Lt. Col. Rene G. Rendon, USAF, CPCM, CPM

In his book World-Class Contracting, (Garrett, Gregory A. World-Class Contracting: 100+ Best Practices for Building Successful Business Relationships, ESI International, Arlington VA 1997,) Gregory Garret states that "outsourcing is here to stay." This statement describes a trend that is becoming increasingly evident at United States Air Force bases worldwide. As the Air Force continues down the right-sizing flight path, more and more base functions, normally performed by government personnel, are now being outsourced to industry. This increase in outsourcing, or contracting out, is significantly changing the Air Force operational contracting environment. This article will focus on some of the more significant impacts that this increased outsourcing has on the Air Force operational contracting environment, and then provide some insight into how operational contracting's new world will change the mission of the operational contracting squadron, and the role of its contracting managers.

The Operational Contracting Environment
The Air Force operational contracting mission is different from that of its systems and support, or science and technology contracting mission. Whereas systems and support contracting encompasses the acquisition and support of air, space, missile and electronic systems throughout the Air Force, and science and technology contracting involves state of the art research and development on past, present, and future Air Force programs, operational contracting focuses on providing contracting support for the Air Force operational commands, such as Air Combat Command, Air Mobility Command, and the Air Education and Training Command. This support is provided by the operational contracting squadrons located at each Air Force base. The contracting squadron supports the base operational mission through the purchase of essential supplies, construction, and services from the civilian economy. The traditional workload of the operational contracting mission can best be described as processing a large number of contracting actions of relatively low dollar values. In FY 96, the Air Force operational contracting offices processed over two million transactions which comprised over 95% of all Air Force contracting actions. In terms of dollars obligated, operational squadrons obligated over 8.5 billion dollars, which comprised just over 20% of all Air Force contracting dollars. Due to the nature of the operational contracting mission, contracting personnel must be knowledgeable in many contracting areas and must be ready to perform a variety of tasks ranging from simplified acquisition purchases to complex large dollar service and construction contracts.

Outsourcing
Outsourcing, or "contracting out" is defined as the transferring of the performance of a function, previously accomplished in-house, to an outside provider. An example of outsourcing is accomplishing an Air Force base's airfield management function through a contractor rather than using Air Force personnel. Outsourcing entails competing a function currently performed in-house with an outside provider. When that competition shows outsourcing to be more efficient and effective, the Air Force contracts with a commercial provider. The Air Force outsourcing program is aimed at institutionalizing the optimum use of public and private resources in support of the Air Force mission. The Air Force Outsourcing and Privatization (O&P) program is focused on accomplishing four goals: sustaining readiness, finding opportunities to improve performance and reduce costs of commercial activities, generating savings for Air Force modernization priorities, and shifting more attention, personnel, and assets from non-core to core activities. While all of the Department of Defense agencies have been implementing an outsourcing strategy to some extent, the Air Force has taken the lead. Over the past twenty years, the Air Force has netted annual savings of about 500 million dollars. Currently, the Air Force is focusing on outsourcing depot maintenance, military family housing, and base operation support. Recently, the Air Force has outsourced base-level functions such as aircraft and engine maintenance, grounds maintenance, civil engineering operations, supply, and transportation. The increased emphasis on outsourcing at the operational base level is resulting in some significant changes to the operational contracting environment. These changes include the use of increasingly complex incentive-type service contracts, increased emphasis on the government's quality assurance program, and an increased emphasis on establishing government and contractor partnering relationships.

Increasingly Complex Contracts
The outsourcing of base services is resulting in an increased use of complex, performance-based service contracts. The heart of these service contracts is the Performance Work Statement, or PWS, which defines the work to be accomplished in the contract. It should be noted that the PWS does not tell the contractor how to do to the work, rather it tells the contractor what needs to be done, and it provides a means for determining whether the work has been acceptably performed. In addition to the PWS, the contract will also contain a Quality Assurance Plan, which provides the Quality Assurance Evaluator (QAE) with an effective tool for surveying the contractor's performance. These tools include various surveillance techniques such as random sampling, 100% inspection, and periodic surveillance. The Quality Assurance Plan is used to ensure that the government receives acceptable contractor performance as compared against the technical requirements of the contract. Thus, the PWS describes the work in terms of objective, measurable performance standards, and the quality assurance plan is used to determine if the contractor' performance meets the PWS requirements. The use of the PWS and Quality Assurance Plan leads to more cost-effective contracts which shift the some of the manageable performance risk from the government to the contractors. In addition, contractors are given more latitude for determining performance methods, with more responsibility for performance quality.

