MEMORANDUM


U.S. Department of Transportation
Office of the Secretary


January 4, 1999

ACTION: Performance-Based Service Contracting Program

[original signed by Mortimer L. Downey]
The Deputy Secretary

Heads of the Operating Administrations


The Director, Office of Management and Budget (OMB) made Performance-Based Service Contracting (PBSC) one of his Priority Management Objectives, and requested agencies to develop plans to convert contracts to PBSC as they come up for renewal. At this time, I am requesting new PBSC candidates be identified for FY1999, 2000, and 2001. A sample of the information required for each new candidate is attached. I have directed the Office of Acquisition and Grant Management (OAGM) to collect this information and present it to OMB. New PBSC candidates are due to the OAGM by January 25, 1999. To assist you in identifying new candidates, PBSC is defined as a contracting strategy for recurring services that emphasizes that the work to be performed should be defined in mission-related output terms, focusing on what needs to be done rather than how to do it. The PBSC Checklist identifies the minimum required elements that must be present for an acquisition to be considered performance-based. These elements are:

  1. Performance requirements that define the work in measurable, mission-related terms;


  2. Performance standards (e.g., quality, quantity, timeliness) tied to the performance requirements;


  3. A quality assurance (QA) plan that describes how the contractor’s performance will be measured against the performance standards; and


  4. If the acquisition is either critical to agency mission accomplishment or requires relatively large expenditures of funds, positive and negative incentives tied to the QA plan measurements.

Although fixed-price contracts are the preferred contract type for PBSC, PBSC methods can be used for cost-reimbursement contracts and time and material/labor hour contracts. I trust the PBSC Advocate in the respective operating administrations (OAs) will assist (1) in raising the awareness of the program community to the PBSC program, and (2) in identifying new PBSC candidates. Those OAs that have not assigned a PBSC Advocate, in accordance with my August 28, 1998, memorandum should provide OAGM with the name, office symbol, and telephone number of their PBSC Advocate as soon as possible. Additional PBSC information has been collected and is located at http://www.dot.gov/ost/m60/pbsc/. The OAGM staff is available to work with you to identify candidates, provide training, etc.

In addition, in the FY2000 OMB passback, there is a requirement for the Department to provide a quarterly report on the progress of conversion to PBSC. The attached sample can also be used to report your quarterly progress. The first report is due to the OAGM by January 25, 1999, and should be updated to the period October through December 1998. Subsequent reports are due to OAGM by the 15th of the month following the end of each fiscal year quarter, i.e., April 15th, July 15th, October 15th, and January 15th. We expect these quarterly reports will include additional PBSC candidates. If you have any questions about PBSC or the reporting requirement, contact Jim Hawkins at 366-6688 or Dave Jordan at 366-4265.

cc:

George Moore, PBSC Advocate, FHWA
James Taylor, PBSC Advocate, RSPA
Ray Rogers, PBSC Advocate, FRA
Kathy Montgomery, PBSC Advocate, NHTSA
Tim Roark, PBSC Advocate, MARAD
Procurement Management Council Members
Alden Johanson, B-10

PERFORMANCE-BASED SERVICE CONTRACTING REPORT
NEW CANDIDATES FOR FISCAL YEARS 1999, 2000 AND 2001


  1. Operating administration


  2. Description of proposed contract services to be converted to PBSC


  3. Contract type of the contract to be replaced by PBSC conversion


  4. Date of expiration of the contract to be replaced by PBSC conversion


  5. Price or cost estimate of the contract to be replaced by PBSC conversion (rounded to nearest $100,000)


  6. PBSC conversion – (expected) date of contract award


  7. PBSC conversion – (expected) contract type


  8. PBSC conversion – (expected) price or cost estimate (including options)(rounded to nearest $100,000)


  9. Performance-based statement of work with performance requirements and standards (yes or no)


  10. Quality Assurance Plan/Contract Administration Plan (yes or no)


  11. Incentive(s) either positive or negative (yes or no). If yes, summarize the incentive(s)


  12. Savings realized by conversion to PBSC (how much and percentage)


  13. Performance improvement realized by conversion to PBSC (how much and percentage with brief narrative)


  14. Brief narrative assessment of conversion progress, including an explanation if progress is slower than anticipated


  15. Prepared by: (name, phone, email symbol)


  16. Approved by: (name of PBSC Advocate, phone number and date)