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Presenter: James Gill Technical Advisor Space & Missile Systems Center. Breakout Session #704 - Incentives Today Name: James Gill Date: 21 Jul 2010 Time: 10:00 – 11:15. 2. OUTLINE. What are Incentives? How can they help improve Contract Performance? Historical Use of Incentives at SMC
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Space & Missile Systems Center
Name: James Gill
Date: 21 Jul 2010
Time: 10:00 – 11:15
What are Incentives?
How can they help improve Contract Performance?
Historical Use of Incentives at SMC
Wide array of Space Systems
*GAO Report 06-66, DOD’s use of Monetary Incentives
Fundamental Question – Still Being Debated
GAO Suggests that there is no evidence that Incentives alter behavior
Most Contractors want to do good work – Do Incentives help set priorities?
All Contractors Consider Fee when evaluating Business Opportunities, some cases fee not primary concern
How Can the Government Make Performance a Condition of Receiving Fee? Should It?
Negative or Positive – Which work better?
For Service Effort, What Incentive Arrangements Motivate Performance
Especially in today’s harsh economic times – future Business is High on contractor’s list of importance
Appropriately applied Incentives transfer reasonable risk to Contractors
Achievable Incentives stimulate productivity
Belt Tightening can mean doing smarter acquisitions
Shared Responsibility means having to say NO
Over-promising and Under-Performing is not acceptable
Accountability is top-down direction
to Review impact of DoD policy changes
Emphasize deliberate risk apportionment
Utilize four-staged acquisition approach
Develop rhythm of research, design, build
Improve collaboration on requirements
Cost at and fund to 80% confidence
Emphasize Systems Engineering and Integration
Contract Type establishes appropriate responsibility, accountability, and risk and reward on the contractor to motivate outstanding performance . Contract TypesTYPES OF INCENTIVES
Incentives can either be negative or positive
A negative incentive is any requirement that causes a contractor to take action in order to avoid an undesirable result
Negative incentives are not to be punitive, or treated as penalties
Note: It’s important to set the stage for an incentive program early during competitive stages
Is competition always a positive incentive?
Remember the “Law of Unintended Consequences”!
Of Underrun to Settlement Cost Position
17.3% of Govt Cost Positon
12.9% of Settlement Cost Position
Correlate incentives to desired program results
Make incentives challenging, but achievable
Recognize contractor motivations as well as Govt.
Establish milestones associated with subcontract performance if critical
Ensure to not overburden the Government and Ktr with administration
Consult with legal on funding of incentives
Remember the stage of the acquisition when establishing incentives
In a time of limited resources incentives can fuel improved efficiencies and savings – reduce the impact of “belt tightening”