By Steve Kelman

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Has Obama administration dropped the ball on performance-based acquisition?

I have always believed that, for improving government management, continuity is a real virtue. Of course, views are by no means unanimous about how best to improve government management -- there is a philosophical split between the "flog them to submission" crowd and those who believe in inspiring the government workforce. But compared with contentious policy areas such as taxes, Medicare or the war in Afghanistan, there's a lot more overlap between administrations about management questions.

Continuity is a virtue for two reasons. First, real management change takes time -- hit-and-run management improvement missions are almost sure to fail. Second, there exists a (not totally unjustified) cynicism among the career workforce about "flavors of the month" that political appointees introduce assembly-line fashion into the agencies they are chosen briefly to run. This cynicism itself reduces employee buy-in and thus the chances that an initiative will actually succeed.

On the day I started my job as administrator of the Office of Federal Procurement Policy – under President Bill Clinton -- I asked my predecessor Al Burman what his three most important priorities as administrator had been. I then promised to do my best to continue to work on them.

One of the three was performance-based acquisition -- an effort Burman had inaugurated in 1990 to structure contracts for services around the goals to be achieved by the contractor, rather than telling the contractor how to do the work but not holding them responsible for any performance standards. This was a sensible approach. What the government cares about is achieving results, not how the contractor gets there. Requiring the contractor to do things a certain way but then not requiring that the results be attained seems (excuse my language) sort of ass-backwards. And if you set up performance standards but allow the contractor to determine how to get there, you open the way for innovative and/or cost-saving ways to reach the goal.

I continued Al's efforts – extracting a pledge from agencies to convert a number of existing contracts to performance-based (and documenting significant cost savings and equal or better performance comparing before and after) and rewriting the part of the Federal Acquisition Regulation on contracting for services to promote performance-based principles. The George W. Bush administration continued the effort, including performance targets for percentage of contracts that were performance-based. That may be a little hard to measure, but the sentiment was the right one, and the area got significant OFPP attention.

Surprisingly, after three administrations in a row promoting performance-based acquisition, the Obama administration has been close to silent on this. This is particularly strange given the administration's focus on performance measurement in government in general. With contractors so important in delivering many programs, one would think that promotion of performance-based contracting would be a high administration procurement priority. The administration also has not (as of yet) taken up the fight to re-introduce share-in-savings contracting, the most-dramatic form of performance-based contract. To be fair, though, it has embraced procurement contests, another variant of performance-based contracting.

Apparently the administration is not promoting this issue on the grounds that the problem has been solved -- that performance-based contracting is now institutionalized in the federal government. I think that anybody who knows what's going on in the agencies would regard that belief, to put it mildly, with skepticism.

Yes, there is more performance-based acquisition than in the past, but it is far from institutionalized. There are a bunch of practical problems, including training staff to develop performance metrics, evaluating proposals with different performance metrics and negotiating metric change in mid-stream (in a sole-source environment). And there are some larger systemic problems, outlined in a report on the topic a while ago from ASI Government, which promotes performance-based acquisition in government, involving governance of these contracts and post-award contract management.

Performance-based acquisition has been the flavor of a decade for three administrations. Especially in an environment where cost savings and performance improvements are crucial, we need to continue it into a fourth.

Posted on Jun 01, 2011 at 12:09 PM


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