Performance-Based

I know, I've written a lot about performance based contracting, but there is an article today over at FCW. I guess we know who is not getting a Christmas card from the Kelman family. But in practice what Lieberman writes is good for another reason too.

If you are paying for performance, you invoice process is a lot easier. I used to go through the invoices and look at the people, then look at their hours. I had to compare what we were paying for against what is realistic. More than a couple times I found companies trying to bill the government for 150 hours in a week. I would remind them that there are only 168 hours in a week and the person had to sleep at some point. But if we are paying for the result, regardless of how much effort was applied, then the invoice process can work more efficiently.

If we're paying for requirements and design documents, developed iterations and deployed software, quite frankly, I don't care if you can do it with 1 person or 100 people. All I care about is that it is done with the specified quality, scope, on time, with high levels of customer satisfaction, low levels of residual risk and at the agreed-upon price. That's my triple constraint (x2). But the contractor can identify the approach that works best for them in meeting those performance metrics.

This type of process encourages, and in fact rewards efficiency. The lower the vendor can get its costs the greater the profit margin.

Anyway, Kelman is notorious for firing back, and I'm sure he won't let Lieberman have the last word. Stay tuned.