Performance Based Contracting (PBC)

DGS/DPS Procurement Forum 12Donald R. Rainey, Sr., CPPB/VCO

Director, Office of General ServicesVirginia Department of Social Services

AGENDABackground/HistoryWhat is PBC?Steps to PBCPBC for Social ServicesQ & A

BACKGROUND/HISTORYGovernment Performance & Results Act 1993Federal Acquisition Streamlining Act of 1994Clinger-Cohen Act of 1996

All of these laws sent an important message about “Performance” in federal programs and acquisitions.

PBC isn’t newFederal government policy for agencies to

use PBC to the maximum extent possible when acquiring services.

What is PBC?Performance – At the state and local

government levels, performance is generally taken to mean outputs, quality and outcomes of government programs and services.(1) Outputs (the amount of service provided)(2) Quality (the quality of the service provided)(3) Outcomes (the results, impacts or accomplishments)

Performance Focus = Outputs + Quality + Outcomes

What is PBC?Performance Based Contracting – A contract

that focuses on the outputs, quality and outcomes of service provision and may tie at least a portion of a contractor’s payment as well as any contract extension/renewal to the contractor accomplishments or performance.

PBC is an “umbrella” term that incorporates a variety of different approaches that can vary depending on the level of government and the type of service.

Steps to PBCEstablish a Team

- Ensure senior management involvement- Involve multi-disciplinary SMEs- Define roles and responsibilities- Develop rules of conduct- Empower team members- Identify stakeholders- Maintain the knowledge base over the project life

Steps to PBCDescribe the problem that needs Solving

- Link the procurement to mission and performance

objectives- Define desired outcomes- Decide what constitutes success- Determine current level of success

Steps to PBCExamine Private & Public Sector Solutions

- Conduct a market survey (team approach)- Learn from public sector counter-parts- Take with private sector companies- Look for existing contracts- Document your research

Steps to PBCDevelop a Performance Work Statement

(PWS) or a Statement of Objectives (SOO)- Write the PWS- Let the contractor solve the problem- Describe the scope in the SOO- Write the performance objectives- Identify constraints- Develop the background

Steps to PBCDecide How to Measure & Manage Performance

- Rely on commercial quality standards- Have the contractor propose metrics and quality

assurance plan- Select only a few meaningful measures to judge

success- Use incentive-type contracts- Recognize the power of profit as a motivator

Steps to PBCSelect the right Contractor

- Compete the requirement- Use Oral Presentations- Emphasize past performance- Use best-value evaluation and source selection

Steps to PBCManage Performance

- Maintain team integrity- Adjust roles and responsibilities- Assign a Contract Administrator- Host a Post-Award Conference (Kick-Off)- Regularly contractor performance- Report on contractor’s performance

PBC Social ServicesIncrease in contracting for services delivery –

vs- agency employees- Rise is expected to continue- 80% of all Human Service (HS) funding involves

performance language- Subject to Federal audits of HS programs- All providers are not the same- Demand for evidence based practices

PBC Social ServicesTraditional focus on inputs and process

measures rather then outcomes

Shifting toward increased accountability- Performance of contractors- Public pressure to justify spending with measurable

performance

PBC Social Services (Concepts)Emphasizes results related to output, quality

and outcomes –vs- process or methodHas an outcome orientation and clearly

defined objectives and timeframesUses measureable performance standards

and quality assurance plansProvides performance incentives and ties

payment to outcomes

PBC Social Services (Benefits)Reward is based on outcomes and performance

resulting in:- Improvement and delivery of better services supporting improved outcomes- Clarity of goals and expectations- Fiscal flexibility for providers to achieve desired

results- Sets the groundwork for program evaluation and

monitoring- Encourages the contractors to develop and implement

innovative and cost effective service delivery- Less frequent but more meaningful monitoring

PBC Social Services (Dynamics)Amount and timing of paymentsExtent to which incentives and disincentives

are offeredLevel of financial risk assumed by the

contractorTypes of information collected and frequency

of reports on performanceContractor involvement in performance

measure developmentReinvestment of saving

PBC Social ServicesContract Monitoring

Most critical and most challenging- Define what actions the agency will take in order to

ensure contract standards are met- Develop well in advance of contract award- Focus on outputs and outcomes not routine tasks- Enforce penalties for not meeting standards

PBC Social Services (Success Factors)Define SuccessSelection of Performance MeasuresCollaboration with ProvidersCapacity of ProvidersStaff and Contractor TrainingInternal Management Systems

Q & A

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