Re: PERFORMANCE-BASED SYSTEM

[msmyre@primenet.com]

From: Mel Smyre <msmyre@primenet.com>

Discussion of performance-based systems would do us some good. To clarify,
cost-plus-award-fee contracts, where the fee (aka "profit") is proportional
to the contractor's meeting some or all of preset performance criteria, are
not the same as "cost-plus" contracts, which assure a fee no matter how
poorly the effort is managed. The contracts could be set up with performance
criteria that make it very profitable for an effort to be closed out early
-- resulting in a smaller overall cost to the government, or performed to
better-than-minimum standard -- resulting in an inproved cleanup level. The
size of the award fee fund will motivate the contractor; if the funds are
not awarded, they are retained by the government. (Cost-plus-award-fee
contracts are also different from "cost-plus-incentive-fee" contracts.)

Award fee boards, which convene periodically, might be opened up for public
comments on contract performance, which would make satisfaction of the
community important to the contractor as well as the contractor's
satisfaction of the government agency.

Multiyear contracts need adjustable annual performance targets instead of
performance milestones which are all set at contract negotiation. Annual (or
periodic) review of performance targets can adjust for rapid or slow
progress -- and an appropriate link to the award fee criteria would be
established.

/s/Mel Smyre
Systems engineer, naval engineer, Commander USNR-Retired, and
RAB Community Member, Twin Cities Army Ammunition Plant, Minnesota