Tuesday, February 9, 2016

Performance Incentive Strategies for Improved Contract Management

Continuing the conversation started by Dr. Steve Kelman on FCW and from mylast post on improving contract management, one way highlighted was better use of performance-based contracts.

During some research for a project this week, I couldn't help notice the supposed incentives these performance work statements (PWS) included. I reviewed the PWS for almost five contracts across several agencies, and what was almost the universal incentive?

...Satisfactory contract performance will result in a positive past performance review...

The negative incentives were almost all the same as well, namely:

...Unsatisfactory contract performance will result in a negative past performance review...

I suppose you can categorize this "incentive/disincentive" plan as non-monetary. However, this is nothing short of mandatory contract management functions required under Federal Acquisition Regulation Part 42.

However, the reality is that incentives should motivate a contractor to achieve higher than average performance levels, consistent with economic efficiency and risk. To this end, incentives need to ensure that they are effective, and that they reflect value both to the government and to the contractor.

As I previously stated, effective contract management starts in the beginning. Early planning is essential in determining and defining requirements in clear, concise language. Further, there needs to be a focus on specific work outcomes to ensure that they are to the greatest extent practicable based on the SMART acronym: 
  • Specific – target a specific requirement. 
  • Measurable – quantify an indicator of progress. 
  • Achievable – specify outcomes that are possible and can be successful. 
  • Realistic – state what results can realistically be achieved, given available resources. 
  • Time-phased – specify when the result(s) can be achieved. 
Collaboration with industry is also essential. Through market research (i.e. industry days, one-on-one sessions, draft solicitations, etc.), industry feedback needs to be solicited regarding performance objectives, requirements, standards, and incentives.

I always prefer monetary incentives, again keeping in mind SMART. Working in conjunction with industry partners to achieve the desired outcomes, incentives should be consistent with the effort and the contract value. They also must be carefully structured to consider the overall impact for providing value in achieving the mission, and to avoid any unintended consequences. Further, if the incentives are not clearly communicated, or through a lack of communications between the government and the agency regarding desires and expectations, there will be little chance of achieving the desired outcome.

Positive incentive examples: 
  • When performance exceeds standard, pay x% of monthly payment into pool. At end of y months, pay contractor amount accrued in pool. 
  • When performance exceeds standard, pay x% of monthly payment into pool. When pool has reached y dollars, pay contractor amount accrued in pool.
Negative incentive examples: 
  • When performance is below standard for a given time period, x% of that period’s payment will be withheld. 
  • When performance is below standard for a given time period, require the contractor to re-perform the service at no additional cost to the government.
Simply stating that a negative past performance rating will be the result of poor performance, with little information or desire about how the contract will be managed, is a recipe for mediocre performance and not an effective way to execute performance-based acquisition.

A very effective tool is the Guidebook for Performance-Based Services Acquisition (PBSA) in the Department of Defense. It is worth a read, and provides a good roadmap to helping ensure a contract has a better chance of success through the upfront work necessary to realize better contract management outcomes.

Wednesday, February 3, 2016

Contract Management Starts at the Beginning

As part of a continuing discussion on contract management, former Administrator of the Office of Federal Procurement Policy, Steve Kelman, blogged about the need to focus on this issue on Federal Computer Week

Responding to this call, ASI Government is allowing access to some of their tools, which are normally only provided as part of a subscription to their Virtual Acquisition Office. These tools are a good primer on contract management, and should provide some useful reference for those seeking to learn more about how to effectively manage contracts.

Nonetheless, effective contract management can only be successful if a real, outcomes-based focus is done upfront, and before the contract is even awarded. The acquisition reform initiatives currently underway across government continue to be focused primarily on pre-award contracting functions, without a clear path on how to effectively manage these contracts once they are awarded.

