Assessing the Effectiveness of Performance-Based Acquisitions in Federal Agencies

Approximately 40% of eligible federal service contracts (and 50% of service contracts among DOD agencies) are performance-based acquisitions (PBAs). Despite the significant volume of federal contracts PBAs represent, little empirical research exists on PBA use or effectiveness. This study focuses on the dyadic contract between government and contractor to examine contract attributes of PBA and non-PBA contracts. The study aims to determine whether PBAs are linked to stronger performance on cost, schedule, and technical performance. Through the analysis, the study explores how contract attributes differ amongst PBA and non-PBA contracts and the factors that contribute to (or hinder) effective implementation of performance-based contracts. To address the studyﾒs objectives, contracts data derived from FPDS-NG is analyzed. Contracts are selected from 22 service areas and studied over a 15-year period (2000-2014). Multivariate techniques are used to compare PBA and non-PBA contracts from these service areas. Semi-structured interviews with federal acquisitions professionals and private contractors are also collected to add context to the findings from the multivariate analysis. The results of the exploratory analysis show that PBAs are associated with higher costs and longer contract lengths compared to non-PBA contracts. PBAs are also associated with incentive contracts over other contract types, when compared to non-PBA contracts. PBAs are associated with higher number of bidders and set aside contracts, compared to non-PBA contracts. The results presented in the study are descriptive and do not indicate casual relationships. This exploratory study examines PBA design and implementation, contributing to the body of knowledge relevant to the research and practice of procurement. Yet, additional research is needed to test causal relationships and investigate the associations explored in this study. Future study should include more robust primary data analysis in order to explore contract attributes beyond the measures available in FPDS-NG. A more comprehensive understanding of the dynamics of performance-based contracts and performance incentives more broadly, can help to improve procurement practices in order to maximize contract performance.Naval Postgraduate School Acquisition Research Progra