Date: March 13, 1998

ACTION: DOT Acquisition Incentive Award Program

(original signed by)
FROM: David J. Litman
Director of Acquisition and Grant Management, M-60

TO: Procurement Management Council Members


In a memorandum to the Secretary's Management Council Members dated August 25, 1997, the Deputy Secretary initiated the Department of Transportation (DOT) Acquisition Incentive Awards Program. The intention of the award was to acknowledge all members of an acquisition team who exhibited excellence and/or innovation which supported the organizational goals and strategies. A critical element of the program was that it was based upon tangible results achieved, not just general excellence. While general guidance was provided by the Deputy Secretary, each operating administration (OA) was encouraged to develop and implement their own nomination and award process.

I would like to provide you with further details and some examples of how some of your colleagues have addressed this program.

General Guidance

1. The basic selection criteria for nominations for the award are:



• The effort must have measurable results; e.g., cost savings, reduced cycle time, measurable improved quality, etc.;
• The effort must be accomplished by a "team". This team may consist of personnel from the functional areas of technical, procurement, legal, financial logistical or other acquisition personnel; and,
• The effort should reflect excellence and/or innovation.
• The award should not be to reward sustained excellent individual performance.


2. As we discussed, each OA is responsible for handling its own nominations and selections. You may incorporate the Acquisition Incentive Award into your existing awards program and structure, or you may establish it separately. However, it should be formally established and publicized within your OA, and you should periodically seek nominations for the award.



3. There will not be a formal DOT-wide recognition ceremony since we expect awards may be given at various times during the year. However, the Office of the Secretary would be pleased to participate in any recognition ceremony (the Deputy Secretary has done this in the past), and/or recognize any OA recipients at Departmentwide acquisition events or though media such as the DOTted Line. To this end, we request that you notify Kathryn Espenshade of any awards made under this program and advise us of any OST participation or recognition desired. OST approval of proposed awards is not required.

Recent examples:

1. The Maritime Administration has incorporated the award into their orders program. Attachment (1) provides a copy for your information.



2. The Federal Highway Administration has already made an award under this program to a group of employees who were successful in attaining significant cost savings for the Government. Attachment (2) provides a copy of the recent internal award.

Also, attached is a copy of the information from the Deputy Secretary and an example of a nomination form. If you would like any additional guidance or assistance, please contact Kathryn Espenshade on (202) 366-4276.

Attachments

3 Acquisition Incentive Awards may be granted to groups of employees for tangible/measurable improvements to the acquisition process for an individual acquisition or the acquisition system as a whole. Recognized efforts must have measurable results, e.g., cost savings, reduced cycle time, measurable improved quality, etc.; must be accomplished by a team; and should reflect excellence and/or innovation.

12.01 Recommendations for cash awards, Special Act or Service Awards, Spot Awards, or Acquisition Incentive Awards shall be submitted using Form MA-906.

12.04 Recommendations for Acquisition Incentive Awards shall be submitted through established channels to the Chief of the Contracting Office (MAR-380) in Washington, DC, for technical review prior to being forwarded to the Head of the Contracting Activity (MAR-300) for approval. The justifications must clearly show how the achievements for which the awards are recommended are measurable and reflect excellence and/or innovation in the acquisition process.

14.01 Monetary amounts for Special Act or Service Awards and Acquisition Incentive Awards shall be based on the appropriate tables for tangible or intangible benefits provided in the appendix to this order.

FHWA POSITION: The Associate Administrator for Administration recommends the approval of this award from the Team Achievement Award Pool.

BACKGROUND: Deputy Secretary Downey established the Department’s Acquisition Incentive Award Program in August, 1997 (See Background Tab). The purpose of the program is to recognize teams of employees whose efforts reflect measurable results and reflect excellence and/or innovation. This group skillfully identified key elements of a contract where substantial cost savings could be realized while preserving the quality of performance required. The team also employed innovative and efficient procurement processes.

Each operating administration is to fund their own awards. Since employees from R&D and Administration worked on this team, it is appropriate to fund this award from the Team Achievement Pool.

POINT OF CONTACT: Anthony Matoccia, HAM-40, ext. 64232

SUPERVISOR: George Moore, Jr., HAD-1, ext. 60604

BASIS OF RECOMMENDATION:

A Federal Highway Administration (FHWA) team consisting of personnel from the Office of Acquisition Management and the Office of Safety and Traffic Operations R&D were successful in attaining significant cost savings in excess of $2.1 million and using innovative streamlining techniques in negotiating a cost-plus-award fee task order contract. The contract is for a state-of-the-art computerized system that will provide advance surveillance, control and information for traffic information of highways, and is an integral part of DOT’s Intelligent Transportation System.

The total price proposed by the offeror of $22 million exceeded the government estimate of $20 million. The FHWA objective in the negotiations was to achieve the program requirements at the government’s estimate, without sacrificing quality. During negotiations the contractor proposed to reduce costs by reducing labor hours or replacing key staff with less experienced personnel. The team considered both the reduction or replacement of personnel unacceptable for this technically complex program.

The FHWA skillfully analyzed labor, overhead and profit contained in the proposal. The negotiation team identified key elements where significant cost savings could be achieved. The team’s negotiation strategy was to obtain a reduction in the contractor’s labor costs, overhead and profit. After many sessions of intense negotiations, the team was successful in having the contractor reduce their bottom-line price while preserving the proposed level-of-effort and skill mix essential of this requirement. As negotiated by the team, the offeror cost-shared additional labor hours and reduced their overhead and profit for a total reduction of approximately ten percent or $2,132,235 from that initially proposed. The contractor ultimately agreed to significantly reduce its costs because of their desire to become a larger participant in the ITS market at the federal, state and local levels.

In addition, the team employed new procurement streamlining processes on this effort, such as determination of capabilities and oral presentations in lieu of evaluation of lengthy formal written technical proposals. These more efficient processes allowed the evaluation panel to make a real-time and comprehensive assessment of the contractor’s qualifications to successfully perform under the contract.

As a result of the team’s efforts, the FHWA obtained an excellent value for performance of this high profile program. New effective procurement methods were used during the pre-award process which resulted in reduced procurement lead time of over two months and lower administrative costs for the government and the contractor. Overall this procurement demonstrated a win-win situation for both the government and the contractor.