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I have a question for anyone familiar with how to innovate within FAR.  Has anyone replicated the UK/Australia typePay-For-Success Contracts under FAR?   I know some States like NY and WI are doing it in some of their public procurements, but I am curious whether this model would work under a FAR based acquisition and what type of contract one would use?  Basically the issue I have is a private sector partner who is willing to put up the funding or wiling to find an investor to do that is not really interested in complying with a huge amount of FAR & supplement clauses.   However, since this looks like a good way not to waste tax payer funding, by only paying if results are achieved, I am looking for the best way to contract for this.   Although OT is probably the way to do it (not sure), what is the agency does not have OT authority?

The Pay for Success (PFS) model is a new way of financing social services to help governments target limited dollars to achieve a positive, measurable outcome. Under the Pay for Success model, a government agency commits funds to pay for a specific outcome that is achieved within a given timeframe. The financial capital to cover the operating costs of achieving the outcome is provided by independent investors or the Government or a combination. In return for accepting the risks of funding the project, the investors may expect a return on their investment if the project is successful; however, payment of the committed funds by the government agency is contingent on the validated achievement of results. In this way, the PFS model shifts the burden of investment risk from the government to private investors, effectively creating a social investment market where the government only pays for results. 

The PFS financing model relies on independent private funding to provide the working capital for the proposed intervention. Because the up-front money is not provided by the government, the PFS project partners are not constrained by government regulation on how they can spend the money. This financial freedom should allow them to explore, develop, and carry out innovative service delivery strategies that they would have been unable to implement with government dollars.

The payment is absolutely contingent on meeting a pre-stated project outcome goal, and typically occurs at the end of the project when outcomes can be measured. Should the PFS project fall short, the government does not pay for the intervention, and the financial risk remains with the private investors, not with the tax-payers. 

If outcomes/results are achieved, the government pays to the contractor or investor a pre-negotiated amount (which includes an ROI).  Results are measured by an independent evaluator hired by the government. 

The question is what type of contract would one use to pay the investor/contractor?

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Just now, Tzarina of Compliance said:

The question is what type of contract would one use to pay the investor/contractor?

Not an expert but by the read of your OP the question that was raised in my mind was not what type of contract but the legal authority with regard to the money side of things.  Almost sounds like supplementing an appropriation which is a no-no generally speaking.

My comment does acknowledges that nothing surprises me in what can be done in the Federal sector so maybe there is a way.   It will be interesting following this thread.

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Are you assuming that this type of contracting is legal?

You say that certain federal funds are “committed”. Committed funds that aren’t obligated can be withdrawn by higher authority which might result in an Anti Deficiency Act violation.

You say that up front financing is provided by private entities. See also Volume II of Principles of Federal Appropriations Law

Chapter 6 Availability of Appropriations Amount 

E. Augmentation of Appropriations

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16 minutes ago, joel hoffman said:

Are you assuming that this type of contracting is legal?

You say that certain federal funds are “committed”. Committed funds that aren’t obligated can be withdrawn by higher authority which might result in an Anti Deficiency Act violation.

You say that up front financing is provided by private entities. See also Volume II of Principles of Federal Appropriations Law

Chapter 6 Availability of Appropriations Amount 

E. Augmentation of Appropriations

I am not assuming anything, just trying to figure out how this would work if at all.  I will look at Chapter 6 as you suggested, thanks.   I was thinking that funding would need to be allotted in full for both evaluator and the max payment amount to avoid ADA violation.     

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Pay for success contracting is really a funding scheme. The idea has been around for about ten years. It's being done by some states, Delaware is one that I know of. See Delaware Code, Title 29, Part VI, Ch. 69, Subchapter VII, which defines "pay for success contract" as follows at § 6990:

Quote

“Pay for success contract” means a written agreement to provide a program, service, or economic development initiative, under which an investor provides funding that a state agency agrees to repay to the investor if the service, program, or economic development initiative meets the performance measures and outcomes in the agreement.

See also Burand, "Contracting (Incompletely) for Success: Designing Pay for Success Contracts for Social Impact Bonds (SIBS)," Cornell Journal of Law and Public Policy (Fall, 2019). 

It cannot be done under FAR. It's not really about procurement contracts. There would have to be authorizing legislation and new regulations, which would take years for Congress and the FAR councils to produce.

