Performance-Based Acquisition (PBA) is a federal government acquisition initiative that can be used in the environmental area to promote innovative cleanup technologies and approaches that expedite completion of the Army's environmental cleanup obligations while reducing the Army's funding uncertainties and lowering overall taxpayer liability. This acquisition approach provides financial incentives for cleanup contractors to develop and implement an expedited and efficient approach to achieve environmental remediation goals at Army installations. PBA also provides contractors more flexibility in exercising approaches that are more cost effective to both the contractor and the Government. Subpart 37.6 of the Federal Acquisition Regulations prescribes policies and procedures for acquiring services using PBA methods.

Performance-Based Acquisition (PBA) is a concept based on reforms mandated to all Federal Agencies by the President's Management Agenda, the Government Performance and Results Act of 1993, and the Federal Acquisition Streamlining Act of 1994. These reforms emphasized the need to focus on results instead of focusing on the processes used to achieve those results. Using this approach, the government no longer develops a prescriptive statement of work dictating how the contractor will achieve project milestones. Instead, the government develops a Statement of Objectives or Performance Work Statement that describes the overall outputs and objectives but does not specify how to achieve those outputs. This approach allows private remediation firms more flexibility to conduct environmental cleanups in a manner that is cost effective for their company while ensuring that required milestones are achieved.

A Performance-Based Contract (PBC) is the contract or task order tool that is implemented as an integral part of PBA. The hallmark of a PBC is that it contracts for an endpoint rather than mandating how work will be completed. The general characteristics of a PBC include the following:

• Contract for "What," not "How"
• Clearly define objectives, milestones, and standards
• May use incentives to enhance performance
• Promote flexibility in exchange for accountability
• Use fixed-price contracts
• Use environmental insurance where required to mitigate uncertainties

According to an Interagency Partnership on Performance, sponsored in part by the Department of Defense, the benefits of PBA include the following:

• Increased likelihood of meeting mission needs
• Focus on intended results, not process
• Better value and enhanced performance
• Less performance risk
• No detailed specification or process description needed
• Contractor flexibility in proposing solution
• Better competition: not just contractors, but solutions
• Contractor buy-in and shared interests
• Shared incentives permit innovation and cost effectiveness
• Less likelihood of a successful protest
• Surveillance: less frequent, more meaningful
• Results documented for Government Performance and Results Act reporting, as by-product of acquisition
• Variety of solutions from which to choose

The goal of the Army is to efficiently achieve completion of all remediation requirements at its environmental restoration sites and, when appropriate, transition the property back into productive reuse. Prior to implementation of the PBA initiative, there were significant variations in program performance, including increasing or unstable cost-to-complete estimates and significant schedule slippage. Installations were completing only 60%-70% of planned milestones on time.

PBA is seen as one mechanism to help achieve the Army's goals. There is a strong conviction that, as in other areas of government services, awarding performance-based contracts will encourage innovation and enhance contractor performance. Based on several pilot projects and a recent performance metrics review, the Army believes that applying a performance-based contract approach, in combination with the requirement for environmental insurance at some sites, will improve overall program performance and help the Army to achieve its cleanup goals.

The Army believes there are several benefits from the PBA approach. From the Army's perspective, PBA creates greater certainty that environmental restoration work will be completed on schedule within an agreed upon budget. This allows for more effective planning because the Army is able to allocate appropriate resources to the restoration program and lock in restoration funding requirements at the current year dollars. In addition, past experience shows that companies implementing a PBC are aggressive in seeking the most effective means to an end, while still meeting the requirement of obtaining regulator acceptance.

In addition, because these are performance-based contracts, the approach provides remediation firms flexibility in determining the most effective means to achieve the stated performance objective. The Army seeks firms with experience in specific remediation areas to ensure that the best approaches are being employed at its sites. By seeking the best firms, and allowing them flexibility in approach, contractors should be able to achieve cleanup at a lower overall cost to the government.

