Experts urge creative contract incentives

Companies should take creative approaches to encourage federal agencies to use performance-based contracting, a team of consultants said at a seminar today.

Agencies are still uncomfortable with the concept, even 13 years after then-Office of Procurement Policy Administrator Allan Burman sent the policy letter that established it as a goal. Burman, now president of Jefferson Solutions — a division of the Jefferson Consulting Group LLC — was one of the consultants offering advice at the seminar.

Company officials should look for incentives that don't require agencies to hand over monetary rewards, the panelists said. Especially with the "four-letter vacuum called Iraq" demanding priority, agencies have little uncommitted money that they can offer as a reward for exceptional performance, said David Metzger, a partner at the law firm of Holland and Knight LLP, which hosted the seminar.

"If incentives and disincentives are left open for you to propose, think creatively," said Angela McNamara, vice president of Jefferson Consulting Group. "It doesn't have to be a check written to you."

One possible reward is additional years of work, Burman said. If a company exceeds expectations, the agency could agree to extend the contract by a preagreed amount of years.

However, "you're still subject to the appropriation of funds," he said. "If the funds aren't provided, that's a little bit of tough luck."

Another possible incentive — and in Metzger's view one of the best — is for the company to be freed from meeting and reporting requirements. If the company delivers on predetermined goals, for example, the agency may agree to cut mandatory status reports from weekly to monthly, or require company officials to attend fewer meetings.

If that happens, "you can begin to release people to do other things, move them to things you're making money on," rather than having them engaged in activities that cost money, he said. Such an incentive costs the agency nothing extra, and benefits the company by reducing costs.

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