Promote Excellence in Vendor Performance Background When the government makes a contract, it takes on a privatesector partner to accomplish a public purpose. The government must be assured that its partner is reliable by examining its past performance. Procurement actions should also encourage suppliers to value government business, provide highquality supplies and services on time and at a reasonable price, and be compatible with public policy goals. Need for Change Improvements in measuring and recognizing a contractor's performance as part of contract award, as well as improvements in the government's management of its contracts, will lead to greater value for the government and taxpayer. The most important means for improving vendor performance is for the government's evaluation process in source selection to seriously consider vendor past performance when making new contract awards. Evaluation of vendor past performance plays a crucial role in vendor selection in the private sector. Yet, one of the most unfortunate features of the current procurement system is that the evaluation process for making contract awards gives little or no weight to vendors' past performance on earlier contracts. Causes of poor quality. The quality of performance the government gets from its vendors is likely to be significantly worse when: -- a history of vendor performance is not maintained for use by the government in awarding future contracts, and -- the government fails to use a powerful incentive for better contractor performance by not using information on past performance as an important factor in making new contractor awards. The Federal Acquisition Regulation (FAR) requires contracting officers to consider vendor performance. Nonetheless, most contracting officers have not used vendor performance data to maximum advantage. Vendors often have to provide some outside references in a negotiated procurement but may choose the references to submit. Many line managers believe references are often not candid for fear of possible legal liability, and the weight given to vendor references in the evaluation scoring system is extremely small. Even when limiting outside references, agencies deprive themselves of the other data most likely to be accurate and that, if used, exerts the most powerful incentive on vendor performanceinformation about vendor performance within the agency itself. The federal government must also improve its contract management activities with regard to vendor performance. A Merit Systems Protection Board (MSPB) study on the quality of the contracting workforce finds that the distrust built into the present federal procurement system is not effective in reducing waste, fraud, or abuse, despite its high cost. In the MSPB study, a contractor states that "increased oversight has become cumbersome, delayed the process, and has created an atmosphere of fear and distrust. This has greatly impacted the decision making process and has increased overall costs to both the government and the contractor."1 This one contractor's statement is representative of the way a majority of contractors view the federal procurement system. The costs of compliance. A recent study by the Center for Strategic and International Studies (CSIS) indicates that contractor compliance with government controls costs three times what commercial companies spend on administrative costs.2 Burdens that the government imposes on its suppliers often are translated into higher prices charged to the government, and sometimes to commercial customers. In many respects, the success of any procurement action hinges on how well the contract is administered to ensure value to the government. In broad terms, contract administration responsibilities comprise fiscal and cost accounting methods, control of government property, quality control, production control, pricing and price redetermination where authorized, compliance with standard contract clauses, subcontracting consent, and in some cases, contract terminations. Each agency is organized differently to provide contract administration. Within the Department of Defense (DOD), there are two specialized organizations: the Defense Contract Management Command (DCMC) with 19,000 people looking after $750 billion under 420,000 contracts for 25,000 contractors, and the Defense Contract Audit Agency (DCAA), with 6,000 people responsible for about $260 billion in contract audit work. Civilian agencies often rely on their contracting officer to perform administration and their Office of Inspector General (IG) to perform contract audits. However, most IGs use DCAA for some or all of their audits. The interagency OMB SWAT Team Report on Civilian Agency Contracting found certain weaknesses in the performance of contract audit and administration functions.3 An interagency group on Civilian Contract Administration Services (CIVICAS) was formed to assess alternative means for heads of agencies to efficiently meet their responsibilities to ensure performance under properly managed contracts. Current contract administration activities are not reviewed from a governmentwide perspective to measure output or value. Defense agencies are being downsized while civilian agencies are looking to improve their contract administration practices. There is no coordinating body to set performance goals or help determine the effectiveness of contract actions in meeting line manager needs through the contracting process. While the Office of Federal Procurement Policy (OFPP) could establish standards in this area, true change will come about only with a team approach of both the government and its contractors seeking the best means to meet contract requirements. Examples of success. One example of the type of program that captures the tenets of a trustcentered team approach is the ProcessOriented Contract Administration Services (PROCAS) program developed by the Defense Logistics Agency. This program works with contractors to accredit internal control procedures to lessen government controls. Another example, in the audit area, is Motorola's experience with DCAA. In 1988, it took one year to get, review, report, and decide on overhead rates, mainly because the contractor did not always know what the government wanted. DCAA worked with internal company auditors in 1989 and cut the total process to five weeks, resulting in significant savings for all parties. Another cooperative approach to improve contract administration is the work of the Army's Corps of Engineers to avoid costly disputes and an adversarial environment in its construction contracts. Under a partnering concept, which sets out how the parties will work through any disagreements that arise under the contract, the Corps has not had a single case of litigation. This helps keeps both parties focused as a team on the contract goals. The federal procurement system must take into account vendor performance, both prior to contract award and during contract administration, to ensure that agency needs for continuous, reliable service are met and taxpayer dollars are well spent. Cross References to Other NPR Accompanying Reports Reengineering Through Information Technology, IT12: Provide Incentives for Innovation. Endnotes 1. U.S. Merit Systems Protection Board, "Workforce Quality and Federal ProcurementAn Assessment," Washington, D.C., July 1992, p. 39. 2. Center for Strategic and International Studies, Integrating Civilian and Military Technologies: An Industry Survey (Washington D.C., April 1993), p. 12. 3. U.S. Office of Management and Budget, "Summary Report of the SWAT Team on Civilian Agency Contracting," December 3, 1992, p. 11.
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