Congress has mentioned pay for success contracts about four times, mostly in hearings in connection with war on poverty and welfare programs.

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This overlaps with the much ballyhooed 'Smart Contracts.'  Which run on the blockchain, the blockchain I tell you, blockchain!  /sarcasm

Smart contracts execute pre-determined actions when predetermined conditions have been met and verified.  Basically, (if -> then) contracts that are entirely outcome driven.  Much research these days looking into how smart contracts can be used by Government agencies, and presumably some of that research is about funding and legal authority. 

Also, https://govlab.hks.harvard.edu/pay-success

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22 hours ago, Vern Edwards said:

Pay for success contracting is really a funding scheme. The idea has been around for about ten years. It's being done by some states, Delaware is one that I know of. See Delaware Code, Title 29, Part VI, Ch. 69, Subchapter VII, which defines "pay for success contract" as follows at § 6990:

See also Burand, "Contracting (Incompletely) for Success: Designing Pay for Success Contracts for Social Impact Bonds (SIBS)," Cornell Journal of Law and Public Policy (Fall, 2019). 

It cannot be done under FAR. It's not really about procurement contracts. There would have to be authorizing legislation and new regulations, which would take years for Congress and the FAR councils to produce.

Congress has mentioned pay for success contracts about four times, mostly in hearings in connection with war on poverty and welfare programs.

Do you believe a transaction like this would be an OT?  Also, if an agency issues a Fixed Unit Price Contract for services and incrementally obligates and only pays for outcomes or not at all, would it not be possible?  Sorry for ignorance.    Also I am exploring this option for a defined up to 5 year period of performance and not an indefinite first-outcome type.  So an arrangement is basically achieve x within 5 years or get paid nothing.  

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23 hours ago, joel hoffman said:

Are you assuming that this type of contracting is legal?

You say that certain federal funds are “committed”. Committed funds that aren’t obligated can be withdrawn by higher authority which might result in an Anti Deficiency Act violation.

You say that up front financing is provided by private entities. See also Volume II of Principles of Federal Appropriations Law

Chapter 6 Availability of Appropriations Amount 

E. Augmentation of Appropriations

It is not really an Augmentation.   There is no commitment by the Government to pay except for a Monitor unless they instantly get what they have a bona fide need to purchase in first place.  In other words,  if I need to purchase solution/services to reduce infant mortality in a specific area, I would normally do it under a cost type contract with no guarantee of success.   Here I am basically having someone else fund this program and only pay if the mortality is reduced by a pre-set percentage, which was my intent and bona fide need in first place.  

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@Tzarina of Compliance In your opening post you asked:

On 9/8/2021 at 6:10 AM, Tzarina of Compliance said:

I have a question for anyone familiar with how to innovate within FAR.  Has anyone replicated the UK/Australia typePay-For-Success Contracts under FAR?   I know some States like NY and WI are doing it in some of their public procurements, but I am curious whether this model would work under a FAR based acquisition and what type of contract one would use?  Basically the issue I have is a private sector partner who is willing to put up the funding or wiling to find an investor to do that is not really interested in complying with a huge amount of FAR & supplement clauses.   However, since this looks like a good way not to waste tax payer funding, by only paying if results are achieved, I am looking for the best way to contract for this.   Although OT is probably the way to do it (not sure), what is the agency does not have OT authority?

I don't know of anyone  in the Federal government who has done a PFS contract under the FAR or an other transaction, and no one has stepped up here to date to  say that they have. The responses that you have received thus far, including mine, have not been helpful.

As I said, I don't think FAR provides for PFS contracting, wherein a private financier pays a service provider and the government pays the financier if the service provider is successful. It's a strange kind of subcontracting arrangement conjured up by bureaucrats short of taxpayer money.

Now you ask:

2 hours ago, Tzarina of Compliance said:

Do you believe a transaction like this would be an OT?  Also, if an agency issues a Fixed Unit Price Contract for services and incrementally obligates and only pays for outcomes or not at all, would it not be possible?  Sorry for ignorance. Also I am exploring this option for a defined up to 5 year period of performance and not an indefinite first-outcome type.  So an arrangement is basically achieve x within 5 years or get paid nothing.  

