ESTABLISHING CONTRACTOR PERFORMANCE CRITERIA AND MEASURING RESULTS —THE MOST CHALLENGING TASKS IN ANY ENVIRONMENTAL PROCUREMENT
Dwight A. Beranek
U.S. Army Corps of Engineers
OUTLINE
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Introduction—The challenge
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Setting criteria—Knowing what we want
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Measuring performance—Getting what we want
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Summary—Meeting the challenge
THE CHALLENGE
Environmental Remediation is a Tough Ballgame:
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Conditions are generated over time
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Discovery is often spontaneous
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Extent of damage/danger is unknown
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Health/safety issues predominate
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There are more laws/rules than you can shake a stick at—And they vary by state/locale
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Personal and contractor liability is risky
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Issues become visible and politicized
Technical Requirements are Hard to Define:
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Site assessment takes time and money —uncertainties often remain
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Subsurface conditions often predominate
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Technical solutions vary widely in process, price, and time
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Matching problem and solution has inherent risks
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Defining acceptable final conditions is judgmental
Placing a Value on Contractor Performance is Difficult:
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How much are we willing to pay for speed?
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How much are we willing to pay for level of remediation?
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How much are we willing to pay for good management?
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How much are we willing to pay for cost reduction?
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How much are we willing to pay for good documentation?
Procurement Process Makes Life Interesting:
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We can't relinquish sovereign responsibilities to contractors
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We must comply with the norms of federal procurement—equity, fairness, integrity, consistency, accountability
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Must be smart in the selection of the procurement vehicles to suit programmatic norms—risk management, performance, time, cost
Setting Criteria - Knowing What We Want:
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Most important step in the process
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Careful planning effort
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Customer driven requirement
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Risk management approach
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learn all we can
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within constraints
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determine risk of uncertainties
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assign risks between government and contractor
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KNOWING WHAT WE WANT:
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Acquisition planning
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Conducted by a technical, procurement, and customer team—determines technical performance criteria, cost, and time targets
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selects the appropriate contracting type
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determines the scope of work
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performs preaward evaluation
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Determine desired end state
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review applicable environmental regulations
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consult closely with regulatory authority
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Apply requirements carefully to site
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Establish parameters necessary to achieve compliance
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Determine constraints
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time
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health/safety
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funds
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political
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Assess present conditions
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analyze site data
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define conditions in regulated parameters
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determine deficient areas—where possible
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qualify potential deficiencies—assign probabilities
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Determine certainty of technical performance, cost, and time criteria
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Select contracting type based upon this analysis, for example:
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low uncertainty/risk—firm fixed price
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uncertain site conditions but known value of technical performance, cost, and time criteria—cost plus incentive fee
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uncertain conditions and unknown or changing value of criteria—cost plus award fee
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MEASURING RESULTS - GETTING WHAT WE WANT:
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Must translate criteria/needs to clear/binding contractual requirements
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Must rely on contractor profit motive
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Must structure contract to incentivize contractor in high value (to government) areas
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Must foster a businesslike climate between parties
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Must establish an oversight process commensurate with government's responsibilities
GETTING WHAT WE WANT (WHEN THE VALUE OF CRITERIA IS KNOWN AND CONSTANT):
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Determine the most important technical performance criteria
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Describe minimum, target, and optimum performance levels
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Determine the value to the government for achieving performance above the minimum criteria level
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Determine the “sharing ration” between government and contractor
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Build the formula into the contract in the fee determination process —in the OK or during negotiations
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Perform the same analysis for cost and time criteria
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Determine the relative values of trading off one criteria for another i.e., Increase technical performance at the expense of cost
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Document the trade-offs in fee determination table, curves, or nomographs
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Tie into contract
WHEN VALUE OF PERFORMANCE CRITERIA IS UNCERTAIN AND/OR CHANGES DURING CONTRACT:
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Use award fee contracting approach
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More subjective approach in fee determination
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Contractor involved in approach
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Government serves as final fee authority
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Establishing a businesslike environment is crucial
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Have an unambiguous contract
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Enter a partnership to establish productive relationship (trust)
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Understand respective motivations
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Sign up to project related goals
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Foster consistent and clear communications
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Face and solve problems early
GOVERNMENT OVERSIGHT ROLES (STATED IN CONTRACT):
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Fee Determination Official (FDO) — Provides equitable judgment on fee—high official
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Performance Evaluation Boards (PEB)
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Evaluates performance, cost, time reports
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Recommends fee to FDO
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Performance Monitors (PM) — Collect data—prepare reports for PEB
RULES OF THUMB:
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Express requirement accurately = convey performance expectations
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Emphasize reward-based incentives = reward successful performance
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Motivate performance excellence = let the contractor manage and do the job
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Cultivate communication and feedback = share agreements and differences
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Keep it as simple as possible = be declarative and unambiguous
SUMMARY - MEETING THE CHALLENGE:
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Government has a sovereign obligation to know what we want and get what we want for the taxpayer — government agents must perform the tasks that will ensure compliance with environmental regulations
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We must do our homework
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setting criteria
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structuring the procurement action
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determining risks and tradeoffs
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We must be accountable and professional