Why has this been problematic? First and foremost, failed leadership continues to plague effective contract management. Either through a lack of attention to agencies' contracting activities, or the inability to properly analyze data through antiquated or ineffective contract management solutions, it seems like senior officials remain blissfully ignorant of waste and abuse. As reported by the Government Accountability Office (GAO) in testimony from 1992: 

…In other cases, senior officials have not made managers accountable for effective contract administration, nor have they made a sufficient commitment to correct contracting problems that have surfaced…

It seems little has changed in the almost 25 years since this testimony was given. Even recent testimony by GAO describes ongoing issues with contract management, as they relate to services contracts: 

…As we testified before you in May, Mr. Chairman, agency procurements of services often are not being conducted as efficiently as they could be. We have found that too frequently agencies are not clearly defining their requirements, fully considering alternative solutions, performing vigorous price analyses, or adequately overseeing contractor performance. Such problems clearly point to a need for more focused management attention… 

This report describes several areas of needed improvement. Namely, strong Chief Acquisition Officers across government with clearly defined roles and responsibilities, improved training of the acquisition workforce, and better adoption of performance-based contracts.

However, if we want to start fixing contract management issues across government, we need to start at the beginning, and have leaders across government who recognize the problem. These leaders need to be engaged, and have the ability to address the problems from the ground up if we expect any real change.

Saturday, June 27, 2015

Agile Development Starts With Agile Contracting

The General Services Administration’s highly touted Blanket Purchase Agreement for Agile development, otherwise known as 18F, has been delayed until July 1. Perhaps GSA should think about delaying the solicitation some more. 
One issue that I have been discussing is the lack of capability in the acquisition workforce when it comes to Agile, in general. Their training and experience has been centered, for the most part, on large, multi-year contracts that use waterfall approaches to software development. Agile requires a new set of skills, and my fear is that 18F will face difficulties with implementation because the cart is being put before the horse.
To help alleviate this issue, the U.S. Digital Service and Office of Management and Budget’s Office of Federal Procurement Policy has recently put up a Challenge; to teach the acquisition workforce how to contract for these digital services.
According to the Challenge announcement, the program, which is deigned to be six months or fewer in length (fewer is the hope), would be aimed at helping federal contracting officers and contract specialists navigate digital services procurement.
Per the announcement, a successful program will teach contracting professional how to:
  • Understand and procure digital services and supplies utilizing concepts such as those described in the Digital Services Playbook and the TechFAR (e.g, DevOps, UX, Design Services, Agile Software Development, Open Source, Cloud, Iaas, SaaS, and PaaS).
  • Appropriately measure the success of these contracts based on industry standards.
  • Accurately describe and define the value received.
  • Encourage the use of commercial practices and innovative approaches (e.g. modular contracting, broad agency announcements, challenges and prizes) to ensure procurements can capture flexible and rapidly changing technology advancements.
This Challenge demonstrates the reality that procurement shops across government do not have the internal capability to acquire these services. However, why was this Challenge not done a year ago? Why has capability for Agile contracting not become a top priority for the Federal Acquisition Institute, or the Defense Acquisition University?
The Challenge program is set to rollout January 2016, but I hope that agencies understand the capability gaps and fill them such that the 18F program does not get further delayed in its implementation.

