The applicability of performance-based acquisition techniques to level-of-effort services contracts

Abstract

This research paper explores the use of performance-based acquisition (PBA) techniques when contracting for services on a level-of-effort (LOE) basis. The research explores how often and how effectively these two concepts are used together in the Navy. This paper examines the following questions: Question #1: Can PBA techniques and LOE contract types be used together effectively, or is there a natural conflict between these two approaches? Question #2: Why does the Navy attempt to use PBA techniques for LOE contracts? Question #3: What are the consequences of using PBA techniques for LOE contracts? An analysis of 50 contracts for services revealed that the Navy ineffectively applies PBA techniques to LOE contracts. A review of policy and regulations demonstrated that PBA and LOE are fundamentally incompatible contracting approaches. The study suggests possible explanations for why the Navy attempts to combine PBA and LOE and explores the consequences of doing so. This paper recommends that acquisition policy-makers at all levels make clear that PBA and LOE are dichotomous choices.