Performance-Based-Acquisition Glossary
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Acceptable Quality Level (AQL): The variance from a performance standard that a contractor is allowed, before the Government rejects its services. Generally speaking, a contractor will be given an an opportunity to correct non-conforming services if it can be accomplished within the required delivery schedule. A form of sampling used to determine a course of action. A procedure that gives a specified risk of accepting lots of given quality.
Activity: Another name for a work process. (An activity uses inputs and generates outputs.)
ADR: See Alternative Dispute Resolution.
Alternative Dispute Resolution (ADR): ADR means any procedure or combination of procedures used voluntarily to resolve controversies without resorting to litigation. Examples of ADR include conciliation, facilitation, mediation, and mini-trials. ADR can provide an effective and less expensive method for resolving contract disputes. Agencies should include an agreement to utilize ADR in their contracts. There is no single correct method for conducting ADR. Each situation is different and the ADR technique and procedures must be tailored to a particular situation and the needs of the parties.
AQL: See Acceptable Quality Level.
Assisted Acquisition: An assisted acquisition is a type of interagency acquisition where the parties enter into an interagency agreement pursuant to which the servicing agency performs acquisition activities on the requesting agency’s behalf, such as awarding a contract, task order, delivery order, or blanket purchase agreement.
Attribute: The property a unit has of being either bad or good. That is, the quality characteristic of a unit is either within the specified requirements or it is not.
Attribute Sampling: A form of acceptance sampling that grades a service as defective or non-defective.
Best Practices: Techniques that agencies may use to help detect problems in the acquisition, management, and administration of service contracts. Best practices are practical techniques gained from experience that Agencies may use to improve the procurement process.
Best Value: The expected outcome of an acquisition that, in the Government’s estimation, provides the greatest overall benefit in response to the requirement. (FAR Part 2.101)
Buy: That stage of the contracting cycle in which bids are analyzed, the proposed contractor is determined capable to perform the contract, and award made to the successful contractor.
Contract: A term used to describe a variety of agreements or orders for the procurement of supplies or services. An agreement, enforceable by law, between two or more competent parties, to do or not to do something, which is not prohibited by law, for a legal consideration.
Contract Administration: That stage of the contracting cycle in which the contracting officer insures that the total contract is being followed, makes necessary changes to the contract, and insures progress toward contract completion.
Contract Modification: Any unilateral or bilateral written alterations in the specification, delivery point, rate of delivery, contract period, price quantity, or other clause of an existing contract, accomplished in accordance with a contract clause (e.g., change order, notice of termination, supplemental agreement, exercise of a contract option, and so forth).
Contract Types: Refers to specific pricing arrangements employed for the performance of work under contract. Specific pricing (or compensation) arrangements, expressed as contract types, include firm-fixed price, fixed price incentive, cost plus fixed fee, cost plus incentive fee, cost plus award fee, and several others. Among special arrangements that use fixed-price or cost reimbursement pricing provisions are instruments called indefinite delivery contracts, basic ordering agreements, letter contracts and others.
Contracting Officer (CO): Any person who, either by virtue of position or by appointment in accordance with prescribed regulations, is vested with the authority to enter into and administer contracts and make determinations and findings with respect thereto, or with any part of such authority.
Contracting Officer's Representative (COR): A Federal employee to whom a contracting officer has delegated limited authority in writing to make specified contract-related decisions. Also referred to as Contracting Officer's Technical Representative (COTR).Contractor's Quality Control Plan: The methodology put into place by a contractor to monitor or control the performance of services, in order to meet PWS requirements.
Contract Specialist: The person responsible for administering the day-to-day business aspects of the contract, including non-technical contract monitoring and preparing modifications, such as: 1) changes in the Statement of Work; 2) changes in delivery schedules; 3) extend or modify the period of performance; or 4) otherwise change any terms or conditions in the contract. This individual reviews invoices to assure that all costs are being billed in accordance with the terms of the contract and indirect rate agreement.
