Acquisition Planning

DOES YOUR ENTIRE TEAM KNOW AND CLEARLY HAVE A “VISION” OF WHAT IT IS YOU ARE BUYING AND WHY?

Take your hands off the keyboard.

Before you start any writing, ask yourself the following question…..

?

The Importance of Vision

Focus the team’s energies Establishes a sense of orientation,

being and purpose Prevents team from being

sidetracked and distracted Team resources are smartly

applied against the highest Return on Investment activities

Vision -- the FIRST order of business!

“Where there is no vision, the people perish...”Proverbs 29:18

“Begin with the end in mind.”Stephen R. Covey

“Would you tell me please, which way I ought to go from here?”

“That depends a good deal on where you want to get to.”

Lewis Carrol, Alice in Wonderland

Communications, Research and Planning

Objective: Understand the critical importance of:Communicating with

industryResearching the

marketplaceDeveloping effective

acquisition plans

Communicating With Industry

Why should we communicate with industry? Advertise our needs and prepare the marketplace Do our “homework” before defining requirements Increase quality, innovation and competition Save money Decrease dependency on incumbent suppliers and

traditional technologiesWhen is the best time to talk with industry?

NOW...BEFORE THE RFP IS RELEASED!

Effective Methods for Communicating

One-on-One Interviews Industry Conferences Electronic Bulletin Boards Advisory Multi-Step Process

Researching the Marketplace

Market research is an interactive process for…gathering data on product characteristics,

suppliers’ capabilities and market business practices...

plus the analysis of that data to make smart acquisition decisions.

Why do Research?

Good market research can help:develop innovative acquisition strategies leverage commercial solutionsdefine best O&M approachdetermine the relevant terms and conditions

needed for the contractdiscover “discriminating” evaluation criteria for

the source selection

Surveillance and Investigation

Market Surveillance(staying abreast of general

industry practices and trends)

Market Investigation (investigates against a defined requirement -- narrow focus and specified time frame)

Market Surveillance Example techniques for staying current

on marketplace practices/trendscontact industry and government expertsreview the market surveillance results of

otherspublish requests for informationaccess Internet databasesreview catalogs and trade journals

FAR 10.002(b)(2)

Market Investigation

The Six Partsof a

Market Investigation

1

2 3 4 5

6Summarize Market Surveillance

Identify Sources

Survey Manufacturers

Check References

Evaluate Candidates

Document Results

Acquisition Planning

The process by which the efforts of all personnel responsible for an acquisition are coordinated and integrated through a comprehensive plan for fulfilling the agency need in a timely manner at a reasonable cost. It includes developing the overall strategy for managing the acquisition.

FAR 7.101

Acquisition Planning

Agencies shall perform acquisition planning for all acquisitions in order to promote and provide for: Acquisition of commercial/ nondevelopmental items Full and open competition

FAR 7.102

Acquisition Plans Should Ensure:

Government will get what it needs, when it is needed

Sufficient/appropriate funds are available Sound business arrangement is planned Risks are identified and managed A healthy competition is promoted

Possible Subjects for an Acquisition Planning

Unique Circumstances

Performance Goals and Objectives

Period of Performance

Key Tradeoffs

Budget & Funding

Ops and Maintenance

Source Selection Streamlining Techniques

Potential Sources

Competition Issues

Source Selection Strategies

Contracting Strategies

GFP/GFI Approach

Key Acquisition Risks

Security Concerns

Data Rights

Milestone Schedule

Source Selection Strategies

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 2.101

Source Selection Strategies

LOW PRICE TECHNICALLY ACCEPTABLETRADEOFF PROCESS

• Less definite requirements

• More development work

• More performance risk

The Best Value Continuum

• More definite requirements

• Less development work

• Less performance risk

Non-Cost More Important

Cost More Important

Tradeoff Process

Used when it is in Government’s best interest to consider award to other than the lowest priced offeror or other than the highest technically rated offerorPermits tradeoffs among cost or price and

non-cost factors (technical, past performance, etc.)

