PERFORMANCE BASED SERVICE ACQUISITION (PBSA)

General. PBSA is the preferred method of contracting for services and supplies. Essential elements of PBSA include:

1. performance requirements, expressed in either a Performance Work Statement (PWS) or Statement of Objective (SOO); performance requirements should be described in terms of "what" the required output is and should not specify "how" the work is to be accomplished;
2. performance standards or measurements, which are criteria for determining whether the performance requirements are met;
3. appropriate performance incentives, either positive or negative; and
4. a surveillance plan that documents the government’s approach to monitoring the contractor’s performance. These elements are discussed further below.

Policy. FAR 37.102 has established the policy to use a PBSA approach, to the maximum extent practicable, for all services. Services exempted from this policy are: Architect-engineer, construction, utility and services that are incidental to supply purchases. Use of any other approach has to be justified to the Ordering Contacting Officer. For Defense agencies, DFARS 237.170-2 requires higher-level approval for any acquisition of services that is not performance based.

Contract-Type. The order of precedence set forth in FAR 37.102(a)(2) must be followed for all task orders. It is:

1. A firm-fixed price performance-based contract or task order.
2. A performance-based contract or task order that is not firm-fixed price.
3. A contract or task order that is not performance-based.

Requiring activities should use the contract type most likely to motivate contractors to perform at optimal levels. Firm Fixed-Price is the preferred contracting type for PBSA. Work statements should be developed in sufficient detail to permit performance on a fixed-price basis.

Performance Work Statements (PWS). The PWS identifies the technical, functional and performance characteristics of the government’s requirements. The PWS describes the work in terms of the purpose of the work to be performed rather than (either) “how” the work is to be accomplished or the number of hours to be provided. The format for the PWS is similar to the traditional Statement of Work (SOW). In addition, the PWS will include performance standards, incentives, and a Quality Assurance Surveillance Plan (QASP).

1. Performance Standards/Metrics. Reflects level of service required by the government to meet performance objectives. Standards may be objective (e.g., response time) or subjective (e.g., customer satisfaction).
   • Use commercial standards where practicable, e.g., ISO 9000.
   • Ensure the standard is needed and not unduly burdensome.
   • Must be measurable, easy to apply, and attainable.

   If performance standards are not available, the PWS may include a requirement for the contractor to provide a Performance Matrix, as a deliverable, to assist in the development of performance standards for future task orders.

2. Performance Incentives. Incentives may be positive or negative; may be monetary or non-monetary. Note: If a financial incentive is promised, ensure that adequate funds are available at time of task order award to pay incentives that may be earned.
   
   
   • Examples of Monetary Incentive include:
     • Incentive fees.
     • Share-in-Savings.
     • A negative incentive can be included if the desired results are not achieved (deduction should be equal to the value of the service lost).
   • Examples of Non-monetary incentives include:
     • Revised schedule.
     • Positive performance evaluation.
     • Automatic extension of contract term or option exercise.
     • Lengthened contract term (award term contracting) or purchase of extra items (award purchase).
3. Quality Assurance Surveillance Plan (QASP). The QASP is a plan for assessing contractor performance to ensure compliance with the government’s performance objectives. It describes the surveillance schedule, methods, performance measures, and incentives.
   
   
   • The level of surveillance should be commensurate with the dollar amount, risk, and complexity of the requirement.
   • Don’t inspect the process, just the outputs.
   • QASP is included as part of the PWS.

Additional Information on PBSC and PBSA

• PBSC Presentation (Seven Steps User Guide)

(Source: http://acquisition.gov/comp/seven_steps/index.html)