Push Is On for Performance-Based Contracts The Office of Management and Budget is pushing hard for performance-based services contracts, but an OMB official acknowledges that there is confusion about what the term means. “We are pushing to reduce the number of time and materials and cost-plus-fixed-fee contracts,” said David Muzio, procurement policy analyst with OMB’s Office of E-Government and Information Technology. He said fixed-price IT contracts should become the norm. Muzio spoke Nov. 18 at a conference sponsored by Federal Sources Inc. in McLean, VA. The Services Acquisition Reform Act (SARA) gives agencies new incentives to use performance-based acquisition. When services are purchased through a performance-based contract worth up to $25 million, those services can be considered commercial items and can be acquired using the simplified provisions of Part 12 of the Federal Acquisition Regulation. That provision is part of the 2004 Defense Authorization Act signed by President Bush Nov. 24. Agencies must produce detailed business cases to justify major IT acquisitions, including projects costing as little as $2 million, Muzio said, and those projects must include a performance-based statement of work. More than half the business cases submitted by agencies last year failed to pass muster, he said, but agencies are “doing better” this year. OMB has just begun distributing its comments on agencies’ 2005 budget proposals. Performance-based services acquisition is usually defined this way: The buyer tells contractors what he wants and the contractor proposes the best way to do it. But the devil is in the details. “The definitions have been inconsistent” from agency to agency, said Robert Burton, acting administrator of OMB’s Office of Federal Procurement Policy. He said OMB is working to standardize the definitions and will issue proposed amendments to the Federal Acquisition Regulation soon. President Bush’s management agenda sets a goal of using performance-based contracting in 40% of IT acquisitions in the current fiscal year and 50% next year. Muzio said performance-based acquisition gives contractors the freedom to use their own expertise and innovation. Burton described performance-based acquisition as “results-oriented.” He spoke Nov. 20 at the Government Contracting Insti-tute’s “Federal Contracting 2004” conference in Washington. He said performance-based RFPs must include metrics to measure performance and must have a quality assurance surveillance plan. In addition, the contracts may include incentives, either positive or negative, he added. OMB has published guides to performance-based contracting at www.arnet.gov.