Performance-based contracts in federal government: benefits, goals, and barriers

Performance-Based Contracting

Since federal contracting began, the federal government has continuously sought ways to manage and more efficiently execute the contracting process. The enduring goal is to achieve maximum effectiveness and ensuring the desired contract outcomes are reached by the contracted party. One tool to achieve this end is the Performance-Based Contract introduced in the early 1990's as a child of Performance Based Acquisition (PBA). This paper will discuss the history of Performance-Based Contracting as well as the benefits, goals and outcomes of this relatively new and innovative contracting initiative.

History of Performance-Based Contracts

Performance-Based Contracts stemmed from reforms made in 1993-1994 as a result of the President's Management Agenda. The President's Management Agenda gave birth to the Government Performance and Results of Act of 1993 as well as the Federal Acquisition Streamlining Act of 1994. Performance-Based Acquisition (PBA) is the materialization of the reforms mandated in the above mentioned Acts. Performance-Based Contracts is the vehicle in which the ideas presented in the Government Performance and Results Act of 1993 and the Federal Acquisition Act of 1994 is delivered. To understand Performance-Based Contracts we must understand Performance Based Acquisition. Performance Based Acquisition is an approach in which the government defines the outcomes and goals of a contract but not the action steps and tasks needed to achieve those goals. What this does is give the contractor the flexibility to utilize best practices and other commercial performance and delivery tools that are best suited to yield the best outcomes. Prior to this, federal government agencies focused on processes and the "how" in achieving outcomes, with Performance Based Acquisition agencies now focus on what matters most, the results. Performance-Based Contracts is the tool, in which the concepts of Performance Based Acquisition are accomplished, a PBC solicits bids from contracting companies based on the results and outcomes that are to be accomplished from the task. It is the means to the desired end.

Benefits, Goals and Outcomes of Performance-Based Contracts

The major outcome of Performance-Based Contracts results from removing the focus off "how" tasks are performed and emphasizing the end result the agency will receive a better overall deliverable. Giving the contracting company A few other benefits and outcomes outlined by an initiative led by the Department of Defense and others include:

Increased likelihood of meeting mission needs

Less performance risk

Better competition: not just contractors, but solutions

Surveillance: less frequent, more meaningful

Results documented for Government Performance and Results Act reporting, as by-product of acquisition

Barriers to Performance-Based Contracts