Contract Reform at the

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Contract Reform at the 

Department of Energy  

Jane L. Monhart

Deputy Director

Contract Reform and Privatization Project Office 

September 21, 1999

Civil Engineering Research Foundation

U. S. Department of Transportation

 
 
 
 
 

Major Objectives 

Improve performance  
Strengthen accountability  
Achieve quality results at less cost  
 
 

Contracts That Work Better and Cost Less

 
 
 
 
 

Contract Reform Culture 

Department business characterized by: 

Receptivity and responsiveness to new contracting approaches and structures  
Encouragement of new partners and new ideas  
Willingness to replace outmoded and burdensome practices  
A climate of experimentation and innovation  
 
 
 
 

Implementation 

Contract Reform Team Report Contract Reform Executive Committee Contract Reform Project Office Basic Elements Model Contracts and Model Provisions Policy Documents Training/Education/Stakeholder Involvement Rulemaking

Policy Followed Implementation

 
 
 
 
 

Basic Elements of Contract Reform 

Increased Competition Protection of the Worker, the Public, and the Environment Diversity Results-Oriented Statement of Work Performance Criteria and Measures Performance Based Incentives Greater Financial Accountability Improved Financial Management Increased Use of FAR-Based Cost Principles Increased Use of Fixed-Price contracts Cost Reduction  
 
 
 
 

The Power of Performance Measures 

What gets measured gets done If you don00 measure results, you can00 tell success from failure If you can00 see success you can00 reward it If you aren00 rewarding success, you00e probably rewarding failure If you can00 see success, you can00 learn from it If you can00 recognize failure, you can00 correct it If you can demonstrate results, you can win public support

Osborn & Graebler, Reinventing Government

 
 
 
 
 

The Performance Measurement Cycle 

00he pattern of:

adoption of crude performance measures, followed by protest and pressure to improve the measures, followed by the development of more sophisticated measures

is common wherever performance is measured.00/font>

Osborn & Graebler, Reinventing Government 
 
 

 
 
 
 
 

Some Results 

Since 1994, there have been approximately 20 compete decisions, compared to only 3 over the previous 10 years. Virtually all 30+ major facility contracts are now performance-based At Hanford, privatization of decontamination laundry services is saving DOE approximately $3 million per year in operating costs and has avoided spending more than $20 million to construct a new onsite facility  
 
 
 
 

Some Results (continued) 
 

At Savannah River, privatization of the onsite power production and transmission facilities is projected to save approximately $150 million over a 10 year period  
The Hanford Site deactivated the Uranium Oxide Plant four months ahead of schedule, with an immediate savings of $2 million in deactivation and maintenance costs, and a reduction in long-term annual maintenance costs from $4 million to $40,000  
 
 
 
 

Some Results (continued) 

Eliminating the 00ederal Norm00from contractor purchasing systems yielded cost savings and cycle time reductions, e.g. $12 million in annual savings in cost of purchasing operations at Hanford; 97 percent reduction in process time at Kansas City Plant; processing steps reduced from 76 to 6 at Pantex  
Improved financial management:  DOE uncosted balances were reduced from $10.8 billion in FY 1993 to $6.6 billion in FY 1996  
 
 
 
 

Some Results (continued) 
 

At the Advanced Test Reactor: Operating efficiency is the best since 1969 Operating costs are the lowest since 1991 Unplanned outages are the lowest in eight years; and Radiation exposure is the lowest in history  
 
 
 
 

Nevertheless. . . 

Pace of contract reform acceptance and implementation varies throughout the Department  
While performance is better and costing less, financial management, project management, baselines, and other systems require more work  
 
 
 
 
Processes are not yet in place to routinely collect and disseminate lessons learned and best practices  
Necessary changes to contract administration have not kept pace to fully realize benefits of contract reform  
Training of DOE and contractor personnel is not keeping pace with contract reform  

Nevertheless. . .

 
 
 
 
 

What Did DOE Do Right? 

Provided top management support Recognized that this is a cross-cutting management initiative Utilized individuals at all levels of agency Obtained frequent stakeholder input Conducted Self Assessment Developed policy after gaining implementation experience  
 
 
 
 

What Would I Do Differently? 
 
 

Start the Initiative with the Basic Elements (not 48 detailed, overlapping recommendations)  
Develop baseline measurements  
 
 
 
 

What Are the Frustrations? 

Leadership in a Cabinet-level agency can change frequently  
IG/GAO audits can make it difficult to 00tay the course00/font>  
The political environment can make it difficult to 00tay the course00-  BUT, it can also help a reform initiative survive  
Culture change takes a long time  
 
 
 
 

Where Is Contract Reform Taking The Department? 

From    To  
Prescriptive Contract Management  Experimentation, Exercise of Good Judgment Emphasis on Process  Emphasis on Results Transactional Approach  Systems Approach Compliance-Based  Performance-Based Uncoordinated, Redundant Oversight Coordinated, Consolidated Oversight Federal Norm   Industry Practice Traditional Contracting Strategy Innovative Contracting Strategies, e.g., Integrator

                              and Privatization Concepts

Traditional Solicitation Techniques Streamlined Solicitation Techniques Administration Based on Functions Administration Based on Results  

A FUNDAMENTAL CHANGE IN THE WAY THE DEPARTMENT DOES BUSINESS

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