Government must justify why additional technical merit is worth a higher price to the buying activity

FAR 15.101-1

A Process Of Elimination

High LowNon-Cost Non-Cost

High ?Cost

Low ? Cost

Lowest Price/Technically Acceptable (LPTA)

Evaluation factors used to establish requirements for technical acceptability

Exchanges (discussions) are permitted Tradeoffs (cost-technical) are NOT permitted Award to lowest price/technically acceptable

offeror

LPTA effective for commodity procurements with established production histories

Requirements Definition Methods

PROCESS Define requirements by stating how things must be done to

obtain the required end state.

EFFORT Define requirements by stating how many people, positions and

skill sets are needed to obtain the required end state.

PERFORMANCE Define requirements by stating what results and performance are

needed to obtain the end state.

Performance-Based Acquisition (PBA)

What is it?PBA is an approach to acquisition that focuses on measurable contractor performance and results, not process and effort. PBA requires seamless integration and consistency between the work statement, selection criteria and contract incentive structure. All must work in harmony to establish a business relationship where the contractor is highly motivated and fully accountable to deliver results-oriented, best value products and services.

PBA Characteristics and Benefits

Performance and results can be measured Focuses on the purpose of the work Work statement, selection criteria, and incentive

structures are integrated and consistent Contractor motivated to achieve customer

objectives Contractor fully accountable for performance Leverages competition and fuels innovation Increases customer satisfaction at a lower price

RequirementDescriptions

EvaluationCriteria

IncentiveStructures

Performance-Based

AcquisitionKey Elements

RequirementDescriptions

EvaluationCriteria

IncentiveStructures

Key ElementsPerformance-

BasedAcquisition

Performance-Oriented Requirement Descriptions

OFPP Letter 91-2 (41 U.S.C. section 405)“It is the policy of the Federal Government

that agencies use performance-based contracting

methods to the maximum extent practicable when acquiring services…..

…..agencies shall justify the use of other than performance-based contracting methods when acquiring services, and document affected contract files”

Describing Agency Needs State requirements in terms of….

Functions to be performed Performance required Essential physical characteristics

THEN NOW

FAR 11.002

Describing Requirements

Need: “Move 20,000 lbs of cargo across the river” Functional: Provide a method for transporting 20,000 lbs

of cargo across the river Performance: Provide a method for transporting 20,000

lbs of cargo across the river in all-weather and within a 30 minute threshold from transport start to finish

Essential Physical: Construct a bridge that draws upwards in the center for moving 20,000 lbs of cargo across the river

Design/detail: Build a bridge based on the following detailed engineering drawings

Statement of Objectives (SOO)

SOOs: Provides offerors the government’s top-level objectives of the acquisitionUsed in lieu of government-written SOWGives offerors flexibility to propose solutions which

meet requirements but are tailored to their optimal technical/business approach

Promotes “what we need” instead of “do it this way” mentality

SOOs v. SOWs

Statement of Objectives Summarizes overall

purpose of the acquisition Outlines top-level

performance goals and objectives

Establishes a relationship between requirements, evaluation criteria and contract incentives

Helps define programmatic risks and concerns

Statement of Work Directly responds to the

SOO Establishes a “contractor-

specific” approach to SOO performance requirements

Used during source selection to evaluate offeror’s understanding of customer requirements

Serves as the basis for contract performance

Example SOO Approach

SOO

WBS

Sec L

Sec M

Model Contract

RFP Proposal

SOW

CWBS

Contract

GovernmentOfferor

RequirementDescriptions

EvaluationCriteria

IncentiveStructures

Key Elements

Performance-Based

Acquisition

Selecting The Right Contract Type

ObjectiveNegotiate a contract type and price that

results in reasonable contractor risk and provides incentive for efficient and economical performance