No. According to the Department of Defense, Office of the Under Secretary of Defense (Installations & Environment) "Performance-based Approaches to Acquiring Environmental Restoration Services", PBCs are being used across the Army cleanup programs. The Base Realignment and Closure (BRAC) program implements performance-based acquisition through use of PBCs as well as Environmental Services Cooperative Agreements (ESCAs) and has a goal of implementing PBCs or ESCAs at the legacy properties (i.e., those bases not included in the 2005 BRAC round). Although ESCAs are different in their structure than PBCs, the main elements of performance based acquisition are in tact. In addition, the Formerly Used Defense Sites (FUDS) program is initiating use of PBCs.

Army Senior Leadership has established a goal to implement performance-based acquisitions for 60% of the Army's Active Installation Restoration Program by the end of FY07 and to maintain that level of PBA expenditure from that point forward. All active installations will be reviewed on an annual basis for consideration of use of performance based contracts in order to meet these goals. However, these are meant as goals only. Each installation will be evaluated based on the status of its cleanup program, including progress to date and overall execution strategy to determine whether a PBA should be considered for part of the installation procurement strategy.

The above requirements for utilizing PBA are based on complying with the Army Environmental Cleanup Strategy (AECS) where part of the purpose is to identify common objectives for creating consistency and accountability across the Army's Cleanup Program. To attain these objectives, the Army needs to take a hard look at how we are currently doing business and identify where to incorporate best commercial practices to improve the effectiveness and efficiency of the cleanup program. Innovative and bold strategies should be explored to increase program effectiveness and to streamline program management. Program variations must be minimized and better business practices must be implemented.

Army Senior Leadership has established a goal to implement performance-based contracts for 60% of the Army's Active Installation Restoration Program by the end of FY07 and to maintain that level of PBA expenditure from that point forward. All active installations will be reviewed on an annual basis for consideration of use of performance-based contracts in order to meet these goals. However, these are meant as goals only. Each installation will be evaluated based on the status of its cleanup program, including progress to date and overall execution strategy to determine whether a PBA should be considered for part of the installation procurement strategy.

No. The Army's original intent for PBA was to reduce schedule slippage and variability in the cost to compete (CTC). However, as a result of allowing contractor flexibility in the remediation approach, incorporating insurance requirements on fixed-price contracts, and ensuring competitive procurements, the government has seen significant cost avoidance throughout the program.

The Army is using PBAs as a method for expediting cleanup at installations. There are numerous sites at Army installations that have been well characterized but do not have remedial actions planned or implemented. PBA allows the Army to promote efficient, incentivized approaches to cleanup of these sites. The PBA strategy focuses on overall program objectives instead of specific tasks, reduces cost overruns and schedule delays that have become typical in remediation contracts, allowing sites to be cleaned up and closed in a timely manner. The community benefits because PBA will lead to an efficient cleanup of contaminated sites where progress was previously delayed, thereby better protecting human health and the environment in addition to fostering productive reuse by the community or the Army.

The PBA approach does not affect the Army's environmental liability or authority over site remediation. Instead, it offers a significant financial buffer to the Army because third party endorsements are provided for known constituents and unknown contaminants. While the Army will hold the contractor liable for fulfilling the PBA contract and achieving the PBA performance measures, the Army still retains statutory liability for the site. Additionally, to meet its statutory and contractual responsibilities, the Army must maintain authority over the site cleanup through review of the PBA contractor(s) performance and approval/signature of project milestones and remedial documentation.

No. The Government Accounting Office (GAO) defines the term "privatization" as "any process aimed at shifting functions and responsibilities, in whole or in part, from the government to the private sector." (See www.gao.gov/special.pubs) Privatization is often found in the service and utilities industries, such as constructing and operating utilities, performing maintenance activities, etc.). Many government agencies have made a strong push toward privatizing services; however, PBA is not part of this push. Under the Army's PBA initiative, the services being contracted are those that were already being conducted (or planned to be conducted) by private remediation companies (i.e., this is not work that the government intended to conduct itself). There is no additional shift of work from government to the private sector. Rather, PBA is implementing a contracting mechanism that places more of the responsibility for achieving environmental remediation goals on those conducting the implementation work - the contractors. Contractors do not receive payment until the Army and regulatory authorities determine that project milestones have been met. PBA represents a shift not in the work type, but in the contract focus of outcomes and performance. The Army retains approval and signature authority, with the statutory and contractual responsibility to manage the contractor's performance.

There are a number of online resources available on PBA. Please see our list of links for more information.