With the increased investment in time, manpower, and money in procuring these major services, the government intends to retain the contractor for a significant period. Most major service contracts will consist of a period of performance of one basic period of one year, with options for four additional years. This allows both government and contractor to benefit from the major investment of resources.
In addition, gone are the days of sealed bid procurements and straight firm-fixed priced contracts. The majority of major service contracts are negotiated using competitive proposals and involve "best value" procurement strategies. Best value contracts are awarded not necessarily to the lowest offeror, nor to the most technically superior offeror, but to the offeror providing the best value in light of a comprehensive, integrated assessment of costs, performance, reliability, quality, feasibility, technical excellence, and management factors and associated risks. These contracts will also most likely incorporate an award or incentive fee structure to encourage superior contractor performance and cost efficiencies.

An example of this new breed of contract is the Base Operations Support (BOS) contract at Laughlin AFB, near Del Rio Texas. This multi-million dollar, five-year contract is for the performance of base civil engineering operations, supply, fuels, and transportation services. The contracts was the result of an OMB A-76 cost comparison study in which the government competed with contractors for the award of the contract. As one can imagine, the Laughlin BOS contractor performs many mission-critical services on base and is considered an integral part of the base community.

These performance-based service contracts are significantly more complex to administer than the traditional single-function contracts which were based on Statements of Work (SOW). The development of the PWS and Quality Assurance Plan require close coordination between the functional offices (civil engineering, supply, fuels, and transportation . . . ) and the contracting office to ensure that they completely and accurately define the Air Force's functional requirements. The PWS must be developed in conjunction with the Quality Assurance Plan, to ensure that the method of surveillance is proper for the type of work to be accomplished in the contract. Frequent communication and coordination between the functional offices and the contracting office is critical. In addition, continuous review of the PWS during contract performance is essential for the success of the contract. The acquisition team (functional program managers, quality assurance evaluator, and contracting officer) must take into consideration any requirement changes, technological changes, contract standards changes, as well as any problem areas caused by ambiguous contract language or ineffective surveillance procedures.

Increased Emphasis on Quality Assurance
The trend in outsourcing base services has put a new emphasis on the role of the quality assurance evaluator (QAE). The QAE function has evolved from a part-time job to one of the most critical positions on the acquisition team. With the Quality Assurance Plan as it's primary tool, the QAE is responsible for ensuring that the contractor performs in accordance with the PWS requirements, thus ensuring that the Air Force receives full value for the increasing dollars spent for these base services. Thus, the QAE needs to be technically competent in the functional area of surveillance, proficient in contract surveillance procedures, and of course, well versed in the requirements of the PWS and Quality Assurance Plan.

The QAE is an integral part of the acquisition team and must interact continuously with the contracting officer. Once the contract is awarded, the QAE is in the best position to determine if the Quality Assurance Plan adequately covers all elements of the PWS. For example, if the contract performance requirements do not accurately represent the criticality of each service, and its payment percentages do not accurately represent the work hours for each task, the QAE will realize that the deductions aren't worth the costs of the time it takes to process them.

As stated before, the PWS does not tell the contractor how to do to the work, rather it tells the contractor what needs to be done, and it provides a means for determining whether the work has been acceptably performed. The QAE should be focused on whether the contractor's performance meets the objective measurements of the PWS. This new focus on performance measurement is intended to allow the contractor to determine the "how" of the contract requirements, and enables the government to focus on the result, or the "what" of the contract requirement. Contracting officers are in a pivotal position as they interact with QAEs to determine contractor performance evaluation, and with the contractors to administer the contractual requirements of the contract.

Increased Emphasis on Partnering
The rising trend in outsourcing base services has put a different perspective on these major service contractors. This perspective is changing to reflect a transition from a tactical focus to a more strategic focus on the value of these contractors. With long-term performance-based service contracts in place, these major service contractors are being viewed as extensions of the Air Force's internal mission capability. This is especially true for contractors performing mission-critical functions such as civil engineering operations, fuels, supply, aircraft and engine maintenance, and airfield management. Because of this new strategic view of service contractors, and the need for increased communication and cooperation, the Air Force is implementing partnering arrangements with its major service contractors.