COR/COTR: See Project Officer.
Cost: Direct and indirect costs allocable to the contract, incurred or to be incurred, less any allocable credits, plus any allocable cost of money pursuant to FAR 31.205-10. Although the total cost of a contract includes all costs properly allocable to the contract, the allowable costs to the government are limited to those allocable costs that are allowable pursuant to FAR Part 31 and applicable agency supplements.
Cost Estimation: The fourth phase of Requirements Analysis in which future costs are forecasted, based on existing information.
Cost Overrun: (or underrun): A net change in the contractual amount over (under) that contemplated by a contract target price (FFP type), or estimated cost (cost type), due to the contractor’s actual costs being over (under) target or anticipated contract costs, but not attributable to any other cause of cost growth (e.g., quantity changes, engineering changes, economic changes, or changes in estimates of program project costs).
Cost-Plus-Award-Fee Contract (CPAF): A cost-reimbursement contract that provides for a fee consisting of (1) a base amount (which may be zero) fixed at inception of the contract and (2) an award amount, based on a judgmental evaluation by the government, sufficient to provide motivation for excellence in contract performance. CPAF contracts are covered in FAR Subpart 16.4, Incentive Contracts. See FAR 16.404-2 for a more complete description and discussion of application of these contracts. See FAR 16.301-3 and FAR 16.404-2(c) for limitations. (FAR 16.305)
Cost-Plus-Fixed-Fee Contract (CPFF): A cost-reimbursement contract that provides for payment to the contractor of a negotiated fee that is fixed at the inception of the contract. The fixed fee does not vary with actual cost but may be adjusted as a result of changes in the work to be performed under the contract. This contract type permits contracting for efforts that might otherwise present too great a risk to contractors, but it provides the contractor only a minimum incentive to control costs. (FAR 16.306)
Cost-Plus-Incentive-Fee Contract (CPIF): A cost-reimbursement contract that provides for the initially negotiated fee to be adjusted later by a formula based on the relationship of total allowable costs to total target costs. This contract type specifies a target cost, a target fee, minimum and maximum fees, and a fee adjustment formula. After contract performance, the fee payable to the contractor is determined in accordance with the formula. The formula provides, within limits, for increases in fee above target fee when total allowable costs are less than target costs and for decreases in fee below target fee when total allowable costs exceed target costs. This increase or decrease is intended to provide an incentive for the contractor to manage the contract effectively. When total allowable cost is greater than or less than the range of costs within which the fee-adjustment formula operates, the contractor is paid total allowable costs plus the minimum or maximum fee. (FAR 16.404-1)
Cost Realism: The costs in an offeror's proposal: (1) are realistic for the work to be performed; (2) reflect a clear understanding of the requirements; and (3) are consistent with the various elements of the offeror's technical proposal. (FAR 15.801)
Cost Reimbursement: Refers to the family of pricing arrangements that provide for payment of allowable, allocable, and reasonable costs incurred in the performance of a contract, to the extent that such costs are prescribed or permitted by the contract. In the case of a CPFF arrangement, costs may vary under or over the initially agreed-to estimate, but the fee remains fixed as an expressed dollar amount and is not subject to adjustment by reason of the contractor’s cost experienced during the life of the contract.
CPAF: See Cost-Plus-Award-Fee Contract.
CPIF: See Cost-Plus-Incentive Fee Contract.
Customer Complaints: This is the least preferred method of surveillance because it cannot be used as a basis of deduction from payment since it is not a statistically valid method of surveillance. Further, customer complaints may not always relate to actual requirements of the contract, and verification of customer complaints can be extremely labor intensive. Its use, however, may be necessary for certain types of tasks that do not lend themselves to random sampling or 100-percent inspection. The contracting officer may use validated customer complaints as the basis for actions (other than payment deductions) against the contractor. In such cases, the Inspection of Services clause becomes the basis for the contracting officer's actions.
