New Guidance for Using Performance-Based Standards

The Pentagon has released a new guidebook that helps procurement officers buy services using performance-based standards. In 1999, the Defense Department spent as much money on services as it did on new supplies and systems. The guidebook (the 59-page document in PDF is at http://www.acq.osd.mil/ar/doc/pbsaguide010201.pdf) is the result of efforts led by former Under Secretary of Defense for Acquisition, Technology and Logistics Jacques Gansler to introduce performance-based contracting into the military services acquisition processes.

Under performance-based contracts, agencies describe to contractors the end results needed by the government. Deciding on how best to meet those requirements is left to the contractor. DoD has developed this guidebook as a cooperative effort to help the acquisition team, and any other stakeholder, better understand the basic principles of performance-based services acquisition, wrote Gansler in a Jan. 2 letter accompanying the new guidebook.

The guidebook walks procurement professionals through the entire acquisition process, from crafting work statements to establishing performance standards. It also clarifies how to build incentives into contracts to encourage vendors to exceed performance standards. A 1998 study by the Office of Management and Budget found that agencies were slow to award performance-based contracts because procurement officers werent familiar with the process.

Last April, Gansler ordered the Pentagon to make half of its service contracts performance-based by 2005. He then directed the military departments and the Defense Logistics Agency to develop a training course for procurement officers on the performance-based process. By making Defenses service acquisition policies transparent, the guidebook should also prove useful for contractors, said Allan Burman, a procurement expert and the president of Jefferson Solutions, which provided input on the guidebook. It aids the move toward a partnership [between government and customers]. Both are focused on achieving the best outcomes, Burman said.