Key components of a performance-based SOW are:
- Specific and clearly defined contract goals
- Technical and schedule requirements stated in terms of desired results
- Methods of performance measurement
- Clearly established deliverables and other reporting requirements
- Mandatory requirements that are limited to the Government's actual minimum needs
Remember, performance-based SOWs are not to be confused with generic goals or general "wish-lists." Do not use this tool as an excuse to abdicate your responsibility to clearly stipulate the required outcomes or results.
Minimum Mandatory PBSC Requirements
- Performance requirements that define the work in measurable, mission-related terms.
- Performance standards (i.e., quality, quantity, timeliness) tied to the performance requirements.
- A Government Quality Assurance (QA) plan that describes how the contractor's performance will be measured against the performance standards.
- If the acquisition is either critical to agency mission accomplishment or requires relatively large expenditures of funds, positive and negative incentives tied to the Government QA plan measurements.
Steps in Preparing a Performance Based SOW:
- Define contract goals
- Prepare a work breakdown structure.
- Develop each task statement in terms of tasks that the contractor is required to perform and clearly identify the desired output from each task. Express task statements in terms of "what is needed" vice "how to do it." This process should produce a results-oriented SOW which answers the following questions:
- What are the required outcomes?
- What accomplishments should come from the task?
- What needs to be measured to know if the results are the desired ones?
- Provide clear functional organization and funding allocations in the SOW to provide a basis for Government and contractor manpower resource lists.
- Define task completion criteria. The performance-based SOW should define what constitutes performance completion under the contract. Be explicit in describing how acceptance is to be achieved.
- Review applicable policies and regulations to identify minimum regulatory tasks.
- Ensure compatibility and consistency with the performance specification, logistic support strategy, and acquisition strategy.
- Rely on the vendor's existing in-house processes wherever practical.
- Apply incentives for high-value performance, but make sure the incentives are commensurate with the requirements and the risk.
- State tasks clearly so the contractor knows what is required. Vague work statements may hinder proposal preparation and source selection by limiting understanding of the Government's critical objectives. The performance-based SOW should clearly and unambiguously describe the tasks the contractor is expected to accomplish.
- Correctly cite references. Thoroughly review all references and sub-tier references (to other documents) to weed out unnecessary requirements.
- Identify quality assurance elements for both hardware and software throughout the life cycle.
- Give the contractor the full responsibility for quality performance by developing formal, measurable performance standards and surveillance plans.
- Identify references to data requirements in any task that generates a deliverable. Ensure that there is a clear task/data relationship to avoid giving conflicting direction. A conflict here could result in a formal protest.
Quality Under A Performance Based Sow
Accountability for the final outcome is explicit with a performance-based SOW. The contractor remains responsible and accountable for achieving required results based upon their own proposed technical and management approach and internal processes which have NOT been dictated by the Government. The offeror is given flexibility in their proposal but absorbs a commensurably greater risk share for contract performance.
This risk is transferred to the contractor two ways:
- by giving the contractor the full responsibility for quality performance by developing formal, measurable performance standards and surveillance plans in the SOW and
- through the use of contractor <incentives/disincentives> for successful/unsuccessful performance.
- 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.
- When performance has exceeded the standard for x consecutive months, reduce government oversight or contractor reporting , as appropriate.
- Document past-performance report card, paying particular attention to performance that exceeded the
- 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.
- When performance is below standard for x consecutive months, increase surveillance or contractor reporting.
- Document past-performance report card, paying particular attention to performance that failed to meet the standard.
Generally, incentives are preferred over disincentives.