Deduction: The contract clause, Inspection of Services, provides a means to reduce payment to the contractor for services not satisfactorily performed by the contractor. In short, if the Government does not receive the service, it does not pay the contractor. The procedure for withholding payments to a contractor is referred to as "deduction." To legally make a deduction from a contractor payment, the amount deducted must correlate to the price of the service not performed; it may not be an arbitrary figure. Thus, it is necessary to determine what percentage of the total cost of a contract each service performed under that contract represents.
Defect: Any nonconformance with requirements specified in the contract.
Direct Cost: Any cost that is specifically identified with a particular final cost objective, but not necessarily limited to items that are incorporated in the end product as material or labor.
Error Rate: The frequency at which defective service occurs.
Evaluation Analysis: The third phase of Requirements Analysis in which the Government's quality assurance surveillance methods are determined.
Fee: In specified cost-reimbursement pricing arrangements, fee represents an agreed-to amount beyond the initial estimate of costs. In most instances, fee reflects a variety of factors, including risk, and is subject to statutory limitations. Fee may be fixed at the outset of performance, as in a cost-plus-fixed-fee arrangement, or may vary (within a contractually specified minimum-maximum range), as in a cost-plus-incentive-fee arrangement.
Fixed Price: Refers to a family of pricing arrangements whose common discipline is a ceiling beyond which the Government bears no responsibility for payment. In the case of a firm-fixed-price arrangement, the agree-to price is not subject to any adjustments by reason of the contractor’s cost experience in the performance of the contract.
Fixed-Price-Award-Fee (FPAF) Contract: A fixed-price contract with an added award amount of dollars set aside for a contractor to earn for providing service judged by the government to be above satisfactory.
Firm-Fixed-Price Contract: Provides for a price that is not subject to any adjustment on the basis of the contractor's cost experience in performing the contract. This contract type places upon the contractor maximum risk and full responsibility for all costs and resulting profit or loss. It provides maximum incentive for the contractor to control costs and perform effectively and imposes a minimum administrative burden upon the contracting parties. (FAR 16.202-1)
Fixed-Price-Incentive-Firm Contract (FPIF): The fixed-price incentive (FPIF) contract provides for an adjustment of profit and the establishment of the final contract price by means of a formula based on the relationship of final costs to a negotiated target cost. Under this type of contract the following elements are negotiated at the outset: a target cost, a target profit, a ceiling price, and a formula for establishing final price and profit.
FPAF: See Fixed-Price-Award Fee Contract.
FPIF: See Fixed-Price-Incentive Firm Contract.
Incentive: Stated rewards and/or consequences that may be employed to motivate a contractor to achieve higher levels of performance under a given contract; can be monetary or nonmonetary; can be based on schedule, management, or cost. An incentive may be positive or negative.
Incentive Arrangement: A negotiated pricing arrangement that structures a series of relationships designed to motivate and reward the contractor for performance in accordance with the contract specification. In fixed-price incentive arrangements, the structure involves the negotiation of a target cost, target profit, target price, ceiling price, and sharing (or adjustment) formula for costs incurred under or over the target cost. In cost-reimbursement incentive arrangements, the structure involves the negotiation of a target cost, target fee, minimum and maximum fees, and sharing formula; or in the case of an award fee arrangement, the payment of a fee (beyond the negotiated base or fixed fee) tied to criteria that are susceptible only to subjective measurement and evaluation.
lndefinite-Delivery/Indefinite-Quantity Contract: A type of indefinite-delivery contract that provides for an indefinite quantity, within stated limits, of services to be furnished during a fixed period, with deliveries or performance to be scheduled by placing orders with the contractor. (FAR 16.504)
Indifference Quality Level (IQL): The point that divides acceptable from unacceptable performance.
Indirect Cost: Any cost not directly identified with a single final cost objective but identified with two or more final cost objectives or with at least one intermediate cost objective. Also, referred to as overhead or burden.
Indicator: An indicator is an essential characteristic of acceptable performance.
