As a government contractor, you should quickly become aware of federal government performance based service contracts under FAR Part 37.

This is critical at the bidding stage as well as understanding your obligations at the What are Performance Based Contracts in Federal Procurement FAR Part 37performance stage. Responding to government bids creates much confusion for businesses that are not familiar with performance based contracting rules. Later, companies can experience serious problems under the Changes Clause and out of scope direction by the government.

Many government solicitations for services are performance based contracts. How your respond in the technical proposal is very important when considering this type of contract.

Understanding the Federal Government Performance Based Contracting Concept

Performance based service contracts have been around for over two decades. However, during 2003 and 2006 there has been more of a push to changing the way the government does business.  Still today, agencies and contractors struggle with the basic requirements. Statements of Work of often improperly written. In addition, contractors struggle to submit solid technical proposals. As a result, performance based contracting courses are becoming a large need for both government agencies and federal contractors.

FAR 37.602 – What is a performance based contract?

Federal government performance based contracts focus on the seven steps to performing the contract.  The theory of performance based acquistions should focus on telling the contractor the end result and not how to accomplish it. See FAR 37.602. As the government posts its new opportunities you will see the trend and development in performance based performance work statements (PWS). Some still tell the contractor what to do and how to do it within the statement of work. The basics about performance based service contracts under FAR Part 37 are as follows:

  • Agency should not dictate to the contractor how to perform the contract;
  • The government should focus on getting results only;
  • Proposal evaluations should lean toward whether the contractor can potentially meet the government’s result;
  • Agency should grade the contractor on its own quality assurance plan; and
  • Contractor’s quality control becomes a changing document throughout the contract life cycle.

FAR Part 37 Problems With Federal Government Performance Based Service Contracting

The federal government has now mandated under FAR part 37 that certain service contracts be performed and procured on a performance based contracting basis. This means that the days of telling the contractor how to do every single aspect of the contract are over for the most part.

  • There is still a national problem with how the agency writes its PWS for federal performance based contracts at the proposal and solicitation stage.
  • You will often see that the statement of work in many government solicitations still tell you exactly how to do each and every aspect of the requirements.

But what can you do about it? The answer is unfortunately very little. At best you can ask specific questions about the nature of your responsibility during the initial questions and answer period.

Can you file a pre-award protest? Maybe. However, there is a great risk that GAO or any protest court would rule in favor of the agency simply because, the court may rule that the agency best determines its own needs despite regulations that government how the PWS should be written

  • Although the question about challenging federal performance based service contracts PWS in the solicitation is really whether the solicitation is written to the performance base standards, you will still be walking on a thin line.
  • Although there is not much case-law on this, your best bet is to develop your proposal in a fashion that tells the government HOW you plan on meeting its end result. You should also inject many of the performance based contracting approaches into your proposals.
  • One important factor to look at when the government evaluates your proposal is to see whether it makes a determination that your approach could not meet its end result.

FAR 37.6 Applicable Federal Rules

FAR Part 37 governs the majority of guidelines for performance based contracting. One article claims that performance based contracting is difficult on the commercial industry. However, other studies show that both the government and the contractor saves money.

  • With federal performance based contracts, performance evaluations provide better data for contractor past performance.
  • A powerful incentive of excellence and customer satisfaction is created when contractors know their performance will influence future award decisions.
  • There are many critics of performance based contracting against OMB. This can be expected in federal procurement.
  • The truth of the matter is that if the government has paid more for government contract awards, then change is needed where performance-based contracts save taxpayers’ dollars.

How to Address Potential Problems With Federal Government Performance-Based Contracts?Many federal service contracts are offered to the public under federal performance-based standards. Many contractors typically do not understand the statements of work as written in the RFP or solicitation. This can result in rejected proposals. Other problems include:

  • Misunderstanding of Quality Assurance Surveillance Plans (QASP) in the solicitation
  • Belief that your common commercial quality assurance plan will suffice for federal performance based contracting
  • Understanding how pricing can directly relate to the government’s requirements

For further information or guidance about federal government performance based service contracts under FAR Part 37, contact our office or call us at 1-866-601-5518 for a FREE initial consultation.

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