The acquisition of services plays a vital role in advancing and maintaining the mission capability of the Department of Defense (DoD). Services acquisition covers a broad spectrum of requirements from research and development, advisor services, information technology support, medical, to maintaining equipment and facilities. For over ten years the DoD has spent more on service requirements than it has on equipment acquisitions. While the acquisition of major systems follows a much defined process, the acquisition of services tends to be more ad hoc. Services acquisition is not about awarding a contract; it’s about acquiring performance results that meet performance requirements needed to successfully execute an organization’s mission.

This guidebook provides acquisition teams with a disciplined, seven step process, for the acquisition of services. Applying this rigorous and systematic approach requires the dedicated effort of an acquisition team composed of functional experts, contracting specialists, contracting officer representatives, and others working together to achieve performance results and value their mission requirements. It’s important to remember that the Federal Acquisition Regulation (FAR) states that the acquisition process is a shared “team responsibility”. Completing this process, like all acquisitions, takes allocated planning time. Getting your acquisition team organized and focused early in the process is a fundamental key to successfully achieving the mission results your customers require.

14.1.1. The Services Acquisition Process

When does the process start? It starts with a valid mission requirement for a service essential for the successful execution of the organization’s mission. The process continues through a planning phase, which develops the foundation for defining your requirement and business strategy, and ultimately ends with the delivery and assessment of the services provided.

The service could be provided by a new contract you develop; it could be provided by an already existing contract within your agency (or outside your agency); or could be part of your agency’s strategic sourcing efforts. The services acquisition process requires that you keep an open mind about where best to source the requirement until you have explored and assessed all the alternatives and developed a clear picture of the requirement and supporting acquisition strategy.

The services acquisition process has three phases.

Planning Phase:

Step One: Form the Team

Step Two: Review Current Strategy

Step Three: Market Research

Development Phase:

Step Four: Requirements Definition

Step Five: Acquisition Strategy

Execution Phase:

Step Six: Execute Strategy

Step Seven: Performance Management

Each phase builds on the knowledge gained in the previous phase. Some actions within each phase can be completed in parallel; others should be completed sequentially to make more informed decisions based on new knowledge gained. The project plan in Appendix B will help you tailor a plan for your service acquisition. This guidebook will cover each of the steps in detail and illustrate how to use the requirements roadmap tool to assist you in developing performance-based requirements documents.

The process is pictured below in Figure 14.1.1.F1.

Figure 14.1.1.F1. The Services Acquisition Process

The Planning Phase, steps 1, 2, and 3, lays the foundation for action. During the planning phase, you form the acquisition team and get leadership support for all the actions that must happen to ensure the mission is supported. Baseline and analyze your current service strategies; identify problem areas and projected mission changes; and get your stakeholders to define their key performance outcomes for this requirement. Also analyze the market place to assess current technology and business practices, competition and small business opportunities, existing and potential new sources of providing the service, and determine if commercial buying practices can be adapted.

During the Development Phase, steps 4 and 5, use the requirements roadmap process to define your High Level Objectives and tasks, standards, allowable variations, and method of inspection. After completing the roadmap you will then be in the best position to develop a performance work statement (PWS) and quality assurance surveillance plan (QASP). During this phase you will also identify your funding sources, develop a government estimate of contract price for the required service, and get industry feedback on your working documents. Finally, synthesize an acquisition strategy that leverages contract type and performance incentives to deliver a best value mission performance to the customer. The basic performance principle is to tell the contractor what the performance results are, not how to do the job. Let industry develop the solution.

In the Execution Phase, steps 6 and 7, you put all your planning and development efforts into action. You create a solicitation document that formally communicates to industry your requirements and strategy. You receive contractor proposals for how they will meet your performance results and standards and then evaluate them against criteria selected that will best determine the success of a potential contractor’s approach. After contract award, the business relationship you have with the service providing contractor should foster innovation and improvements to mission performance outcomes. This part of the process involves two key areas: administering contract requirements such as invoicing and payments; and managing the relationships and expectations of both the contractor and customers in meeting the terms of the contract and achieving the required mission performance results. You also start the planning phase for a follow-on acquisition if there is a continuing need for the service being provided.