Input: Anything put into a system or process or expended in its operation to achieve a result or output.
Inspection of Services Clause: All service contracts,as outlined in FAR Subpart 46.3, contain a requirement, in the Inspection of Services contract clause, that the contractor provide and maintain an inspection system acceptable to the government. This is commonly referred to as the contractor's quality control (QC) plan. The contractor must keep records of his or her quality control inspections under this system throughout the life of the contract. The Quality Assurance Evaluator (QAE) must also keep records of any inspections of the contractor's quality control procedures, including QC records, for the life of the contract.
Integrated Project Team: Referred to as an IPT, an integrated project team is a multi-disciplinary team lead by a program manager responsible and accountable for planning, budgeting, procurement and life-cycle management of the investment to achieve its cost, schedule and performance goals. Team skills include: budgetary, financial, capital planning, procurement, user, program, value management, earned value management, and other staff as appropriate. (OMB Circular A-11)IPT: See Integrated Project Team.
Job Analysis: The act of looking at a job as it is being done in-house or a contractor to determine what actually results. Job analysis looks at organization, workload, performance values, and resources.
Level-of-Effort (LOE) Contract: A contract mechanism based on a predetermined level of activity or effort - - rather than results achieved - - over a stated period of time, using a fixed-price or cost-reimbursement pricing arrangement.
LOE: See Level-of-Effort Contract.
Lot: A collection of service outputs from which a sample is to be drawn and inspected to determine conformance with the standard.
Lot Size: The number of service outputs in a lot.
Non-Research and Development Requirements: Those needs for services to be acquired from non-governmental sources by contract. These requirements support or improve agency policy development, improve skills, assist in decision-making, management, and administration or support or improve the operation of management systems. These requirements include areas such as: advisory and assistance services; information technology functions; engineering studies; clinical medicine; and training.
Ombudsman: An ombudsman investigates selected complaints and issues nonbinding reports, with recommendations addressing problems or future improvements deemed to be desirable.
One Hundred Percent Inspection: This surveillance type is preferred for those tasks that occur infrequently. This includes tasks that cannot be random sampled because the sample size for a small lot may exceed the lot size. It is also used frequently for those tasks having very stringent performance requirements. When this type surveillance is used, the QAE must inspect and evaluate the contractor's performance each time it is performed. The results of the contractor's overall performance is then evaluated to determine acceptability of the lot.
Output: The amount of something produced by a system or process during a given span of time.
Partnering: Partnering is a technique for preventing disputes from occurring. Under this concept, the agency and contractor, perhaps along with a facilitator, meet after contract award to discuss their mutual expectations. The parties mutually develop performance goals, identify potential sources of conflict, and establish cooperative ways to resolve any problems that may arise during contract performance.
PBA: See Performance-Based Acquisition.
PBSA: DoD acronym for Performance-Based Services Acquisition. See Performance-Based-Contracting (PBA).
PBSC: See Performance-Based Acquisition.
Percent of Sample Found Defective: Determined by dividing the number of defects by the sample size when the reject number has been equaled or exceeded. The resulting number is used to make an equitable deduction from the contract price for non-performance by the contractor.
Performance Analysis: The second phase of Requirements Analysis in which indicators, standards and the Acceptable Quality Level (AQL) for key tasks are identified.
Performance-Based: Being associated with outcome rather than with process.
Performance-Based Acquisition (PBA): Structuring all aspects of an acquisition around the purpose of the work to be performed as opposed to either the manner by which the work is to be performed or broad and imprecise statements of work. May also be referred to as Performance-Based Service Contracting (PBSC).
Performance-Based Services Acquisition (PBSA): DoD term for Performance-Based-Contracting (PBA).
Performance Indicator: A characteristic of an output that can be measured. It can measure quantity as well as quality. By using a performance indicator and its associated standard, it is possible to determine if a process is producing a quality output.