Monday, May 11, 2015

Politicians and Protests Don't Mix

According to language included in the National Defense Authorization Act (NDAA), which passed out of the House Armed Services Committee on April 30, Congress is seeking answers to the recent surge in protests the last few years.
The NDAA has a provision instructing Defense to commission a study regarding how Defense contractors are using the protest process in their favor, or simply manipulating the system.
I believe the Government Accountability Office (GAO) has already addressed these issues in their latest report to Congress (here). Also troubling is the desire to use a Federally Funded Research and Development Center for this analysis, which is a troubling potential contracting issue in and of itself.
Allow me to answer the commission's questions and save the taxpayers untold millions:
The issues this “commission” is tasked with analyzing include: 
(1) If contractors who currently have a DoD contract enter a bid protest to delay the implementation of new contracts that would draw business away from the old one. The Government Accountability Office has up to 100 days to review a bid protest and render a decision.
I have had only one contractor be candid with me about it, but of course you are going to protest in this situation as the incumbent! Honestly, what do you have to lose? You lost the contract, and that is 3 extra months of revenue. What is the downside? Some would argue bad faith, strained customer relations, etc. Ninety more days of revenue trump these concerns, especially in this cutthroat, hyper-competitive government contracting market. 
(2) The extent to which companies file a bid protest even when they do not believe the Defense Department made an error in order to delay or otherwise disrupt the process.
I call these protests “sour grapes,” and no attorney worth their salt will admit to them, since the attorneys, in my opinion, are the only ones that win here. Some firms just get bad legal advice, other firms may just not know any better.
However, I have had several companies tell me that these protests were filedsimply because the risk averse contracting community is not providing enough information in the debrief process to give contractors confidence in the contract award decision.
Therefore, these protests are filed in hopes of digging up some dirt, and ultimately exerting pressure on the Contracting Officer for the ultimate goal of the protest and the third issue;
(3) Whether there are net benefits for companies filing a protest or indicating they plan on filing a protest.
The statistics show that this is the real path to protests, getting another bite at the apple in some form or fashion through corrective action. 
This effectiveness rate, which held steady at 43 percent of all cases filed last fiscal year, and as reported by the GAO, is the important figure. Nearly half of all protests ended by having the protested agency take some action. Those are pretty good betting odds.
This corrective action might take the form of pulling and rewriting objectionable parts of the solicitation, brokering with the protestor to win work with the winning contractor, or reevaluating the losing contractor's proposal.
The buying environment is creating the protests pressures on both sides, and the continued lack of communications and collaboration with industry by government exacerbates the issues. Further, many firms use protest after protest as part of their contract development strategy, with little consequence since the protest process is ripe for abuse. 
We do not need Congress to waste money on reports and committees that provide little useful information. Instead, taxpayers would be better served by properly resourcing government management and demanding accountability for results.

Thursday, April 23, 2015

Project Management: The Missing Link of Acquisition Reform

An article published this week on Federal Computer Week highlights the woeful state of the project management capability that currently exists in the federal government, and how attention needs to be paid to this critical government management function.
In the article, Healthcare.gov is once again the punching bag for the model program of what a federal boondoggle is all about. However, lessons learned from this program, along with the Government Accountability Office making Information Technology (IT) acquisition the newest member of their High Risk list , has seemingly given traction to the fact that acquisition reform is a holistic model, and must also include those activities that happen after a contract is awarded.
Former Department of Homeland Security CIO Richard Spires made an excellent point about the focus area:
This is not really a technology problem as much as a skill and cultural one,” he said. “Culture is the biggest issue.
This is an interesting article worth a look, as creating the culture of performance and constant improvement can have a major impact in improving federal programs, especially when it relates to IT.
It is the implementation of the U.S. Digital Services Playbook, along with theTechFAR Handbook, that holds the most promise for turning around federal IT programs through proper use of performance based contracting, and best practices of agile.
The inaugural podcast by Anne Rung, Administrator of the Office of Federal Procurement Policy, highlights successes in IT acquisitions using these prominent procurement tools. The first podcast featured Mark Naggar, project manager of the Department of Health and Human Services' (HHS) Buyers Club. He detailed his use of the TechFAR Handbook and the Digital Services Playbook, specifically noting that he tapped play No. 4, "build the service using agile and iterative practices," to help his team quickly contract with numerous firms for development of IT system prototypes.
The HHS initiative is a great foundation for the art of the possible in government, were engaged and committed leadership demands improved performance from their teams, provide the resources and means to achieve it, and have accountability at the forefront of results.
Combined with effective and agile contracting technique, effective project management can be the critical success factor for programs to succeed. It should be an concerted, integrated effort to address the failures of government management, and not an either/or proposition.

Sunday, April 19, 2015

Want to Win Government Contracts? Do Your Homework

One of the most common complaints that I hear from Contracting Officers in the federal government is the frustration with small businesses.
These frustrations often revolve around responses from small business, or lack thereof, to market research, especially responding to Requests for Information (RFI). These issues are also often exacerbated by small businesses that seemingly waste the time of government officials by not being focused in their business development strategies and outreach to government.
Why? The common denominator is often the lack of education about how federal government contracting works.
Here are some tips to ensure you are educated and ready to help build productive relationships with federal prospects:

Know Thyself

It sounds rather self-explanatory, but there is noting worse that witnessing this train wreck, which regretfully I have seen all to often:
Federal prospect: “So what does your company do?”
Small business: ”Well, we do some cyber security. Combined with some project management. We are also a SVDOSB….”
After about 5 minutes of this, the federal prospect is looking at her watch, says thank you, and is thrilled to be heading out the door or going on to the next person.
You need to be able to describe your products and services very succinctly, and be able to demonstrate the value proposition of your offerings in a typical “Elevator Speech” of no more than 30 seconds.
Articulate what you do, discuss your differentiation, and stay focused.

