EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503

August 5, 1999



The Honorable Mortimer Downey
Deputy Secretary of Transportation
Washington, D.C. 20590

Dear Mr. Downey:

Thank you for your Department’s efforts in helping to improve the quality of DOT acquisition systems and management, including through the use of Performance-Based Service Contracting (PBSC). The implementation of PBSC is one of the Director's Priority Management Objectives, which he is closely following. We wanted to share some thoughts with you as you continue to move forward in this effort.

OMB recently reviewed DOT's most recent quarterly report and selected PBSC contracts provided by DOT’s Office of Acquisition and Grant Management. DOT has generally been responsive to OMB’s initiative in this area. However, the level of contracts proposed for PBSC in relation to DOT’s total service contracts is too low. Some modes appear to lack any significant effort on PBSC. We have forwarded feedback on the quality of specific contracts recently provided to OMB for our review to your Senior Procurement Executive along with suggestions for improvement.

We believe DOT could improve upon its PBSC effort, increasing the number of contracts converted and the quality of those classified by the Department as PBSC. We request that the Department develop and implement a more significant, determined effort on PBSC. We believe this must be a team effort, embraced and driven by the program community and supported by budget staff. It cannot be treated solely as a procurement initiative.

We look forward to working with you in the coming months on this important effort. Tim Rosado in the Transportation Branch (395-7773) and Stan Kaufman in the Office of Federal Procurement Policy, (395-6810) are available to discuss PBSC with you or the appropriate modal contracts.

{original signed by}
Michael Deich
Associate Director
General Government and Finance		 {original signed by}
Dee Lee
Acting Deputy Director for Management