14.1.2. What is a Service Requirement?

A service requirement’s primary purpose is to perform an identifiable task rather than furnish an end item of supply. Its primary purpose directly engages a contractor’s time and effort. A service requirement may be either non-personal or personal and performed by professional or nonprofessional workers whether on an individual or organizational basis. Some of the areas in which service requirements are found include the following:

Maintenance, overhaul, repair, servicing, rehabilitation, salvage, modernization, or modification of supplies, systems, or equipment
Routine recurring maintenance of real property
Housekeeping and base services
Advisory and assistance services (A&AS)
Operation of government-owned equipment, facilities, and systems
Communication services
Architect-engineering (see FAR part 36.6)
Transportation and related services (see FAR part 47)
Research and development (see FAR part 35)

For DoD, the various types of services are grouped into portfolio categories within the taxonomy for the acquisition of services (reference DFARS Procedures, Guidance, and Instruction PGI 237.102-74). The contracting officer is responsible for determining whether the services needed are non-personal or personal using the definitions found in FAR 37.101 and 37.4 and the guidelines found in FAR 37.104. Agencies shall not award personal service contracts unless specifically authorized by statute to do so.

14.1.3. Non-Personal Services Requirements

Non-personal service means that the personnel rendering the services are not subject, either by the contract’s terms or by the manner of its administration, to the supervision and control usually prevailing in relationships between the government and its employees. Non-personal service contracts are authorized by the government in accordance with FAR 37.102, under general contracting authority, and do not require specific statutory authorization.

14.1.4. Personal Services Requirements

A personal service is characterized by the employer-employee relationship it creates between the government and the contractor’s personnel. The government is normally required to obtain its employees by direct hire under competitive appointment or other procedures required by the civil service laws. Obtaining personal services by contract, rather than by direct hire, circumvents those laws unless Congress has specifically authorized acquisition of the services by contract as indicated in FAR 37.104.

In a personal services contract, the contractor is considered to be, and is treated as, an employee of the government. In this type of relationship, a government officer or employee directly supervises and controls the contractor’s personnel on a continuing basis. Personal service contracts require specific authorization.

14.1.5. Preference for Performance-Based Acquisitions (PBA) for Services

The FAR, in implementing Public Law 106-398, states that performance based acquisition methods should be used to the maximum extent practicable. PBA for services involves performance requirements and acquisition strategies that describe and communicate measurable outcomes rather than direct specific performance processes. It is structured around defining a service requirement in terms of performance results and providing contractors the latitude to determine how to meet those objectives. Simply put, it is a method for acquiring what results are required and placing the responsibility for how it is accomplished on the contractor.

To be considered performance-based, an acquisition should contain, at a minimum, the following elements:

Performance Work Statement (PWS) — Describes the requirement in terms of measurable outcomes rather than by means of prescriptive methods.
Measurable performance standards —Determines whether performance outcomes have been met; defines what is considered acceptable performance.
Incentives / Disincentives — Addresses how to manage performance that does not meet (or exceed) performance standards. While not mandatory, incentives should be used, where appropriate, to encourage performance that will exceed performance standards. Incentives can be both monetary and non-monetary.
· Quality Assurance Surveillance Plan (QASP) — Describes how the government will assess contractor performance against the performance standards contained in the PWS.

14.1.6. Objectives of Performance-Based Acquisition (PBA)

By describing requirements in terms of performance outcomes, agencies can help achieve the following objectives:

Maximize performance: Allows a contractor to deliver the required service by following its own best practices. Since the prime focus is on the end result, contractors can adjust their processes, as appropriate, through the life of the contract without the burden of contract modifications, provided the delivered service (outcome) remains in accordance with the contract. The use of incentives further motivates contractors to continue to exceed minimum contract performance requirements.

Maximize competition and innovation: Encouraging innovation from the supplier base by using performance requirements maximizes opportunities for competitive alternatives in lieu of government-directed solutions. Since PBA allows for greater innovation, it has the potential to attract a broader industry base.

Encourage and promote the use of commercial services: The vast majority of service requirements are commercial in nature. FAR Part 12 (Acquisition of Commercial Items) applies to the acquisition of commercial services and provides procedures that offer the benefit reducing the use of government-unique contract clauses and similar requirements, which can help attract a broader industry base. However, it is often the case that commercial services will be acquired through contracts awarded under FAR Part 15 (Contracting by Negotiation) given the limited contract types authorized under FAR Part 12.