Don’t get intimated

Going to events around Washington, D.C. can be a challenge. Not only is it hard enough to get access to procurement officials, but also you normally have to wait in line behind large business representatives that have easier access and the resources to get it.
Understand that outside of events, you have to focus your messaging to your target market. The government has a 23% goal of awarding government contracts to small businesses. Granted it is not reality, nonetheless it is an opportunity to use any socioeconomic designation to your advantage. Further, looking at opportunities where the government is doing simplified acquisition procedures, normally set aside for small businesses, is another avenue to help increase your chances without having to go against the large firms in open market bids.
Be good at paperwork and administrative hoops to jump through
Government contracting is not for the faint of heart, as the restrictions, regulations, and laws can be a minefield, and can potentially destroy companies who do not understand them.
The Small Business Administration has many resources available to set you on the right path to compliance and ensuring your company is setup for success.
Procurement Technical Assistance Centers are also available to help small businesses compete successfully in the government marketplace.

Gain past performance through subcontracting

Prime contracts are the ultimate goal, but another path to success is to work as a subcontractor for larger companies. Although large firms not only have small business databases and small business liaisons to find potential teaming partners, don't count on firms beating down your doors.
These big contractors have dozens of companies coming to them with hat in hand all the time, expecting to get business from them simply because they have some socioeconomic designation. This alone will not get you any interest.
Large businesses will be most receptive when you have identified opportunities for which the large business can see immediate potential for an award. With this potential, now the large business can bring to bear their influence, past performance, and market influence.

Research government databases and build your pipeline

Most small business advocates at agencies will tell small businesses to go to Federal Business Opportunities, commonly referred to as FedBizOpps, to look for contract opportunities at their agency. Although this is not particularly bad advice, firms that think they can simply use FedBizOpps to find opportunities will typically not be successful.
Small businesses mistakenly think that they can simply bid on opportunities posted on FedBizOpps, and they stand a chance. The reality is that firms spend months, if not years, in the capture management process marketing their goods,building good will, and the relationships and the brand awareness necessary to lower the risk to the government of selecting your firm for award.
One of the best tools available for pipeline and opportunity development is the Federal Procurement Data System (FPDS-NG). The FPDS-NG system is a key open source for data related to the initial award and subsequent modification of agency contracts and contract vehicles. While it is the Government's primary repository for historical contracting data, FPDS-NG can be a key tool to analyze opportunities and develop your strategy to put you ahead of your competition, find teaming opportunities, build a pipeline, and expand your horizon to win contracts before they are posted on FedBizOpps.

It’s ultimately about the relationships

Although it is very difficult to get access to government officials, relationships are the ultimate successful factor for a winning small business government contractor. You can't just rely on cold calling and mailing brochures, since the government official probably will not get them anyway.
So while getting your firm compliant and doing paperwork is important, pounding the pavement and networking to meet the government decision makers, and those at large contractors, is what will ultimately lead to success. You should also be doing that in person, so pick the events you want to go to wisely. You could spend a fortune going to events literally every day in Washington, D.C. alone.
Lastly, focus your marketing on the two or three agencies where you have the best chance of success by aligning your goods and services with those of your target agency where you have the best chance of winning business.
Government contracting is extremely difficult, and has only become more challenging with budget cuts and sequestration. However, it can be extremely lucrative, and also very rewarding to work on some of the most important missions and challenges government faces.
Focus yourself and your marketing, do you homework, and the world of government contracting will be an exciting and rewarding opportunity to expand your business prospects and your company’s future.

Thursday, April 16, 2015

Basic Steps To Build A Project Estimate

One of the most difficult challenges project managers have in creating the preliminary project package is the Independent Government Cost Estimate (IGCE).

