Historically, military procurements were characterized by requirements (in standards and specifications) that not only governed what was being procured, but also provided detailed instructions on how the procured item was to be designed and manufactured. For example, contracts routinely specified what parts could be used, how manufacturing processes were to be performed, what plans were required, and so forth. A key part of Defense Acquisition Reform has been a move from this "how-to" type of contracting to performance-based contracting. Inherent in this approach is the need for and reliance on performancebased requirements (PBRs).
The concept of performance-based service contracting has been a part of government-wide contracting for a long time. In fact, OFPP Policy Letter 91-2 (April 9, 1991) defined performance-based contracting as a means of "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 broad and imprecise statements of work." Yet, with occasional exception, it was common practice within the Department of Defense (DoD) and the military services to tell contractors what was needed, what to do, and how to do it. Under Defense Acquisition Reform, performance-based contracting and the use of PBRs have become realities within DoD. In large measure, the implementation of performance-based contracting has been supported by the Defense Standardization Program, under which the complete system of military specifications and standards has been changed.
Under the Defense Standardization Program, many specifications and standards have been rescinded, converted to performance-based documents, changed to guidance documents, and so forth. Greater reliance is being placed on the use of commercial standards and specifications. Finally, military procurement agencies cannot impose any military or commercial standards without a waiver. Compare this policy with its predecessor under which the decision not to use many military standards required a waiver.
It has been stated that performance-based contracting requires the use of PBRs. Just what is a performancebased requirement? As discussed in SD-15 (See "For Further Study," 2.b), performance-based requirements describe the required results and provide criteria for verifying whether or not these results have been met. Performance-based requirements do not state the methods for achieving the required results. Ideally, they have the following characteristics:
Requirements are stated quantitatively
Requirements are verifiable
Interfaces are stated in sufficient detail to allow interchangeability with parts of a different design
Requirements are material and process independent
Table 1 compares performance-based requirements with non-performance-based requirements. Four types of performance specifications are used by DoD: commercial item descriptions (CIDs), guide specifications (GSs), standard performance specifications (SPSs), and program-unique specifications. Performance specifications are also categorized by the type of item being acquired. There are material specifications, component specifications, and system specifications.
Table 1: Comparing Performance-based Requirements with Non-performance-based Requirements
Area of Comparison
Describe functions product is to perform and level of performance
Describe how product is to be designed and manufactured
Describe means for verifying performance
Describe means of ensuring specified processes are followed
Design Latitude Given to Contractor
Allow contractor to determine best ways to achieve results
Force the contractor to use prescribed methods and approaches
Responsibility for results clearly belongs to contractor
Responsibility for results shared by customer and contractor
Customers have needs or expectations regarding the products they buy. These needs include the function(s) to be performed and the level of performance (stated quantitatively or qualitatively). Indentifying these needs is the first step a contractor must take in developing a product. Often, the customer needs include all factors that influence performance. Some of these factors may be well beyond the ability of the contractor to affect in any meaningful way. Consequently, it makes sense that requirements derived from the customer's needs reflect only those factors within the control of the contractor.
In the commercial world, the customer's requirements almost always are stated as needs and any necessary translation is done by the manufacturer. For example, consumers may want (i.e., need) an automobile that "feels comfortable." Industry must interpret this need and translate it into meaningful design requirements. In the military world, the customer's needs are explicitly stated in an Operational Requirements Document. The acquisition agency then develops a procurement package that includes system-level requirements derived from these needs.
In general, the process of developing requirements can be described in Figure 1.
Figure 1. Requirements Development Process (Click to Zoom)
As indicated in Figure 1, performance-based requirements are derived from the customer's needs. This derivation, or translation from needs to requirements, is not an exact science. Various methods and tools are used, as indicated in the figure. Quality Function Deployment (QFD) is one such tool. QFD is a tool for translating defined customer requirements into appropriate design requirements at each stage of design and development. Commercial companies often use benchmarking to determine the level of performance required to remain competitive or expand market share. Comparisons with previous products is also a method used to develop the requirements. Whatever method is used, the goal should be to develop requirements that are quantitative and verifiable.
For Further Study
Additional information on Performance-based Requirements and related topics can be obtained from the following web sites.
"A Guide to Best Practices for Performance-Based Service Contracting," Interim Edition, Office of Federal Procurement Policy (OFPP), Office of Management and Budget (OMB), April 1996.
"Performance Specification Guide," SD-15, Defense Logistics System Command (DLSC/LM), June 29, 1995.
Carl Peckinpaugh, "What is Performance-Based Contracting? A Legal View," Federal Computer Week, May 26, 1997.
Kenneth Crow, "Customer-Focused Development with QFD," DRM Associates, 1996.
"Specifications and Standards - A New Way of Doing Business," OSD Memorandum, 19 June 1994.
About the Author
* Note: The following information about the author(s) is same as what was on the original document and may not be correct anymore.
Ned H. Criscimagna is a Senior Engineer with IIT Research Institute (IITRI). At IITRI, he has been involved in projects related to Defense Acquisition Reform. These have included a project for the Department of Defense in which he led an effort to benchmark commercial reliability practices. He led the development of a handbook on maintainability to replace MIL-HDBK-470 and MIL-HDBK-471, and the update to MIL-HDBK-338, "Electronic Reliability Design Handbook." Before joining IITRI, he spent 7 years with ARINC Research Corporation and, prior to that, 20 years in the United States Air Force. He has over 32 years experience in project management, acquisition, logistics, reliability and maintainability (R&M), and availability.
Mr. Criscimagna holds a Bachelor's degree in Mechanical Engineering from the University of Nebraska-Lincoln, a Master's degree in Systems Engineering from the Air Force Institute of Technology, and he did post-graduate work in Systems Engineering and Human Factors at the University of Southern California. He completed the U.S. Air Force Squadron Officer School in residence, the U.S. Air Force Air Command and Staff College by seminar, and the Industrial College of the Armed Forces correspondence program in National Security Management. He is also a graduate of the Air Force Instructors course and completed the ISO 9000 Assessor/Lead Assessor Training Course. Mr. Criscimagna is a member of the Amercian Society of Quality (ASQ) and a Senior Member of the Society of Logistics Engineers (SOLE). He is a certified Professional Logistician, chairs the ASQ/ANSI Z-1 Dependability Subcommittee, is a member of the US TAG to IEC TC56, and is Secretary for the G-11 Division of the Society of Automotive Engineers.