Using metrics to manage contractor performance

Abstract

Acquisition transformation has brought numerous changes to the way the Department of Defense (DoD) purchases goods and services, as well as to the way it manages the contractor's performance after contract award. One of the most significant changes has been the emphasis on the use of commercial goods and services coupled with the use of performance-based contracts to satisfy mission-critical needs. As the performance of contractors has become more critical to the mission, there has been a significant reduction in the number of acquisition personnel available to perform what traditionally has been referred to as contract administration tasks. In addition, with the increase in the amount of services contracts, there has been a change in the skills needed to manage contracts after award. Contract administration is currently undergoing a paradigm shift because of changes to what the DoD buys and to how purchases are being made. The move to minimize the importance of detailed specifications and to rely on commercial processes requires more management than administrative skills. The bottom line is that new methods and skills must be explored and developed to more effectively perform what traditionally has been referred to as "contract administration." This study, which addresses contracts at the micro level, concludes the Government Performance and Results Act (GPRA) of 1993 represents a viable framework by which contracts should be structured, as well as managed. The Act requires managers in the Executive Branch to develop strategic plans and use performance indicators to measure output and to evaluate the outcome of the contract, as well as the contractor's performance. The study also recommends Kaplan and Norton's Balanced Scorecard method of performance measurement, together with Contractor Performance Information (Past Performance Reporting) requirements, can be adapted to the management of contracts. Past Performance reporting and tracking requirements define "in general terms" the buyer's perspective of what is expected from the contractor. The Balanced Scorecard methodology enables managers to then identify the critical success factors and critical measures for each expatiation. Both parties will benefit by jointly managing these indicators concurrently throughout the life of the contract, rather than reacting to after-the-fact reporting. The goal of such requirements is to add joint accountability for results to the buyer-seller relationship.