Shift in risk: Much of the risk is shifted from the government to industry, since contractors become responsible for achieving the performance results contained in the Performance Work Statement through the use of their own best practices and processes. Agencies should consider this shift in responsibility in determining the appropriate acquisition incentives and contract type.

Achieve savings: Experience in both government and industry has demonstrated that use of performance requirements results in cost savings.

14.1.7. Principles of Performance-Based Acquisition (PBA) for Service Requirements

PBA is not a new procurement strategy. Many procurement activities have never stopped using PBA techniques. The Department of the Navy, as one example among many, has used PBA techniques effectively for facilities maintenance services for decades. The Department of the Air Force and the Army Corps of Engineers has employed PBA techniques in many of their service acquisitions.

PBA techniques are applicable to a broad range of service requirements. Simply stated, PBA methods structure a contract around the contractor achieving stated performance results and standards. The contractor’s performance against the required standards must be measurable through an objective process. This means that the government acquisition team must describe the required performance results in clearly defined terms with performance standards that can be effectively measured. This is often the most difficult part of implementing PBA techniques. Writing a Performance Work Statement in a way that describes performance results requires us to focus on the relationship between what needs to be done and how well it must be accomplished, not how it must be accomplished or how many full-time equivalents (FTEs) are required. When PBA techniques are not appropriate for use, the decision shall be documented and included in the contract file.

Let’s examine a couple of examples of writing a requirement that focus on achieving a specified outcome rather than how to perform the function. The Navy decided to outsource its ordering, inventory management, and delivery of aircraft tires. They could have developed a detailed specification on how to order, inventory, and deliver aircraft tires. What the Navy did was to review what performance outcomes the fleet needed to support aircraft operations around the world. Through this review and analysis they developed the following performance objectives, performance standards, and acceptable level of deviation depicted in Table 14.1.7.T1.

Table 14.1.7.T1. Performance Outcomes

Performance Objective	Performance Standard	AQL or Tolerance
Deliver any Navy aircraft tire required within CONUS	Within 48 Hours	95% On Time
Deliver any Navy aircraft tire required outside the CONUS	Within 96 Hours	95% On Time

With this simple set of performance outcomes, contractors were given wide latitude to develop an ordering, inventory, and delivery methodology to support Navy flying operations. Through the innovation introduced by industry the Navy achieved the following benefits:

$3M per year in supply chain management savings
Reduction from approximately 1.5 years wholesale inventory to three months
Reduction from 60 days to 15 days retail inventory at all Continental United States (U.S.) (CONUS) Naval Air Stations
Response times reduced to two days in U.S., four days outside CONUS (OCONUS)
On-time delivery improvement from 81% to 99+%
Over $49 million net savings to the Navy over life of contract

Another example of the challenges you’ll face in developing performance outcomes is illustrated by an example from the Corps of Engineers. The Corps had developed a comprehensive Statement of Work (SOW) for a dredging requirement. It specified where to dredge, how to dredge, when to dredge, and provided little opportunity for innovation; after all it’s just dredging, right. So let’s step back and try to understand what the real requirement was. Why was the dredging required? Was that the real requirement? Isn’t dredging a process to achieve an objective or outcome? After some prolonged and heated discussion, they determined that the dredging was required so that shipping could proceed through a specified channel without underwater obstructions. In other words keeping the channel open was their performance objective, not dredging.

With this new focus, the next question was how well or to what standard must the channel be kept (not dredging)? The answer was 100 feet wide and 12 feet deep mean low water. Now they had a performance standard, but how would they know if the contractor was meeting that performance standard? Their answer was providing a boat with a global positioning system (GPS) and sonar system that could measure depth and position to ensure the channel met the specified standard. With their new performance objective, performance standard, and a means of inspection, they were well on their way to developing a simpler, more performance-based requirement.

No matter where you are in the services acquisition process, it’s very easy to get trapped into a preconceived idea of how a particular function should or must be performed. Like the examples cited above, you need to keep the focus on what mission outcomes you are trying to achieve, not how the process must be accomplished. If you can keep a higher view of what you’re asking a contractor to accomplish, you will have far more success in implementing a performance-based approach for your service requirements.

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