Performance Requirement: The point that divides acceptable and unacceptable performance of a task according to the Performance Requirements Summary (PRS) and the Inspection of Service Clause. It is the number of defectives or maximum defective in the lot that is deemed acceptable. Any further defectives will require the Government to effect the price computation system.
Performance Requirements: The results the contractor is required to achieve.
Performance Requirements Summary (PRS): A document that contains information about: the key services that a contractor is required to perform; standards to enable the government to test the quality of a contractor's performance; and surveillance methods to be used.
Performance Standard(s): A defined level of performance against which the quality of contracted services can be measured.
Performance Work Statement (PWS): Section C of the request for proposals and of the contract; includes any description or specifications needed in addition to Section B. Defines requirements in clear, concise language identifying specific work to be accomplished. To the maximum extent practicable the statement of work will 1) Describe the work in terms of "what" is to be the required output rather than "how" the work is to be accomplished or the number of hours to be provided; 2) enable assessment of work performance against measurable performance standards; 3) rely on the use of measurable performance standards and financial incentives in a competitive environment to encourage competitors to develop and institute innovative and cost-effective methods of performing the work; and 4) avoid combining requirements into a single acquisition that is too broad for the agency or a prospective contractor to manage effectively.
Periodic Surveillance: This type of surveillance consists of the evaluation of samples selected on other than a 100% or statistically random basis. An example of periodic surveillance is weekly inspections when the QAE chooses the location and time in other than a statistically random manner. This is not a preferred method of surveillance and cannot be used as a basis of deduction from payments because it does not provide a statistical basis for deducting for nonconforming performance. Tasks shown on the PRS as having periodic surveillance will have no maximum payment percentage calculation in the fifth column of the PRS. The contracting officer may use the results of periodic surveillance inspections as the basis for actions (other than payment deductions) against the contractor. In such cases, the Inspection of Services clause becomes the basis for the contracting officer's actions.
Price: Cost plus any fee or profit applicable to the contract type.
Profit: Generally characterized as the basic motive of business enterprise. In contract pricing, profit represents the projected or known monetary excess realized by a producer or performer after the deduction of cost (both direct and indirect) incurred or to be incurred in the performance of a job, task or series of the same.
Progress Payment: A payment made as work progresses under a contract on the basis of percentage of completion accomplished, or for work performed at a particular stage of completion.
Project Officer: The person responsible for the technical direction of the contract, including: 1) monitoring technical progress, including surveillance and assessment of performance and recommending to the Contracting Officer changes in requirements: 2) interpreting the statement of work and any other technical performance requirements; 3) performing technical evaluation as required; 4) performing technical inspections and acceptances required by this contract; and, 5) assisting in the resolution of technical problems encountered during performance.
PRS: See Performance Requirements Summary.
PWS: See Performance Work Statement.
QA: See Quality Assurance.
Qualitative Performance Standards: A standard which measures quality.
Quality Assurance: Those actions taken by the government to check goods or services to determine that they meet the requirements of the SOW.
Quality Assurance Evaluator (QAE): A functionally qualified person who performs quality assurance functions for a contracted service.
Quality Assurance Plan (QAP): A detailed plan setting forth the process that will be used to measure contractor performance; defines what the agency must do to ensure that the contractor has performed in accordance with the PWS performance standards. May also be referred to a Quality Assurance Surveillance Plan.
Quality Assurance Surveillance Plan (QASP): This plan measures performance against standards in the Performance Work Statement. A good QASP should include a surveillance schedule and clearly state the surveillance method(s) to be used. The QASP also establishes how resources will be used to ensure that the government receives what it is paying for. Development of the QASP also allows the government to clearly define the amount of contract administration resources needed. The detail regarding a particular task should be commensurate with the importance of the task. The QASP should focus on the quality, quantity, and timeliness, etc., of the performance outputs to be delivered by the contractor, and not on the steps required or procedures used to provide the product or service. May also be referred to as a Quality Assurance Plan (QAP).