These partnering relationships are not legal entities, but rather a change in attitude from that of an adversarial, arms-length to one based on teamwork, cooperation, and good faith performance. The traditional government-contractor relationship at an operational base was more tactical in nature, with a short-term relationship focus. In this traditional environment, the government and contractor operated in an adversarial nature, believing that the only way to manage a contract was at the other's expense. However, with the contractor now performing long-term mission-critical functions, both parties are now motivated to work in a more collaborative mode. The partnering relationship constitutes a mutual commitment by the parties on how they will interact during the period of performance, with the primary goal of facilitating improved contract performance through enhanced communications. The partnering relationship requires a mutual commitment to work together to the benefit of both parties, sharing relevant information and the risks and rewards of the relationship. The partnering relationship also requires a clear understanding from both parties of expectations, open communications and information exchange, mutual trust, and a common direction of the future. Most partnering programs involve frequent meetings between functional program managers, contracting officers, and contractor management personnel. These meetings are for discussing and resolving any technical or contractual issues pertaining to the contract. The objective is to identify, analyze, and resolve performance issues before they become detrimental to the organization's mission. As the partnering relationship matures and both parties become comfortable with the arrangement, contract performance will improve, with problems and deficiencies becoming less common. The contracting officer must be consistently and constantly vigilant with the management of the partnership to ensure that the relationship does not deteriorate. The contracting officer must continue to monitor the relationship through appraisal and feedback mechanisms to facilitate any changes or problems that may arise during the contract performance period.

Changing Missions and Roles
The mission of the Air Force operational contracting squadron is changing to reflect the increased outsourcing of base functions. The contracting mission is evolving from that of a short-term tactical focu s , to that of a long-term strategic focus. The increased in outsourced functions and resulting long-term contracts and associated partnering arrangements are no doubt expanding the mission of Air Force operational contracting. The operational contracting squadron is beginning to play a much larger role in contributing to the base's broader goals and objectives. Thus, the mission of the contracting squadron will evolve to that of performing strategic sourcing and contract management activities in order to support the overall objectives of the Air Force base.

Since many of the traditional contracting activities are either being eliminated or automated, the role of the operational contracting officers is also changing to reflect this new strategic focus. The use of government credit cards and EC/EDI systems are allowing contracting officers more time to focus on the higher value-added activities such as managing partnering relationships and conducting market-research. Thus, contracting officers at operational squadrons will be focused, not on the day-to-day activities of small dollar purchase order placement, but more on "relationship management" with long-term service contractors. Partnering activities focused on anticipating and resolving contract problems, and working through informal conflict management procedures will be one of the primary characteristics of the new operational contract environment. It should be noted that this shift in contracting role from tactical to strategic is occurring not only in Air Force operational contracting, but also in the commercial purchasing world. A recent survey of purchasing managers revealed that buyers are focused on dedicating their time to more strategic activities such as supplier assessments and research, supplier alliances, market intelligence, benchmarking, and outsourcing negotiations and administration.

In order to fully realize this new strategic role, operational contracting officers must view themselves as "business advisors" to the senior Air Force base leadership. This new expanded contracting perspective puts the contracting officers in the best position to provide, not only contracting expertise, but also product and market expertise, as well as commercial contracting and supplier management advice and counsel to senior Air Force leadership. The Air Force must realize that the role of the operational contracting squadron is evolving from a tactical role to a strategic role, which has a direct impact on the success of the larger base organization. Senior Air Force leadership should be looking to operational contracting officers for expertise on new product technologies, potential new materials or services, new sources of supply and changes in market conditions.

The Air Force's emphasis on contracting out its support functions has significant implications for the mission of its operational contracting squadrons, as well as the role of its contracting officers. Operational contracting officers will assume increasing responsibilities as they fulfill their strategic role in providing contracting support to the Air Force base. The challenges will be great, as well as the rewards, in both job satisfaction and the knowledge that they will progress to become one of the organization's most critical team members.

The views and opinions expressed in this article are those of the author, and do not necessarily represent the opinions of the United States Air Force

About the Author
Lt. Col. Rene Rendon is Commander, 47th Contracting Squadron, Laughlin AFB Texas. A CACM, CPCM, and CPM, he is also a Fellow and a member of the Alamo Chapter.

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