; level of 
competition; number of contract audits; customer (project officer) 
satisfaction; length of procurement cycle; and small business 
participation.
    OFPP recognizes that performance-based service contracting will 
require cultural change and, therefore, must rely on the support and 
good faith efforts of both the agencies and the contracting community 
to be successful. Thus, to help ensure the success of this pilot 
project, OFPP will also ask contractors for their cooperation. Working 
with associations representing large numbers of service providers, OFPP 
is considering asking potential contractors to: endorse this project; 
assist OFPP in identifying requirements that are typically acquired on 
a cost reimbursement basis for the government but on a fixed price 
basis for commercial clients; identify obstacles in government service 
contracting that need to be overcome to implement performance-based 
contracting methods and/or preferred commercial contracting practices; 
and voluntarily refrain from bid protests and disputes related to 
procurements contained in the agency pledges.

PUBLIC MEETING: A public meeting will be held in the White House 
Conference Center, Eisenhower Room, 726 Jackson Place, Washington, DC 
20503 at 2 p.m. on Thursday, June 16, 1994. Persons or organizations 
wishing to present ideas or suggestions about the pilot program or 
other specific actions that OFPP and other government agencies can take 
to increase the use of performance-based service contracting are 
encouraged to attend the meeting. Persons and organizations wishing to 
make oral statements will be given five minutes each to present their 
views. Persons wishing to attend and/or present statements at the 
public meeting should contact Ms. Margaret B. Davis at 202-395-6803 on 
or before June 9, 1994 in order to be placed on the agenda and to 
enable OFPP to adequately plan the meeting.

DATES: Comments and suggestions in response to this Federal Register 
notice should be received at OFPP by close of business June 9, 1994. 
Copies of statements to be presented at the public meeting also should 
be received by that time.

ADDRESSES: Comments and statements should be submitted to the OFPP, New 
Executive Office Building, room 9001, 725 17th Street NW., Washington, 
DC 20503, Attention: Stanley Kaufman.

FOR FURTHER INFORMATION CONTACT:
Stanley Kaufman, Deputy Associate Administrator, OFPP, 202-395-6810.
Steven Kelman,
Administrator.
[FR Doc. 94-12483 Filed 5-20-94; 8:45 am]
BILLING CODE 3110-01-M