Quantitative Performance Standards: A standard which measures quantity.
QAP: See Quality Assurance Plan.
QASP: See Quality Assurance Surveillance Plan.
QC: See Quality Control.
Random Number Table: A table of numbers arranged in a random fashion. A table used to make random samples.
Random Sample: A sampling method whereby each service output in a lot has an equal chance of being selected.
Random Sampling: A method of looking at a few individual items in a lot to determine the quality of that lot against a standard.
Recurring Services: Services that are required regularly and/or repeatedly.
Request for Proposals: A solicitation document used in other than sealed bid procurements.
Research and Development: Encompasses research directed toward either increasing basic scientific knowledge or realizing the potential of scientific discoveries; and the systematic development of scientific knowledge to meet specific performance requirements.
Result: An intended, measurable change (of a condition, an outcome, or a product of a process); needs to be thought of in terms of an end state (for example, established) rather than as a process (for example, to establish).
Risk: An assumption of possible monetary loss or gain in light of the job or work to be done. One of the elements to be considered in the negotiation of a fair and reasonable price, as well as in determining the type of contract under which performance will occur.
Sample: A sample consists of one or more service outputs drawn from a lot, the outputs being chosen at random.
Sampling: A method of obtaining statistics from a large body of data without resorting to a complete census. Two broad methods of selecting samples are probability sampling (in which sample units are selected according to the law of chance) and nonprobability sampling (in which personal choice, expert judgement, or some other nonprobabilistic rationale is used to select sample units).
Sampling Guide: The part of the surveillance plan which contains all the information needed to perform a random sample.
Sampling Method: The actual means of evaluating a contractor's performance.
Sampling Plan: A plan which indicates the AQL, the number of units from each lot which are to be inspected (sample size) and the criteria for determining the acceptability of the lot (acceptance and rejection numbers)
Service: A job performed to the standard and with the acceptable quality level. The contractor must do the specific job, and meet the standard, and meet the acceptable quality level before one can say that performance has been acceptable and that he/she should be paid.
Service Contract: FAR 37.101 defines service contract as "a contract that directly engages the time and effort of a contractor whose primary purpose is to perform an identifiable task."
Services: The performance of identifiable tasks rather than the delivery of an end item of supply; includes tasks that are delivered under contract where the primary purpose of the contract is to provide supplies.
SOO: See Statement of Objectives.
SOW: See Statement of Work.
Statement of Objectives: Also known as SOO, this is an alternative approach to the Performance Work Statement (PWS). According to guidance provided in OFPP's Performance-Based Service Acquisition July 2003, a Statement of Objectives is a summary of key agency goals, outcomes or both that is incorporated into performance-based service acquisitions in order that competitors may propose their solutions including a technical approach, performance standards and a quality assurance surveillance plan based upon commercial business practices.
Statement of Work: A document that describes accurately the essential and technical requirements for items, materials, or services including the standards used determine whether the requirements have been met. In Performance-Based Acquisition the SOW is referred to as a Performance Work Statement (PWS) to reflect the emphasis on measuring performance.
Surveillance: A function of contract administration used to determine contractor progress and to identify any factors that may delay performance. Involves government review and analysis of (1) contractor performance plans, schedules, controls, and industrial processes and (2) the contractor's actual performance under them. (FAR 42.11. 01)
Surveillance Plan: See Quality Assurance Surveillance Plan (QASP).
Task: A statement of desired results for a contract work statement requirement.
Task Value: Task value is calculated with criticality as the most important criteria followed by the cost or lost value of nonperformance of the task.
Tree Diagram: A visual representation of the major functions performed by a system which shows logical parts and subparts.
U
UCF: See
Uniform Contract Format.
Uniform Contract Format (UCF): A standard format that the Federal Government uses to facilitate preparation of solicitations and contracts.
Work: A series of actions, changes, or functions that bring about an end result.
Work Analysis: The first phase of Requirements Analysis in which work is broken down into input, work and output.
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