PERFORMANCE-BASED CONTRACTING

[Aimee Houghton <aimeeh@igc.org>]

From: Aimee Houghton <aimeeh@igc.org>

Here's another comment I receive in response to my notes on a 
performance-based system.
Lenny
You are right on with your comment about efficiency and community
involvement in cost contract administration.
Cost vehicles are more difficult to administer, and the bureaucracy is
not often responsive to this additional (or differently applied) resource
need. However, with a little innovation, proper management is possible and
should provide a much higher quality product (quicker, better, less
expensive, etc.)
Often, the agencies who do cost contracting spend way too much time
"at the front end" negotiating down to the paper clips and filling files
with useless information. That leaves less resources to get out into the
field to do proper cost control and quality assurance. Since cost
contracts are most appropriately used to do work with a large component of
uncertainty, it makes sense to spend less time negotiating and more time
working together in the field. It is in the field where huge cost savings
can be realized. And, the beauty of a cost contract is that you can
actually incentivize this kind of behavior (i.e. creativeness in the
field).
The key to spending less time negotiating is through parametric cost
estimating (often using expert systems, like the Navy's Cost-to-Complete
software) which establishes a reasonable "ball-park" target cost for the
specific work. That way the government is reasonably assured that any cost
savings are legitimate, not the result of the contractor "high-balling" his
proposal.
There is no question that it would be very valuable to get the
community involved with evaluating (and probably even working together in
the field with) the cost contractors. This opens up all kinds of potential
difficulties which will tend to turn the contracting officers' ears off to
the idea. However, it could be legally done. As long as a qualified
Technical Representative is present in the field or reviews the feedback
(to ensure that no one is inappropriately "directing" the contractor), the
feedback and creative ideas that the community could provide could save
untold millions and result in a better product.
I have always struggled with the problem of not having enough "eyes
and ears" on our sites. It is a fact that the more people you have
constructively watching the site work, the better the contractor will work.
Certainly, it would take quite a bit of work to implement an idea like
this, but I think it would be worth pursuing.