A Report on the Performance-Based Service Contracting Pilot Project



This report describes a governmentwide pilot project to implement Performance-Based Service Contracting (PBSC) methods on contracts for recurring services, and to measure PBSC’s impact. This project tests the hypothesis, based on anecdotal evidence, that PBSC saves money and brings about contractor performance that better supports mission attainment.

Some agency contracting activities, most notably within the Department of Defense, have implemented PBSC over time, and have anecdotally and consistently reported positive results. As part of a comprehensive approach to encourage governmentwide acceptance of PBSC, OFPP designed this pilot project to generate data and evidence addressing the advantages of PBSC.

In October 1994, executive officials of 27 agencies signed an OFPP-sponsored pledge to participate in the project. The pledge committed them to implement PBSC and measure its effects on volunteered contracts, conform to stipulated project design criteria, and cooperate with each other to institutionalize PBSC. Four industry associations representing over 1,000 companies endorsed the project and signed an industry pledge to cooperate with the project and otherwise promote the use of PBSC among their member firms.

Agencies designated non-PBSC contracts that were due to expire, and resolicited them using PBSC methods. Twenty-six contracts from 15 agencies with a combined award value of approximately $585 million are included in this project. The contracts range in amount from $100,000 to $325 million.

The project’s findings are based on a comparison of before-and-after measurements on the following variables: contract price; agency satisfaction with contractor performance; type of work performed; type of contract; competition; procurement leadtime; and audit workload. The results strongly validate PBSC and support its use as a preferred acquisition methodology. PBSC, when fully and properly applied, enables agencies simultaneously to obtain significantly improved performance at significantly reduced prices. However, based on experiences outside of this project, agencies are cautioned that application of only selected aspects of the total PBSC methodology is not likely to be nearly as successful, and can even cause a reduction in the value of services provided.