“The optimum balance between risk and reward”

Contract Type Risk Relationship Government Risk

Time & Materials (can’t predict extent or duration)

CPFF (preliminary study)

CPAF (hard to objectivelyevaluate)

CPIF (prototyping, initial production

Cost and Cost Sharing (commercial opportunities)

FPIF (initial production)

FFP w/EPA (cost variations expected)

FFP (commercial items, low performance risk)

Contractor Risk FFP (commercial items, low

performance risk)

FFP w/EPA (cost variations expected)

FPIF (initial production)

Cost and Cost Sharing (commercial opportunities

CPIF (prototyping, initial production)

CPAF (hard to objectivelyevaluate)

CPFF (preliminary study)

Time & Materials (can’t predict extent or duration)

Low Risk

HighRisk

HighRisk

Low Risk

Factors in Selecting Contract Type

Overall mission objectives

Type and complexity of requirements

Schedule urgency Period of Performance Inherent risks of

performance

Adequacy of accounting systems

Past performance Adequacy of price/cost

analysis Contractor’s technical

capability and financial responsibility

Price competition

Incentive Contracts

Appropriate when supplies/services can be bought at lower costs and, in certain instances, with improved delivery of technical performance, by linking profit or fee to contractor performance

Incentive Contracts

FAR 16.401: Incentive contracts are designed to obtain specific

acquisition objectives by -- (1) Establishing reasonable and attainable targets

that are clearly communicated to the contractor; and

(2) Including appropriate incentive arrangements designed to -- (i) motivate contractor efforts that might not otherwise be

emphasized and (ii) discourage contractor inefficiency and waste

What Can Be Incentivized?

CostAll incentive contracts must include a cost

incentive feature Profit or fee adjustment formula Intended to motivate cost management Normally includes target cost, target profit or fee,

and a profit or fee adjustment formulaAC = TC Target Fee

AC >TC Downward Target Fee

AC <TC Upward

Target Fee

What Can Be Incentivized?

Performance Designed to relate profit/fee to results achieved by

contractor compared with goals Useful on service contracts when sustained, high

quality performance is mission critical Clear, objective measurements important

Test and acceptance criteria must be explicit in contract

Technical/performance incentives must be balanced

What Can Be Incentivized?

Delivery/ScheduleUse when strict schedule

adherence is mission criticalContract should specify application

of reward/penalty mechanism in the event Government caused delays or other delays beyond contractor control (i.e., no-fault provisions)

What Can Be Incentivized?

Multiple-incentive approachesMotivates contractor to strive for success in all areas

of cost, schedule and performance Compels smart trade-off decisions consistent with key

objectives of the acquisition Because of interdependent nature of cost, schedule and

performance, multiple-incentive structures help mitigate risk of overemphasizing one area at the expense of another

Incentive ContractsIncentive Contracts

Fixed-Price Incentive

Cost-Reimbursement

Incentive

Firm Target

Successive Targets

Fixed-Price Award Fee

Cost-Plus Incentive

Fee

Cost-Plus Award Fee

When to Use Cost Reimbursement

When costs of performance can not be estimated with reasonable certainty or accuracy

May only be used when: Contractor’s accounting system is adequateGovernment surveillance during performance will

provides assurances that efficient methods and effective cost controls are used

Cost-Plus-Award-Fee (CPAF)

CPAF is a cost-reimbursement contract that provides for a fee consisting of:a base amount (which may be zero) fixed at

inception of the contract andan award amount, based upon a judgmental

evaluation by the Government, sufficient to provide motivation for excellence in contract performance

FAR 16.305

Cost-Plus-Award-Fee (CPAF)

Suitable when Neither feasible nor effective to devise predetermined

objective incentive targets applicable to cost, technical performance, or schedule

Contractor performance evaluation is more subjective in nature (i.e. situational analysis)

Additional cost of administration is justified by the expected benefits

FAR 16.405-2