First, what is an IGCE?
According to the Defense Acquisition University:
The IGCE is the Government’s estimate of the resources and projected cost of the resources a contractor will incur in the performance of a contract. These costs include direct costs such as labor, products, equipment, travel, and transportation; indirect costs such as labor overhead, material overhead, and general and administrative (G&A) expenses; and profit or fee (amount above costs incurred to remunerate the contractor for the risks involved in undertaking the contract).
The IGCE will be developed by the requiring activity, and will be used to establish a realistic price or cost for budgeting purposes by the Contracting Officer, in addition to being the baseline for evaluating an offeror’s price/cost proposal. Further, the IGCE will also be used for technical and management information.
Here are some steps and tips for creating your project’s IGCE:
1) Define the Tasks to Estimate
First things first, you will need to determine all the tasks that need to be performed on the project. This can be best accomplished using the Work Breakdown Structure (WBS). Planning tasks by using a WBS allows you to break down the work packages to the lowest level elements for estimating and scheduling resource requirements (people, facilities, and equipment). Further, the WBS can ensure all tasks are identified in terms of cost, schedule, and performance goals in order to reduce risk.
2) Identify Expertise on the Project Team
Hopefully you are working in an Integrated Project Team (IPT), which should be composed of functional experts from the various disciplines needed to manage the project throughout the lifecycle. This diversity will help you estimate and define the tasks, as many of the ultimate tasks will have someone from the IPT allocated to do the work. Once identified, this resource assigned the task is probably the right person to help prepare the estimate.
In the event that IPT members are not the right people, or you are not in an IPT, find someone who can help with the estimate. These individuals ideally have expertise from past experience on similar or like projects. Ultimately, you will need to identify who will create your estimates for every project task. Once you know who will be responsible for helping create the estimates, you can then plan to meet with the right people so you can focus on their sections of the project outside of the typical IPT meetings and the guessing game that often comes with these estimating exercises.
3) Determine the Estimating Technique
Outside of the professional judgment of IPT members or outside the group to help shape estimates and task durations, here are three common techniques:
Analogous estimating. Basing your estimates on the results of a previous project is one the best estimating techniques that project managers can use. If you can find a similar project done in the past, or currently being executed, then you can access the duration of tasks, labor categories used for task estimates, and project budget. Although this estimating technique is efficient, do not fall into the trap of simply cutting and pasting, as this technique may not get you very accurate results.
Parametric estimating. Parametric estimating is a more accurate technique for estimating costs and task durations, as it uses the relationship between variables to calculate the task cost or duration. For example, if it took me two hours to paint a 100 square foot room in my home, and I plan to now paint a 400 square foot room, I could estimate that it will take eight hours to paint.
However, if the first hour were spent prepping the room to paint, the estimate would need to be scaled appropriately: 1 hour for prepping and then four hours to paint, for a total of five hours.
Three-point estimating. This technique allows taking into account uncertainties of estimates, but weights the result more heavily towards the most likely outcome. You will need to determine the most likely, best case, and worst-case timescales for the task. With these figures, add together the durations for the best and worst case, plus four times the most likely. Then divide by six.
The equation:
Best case (O, for optimistic)
Worst case (P, for pessimistic)
Most likely (M, for…. Most)
(O + 4M + P) /6
You can also use this technique for labor costs, especially for labor rates per labor category. One of the best techniques for getting the rates is using the GSA Schedules from GSA Advantage.
4) Track the Accuracy of Estimates - Lessons Learned
Creating estimates is not a one and done exercise. Once they are done, you want to continue to build institutional knowledge by verifying the accuracy of the estimates to determine how well you and the team estimated the task durations and their costs. You should determine whether a particular technique for estimating worked best for your team, or for different types of tasks.
This exercise is for lessons learned, as you will be tracking actuals versus estimates for task durations and costs. Verifying how much time you thought the task would take or cost, and comparing it to how long it really took or cost, is a great way to sharpen your estimating skills to improve on future estimates and to also verify how accurate your estimates were.
Cost estimating is often a difficult exercise, and many project managers have difficulties knowing where to start. These tips should get you on the right path to creating realistic estimates for your project, and avoid the ever-present Atmospheric Estimate.