I don't want to sound harsh. I don't mean to be. But it strikes me that you have heard about something that seems promising, but you haven't done enough research and don't understand PFS contracting or the FAR well enough to figure out how it would work, so you have come here. I for one don't want to write a thousand words or more in this awkward back-and-forth and forever-branching-out forum to sort things out for you.

Consider this from the Delaware State Code that I cited earlier:

Quote

(f) Each pay for success contract must include all of the following:

(1) A full and thorough description of the objectives to be addressed by the pay for success contract and an analysis of how the defined performance measures will demonstrate progress in addressing the objectives, and how achieving the objectives should provide a significant public benefit, lead to a long-term reduction in state expenditures, or enhance job growth.

(2) A requirement that the agency will hold the funds for the pay for success contract in a reserve account that is specifically for the pay for success contract.

(3) A requirement that a substantial portion of the outcome payment is conditioned on achieving specific outcomes based on the defined performance measures that lead to fiscal, economic, or social value for the State.

(4) A requirement that the program intermediary or investor provide evidence that the program intermediary or investor has secured all of the necessary financing before service delivery begins.

(5) A description of the data each agency involved in developing the pay for success contract will provide to the program intermediary or investor. The data will be provided by the agency only to the extent permissible by law.

(6) The objective process that an independent evaluator, chosen by the agency head, will use to monitor program progress and determine if a performance measure is achieved.

(7) The reporting requirements the program intermediary or investor must provide to the agency regarding the program intermediary’s or investor’s progress in meeting the objectives.

(8) The method that will be used to calculate the amount and timing of outcome payments to the program intermediary or investor during each year of the pay for success contract if the independent evaluator determines that the program intermediary or investor achieves a performance measure.

(9) The terms under which a pay for success contract may be terminated.

https://delcode.delaware.gov/title29/c069/sc07/index.html

As I tried to explain in my earlier post, PFS contracting is largely a financing arrangement. The FAR makes no mention of and prescribes no rules or guidance for such privately financed contracts. You could call Delaware officials to learn more about what they are doing, but they probably know next to nothing about the FAR and what it permits federal agencies to do.

In short, if you want to know more about the possibility of PFS contracting under the FAR, either wait for someone to post here who has done one under the FAR or start a research file and go to the library and make some phone calls.

Best of luck to you.

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6 minutes ago, Vern Edwards said:

@Tzarina of Compliance In your opening post you asked:

I don't know of anyone  in the Federal government who has done a PFS contract under the FAR or an other transaction, and no one has stepped up here to date to  say that they have. The responses that you have received thus far have not been helpful.

As I said, I don't think FAR provides for PFS contracting, wherein a private financier pays a service provider and the government pays the financier if the contract is successful. It's a strange kind of subcontracting arrangement conjured up by bureaucrats short of taxpayer money.

Now you ask:

I don't want to sound harsh. I don't mean to be. But it strikes me that you have heard about something that seems promising, but you haven't done enough research and don't understand PFS contracting or the FAR well enough to figure out how it would work, so you have come here. I for one don't want to write a thousand words or more in this awkward back-and-forth and forever-branching-out forum to sort things out for you. But here are some  tips.

Consider this from the Delaware State Code that I cited earlier:

https://delcode.delaware.gov/title29/c069/sc07/index.html

As I tried to explain in my earlier post, PFS contracting is largely a financing arrangement. The FAR makes no mention of and prescribes no rules or guidance for such privately financed contracts. You could call Delaware officials to learn more about what they are doing, but they probably know next to nothing about the FAR and what it permits federal agencies to do.

In short, if you want to know more about the possibility of PFS contracting under the FAR, either wait for someone to post here who has done one under the FAR or start a research file and go to the library and make some phone calls.

Best of luck to you.

Thank you, Vern and I appreciate your comments and Delaware research.  I am writing here not because I don't want to do research, I am simply curious if anyone has done this and could share some thoughts/experiences.  I understand that this kind of contracting is really not the type that most people here care about since PBS tend to serve "feel good" public purpose projects rather than war fighters or infrastructure.  Nevertheless, there is a real need for some innovative approaches in some of the social impact contracting which could potentially save tax payer funding and leverage private sector funding.     I have done a lot of research on PFS contracts as they are implemented at State level and also in other countries.  In fact there is at least one agency in the US Government which has done this kind of "bond" arrangement for a project overseas.  Bond is really a misleading word here, but essentially it's a private public partnership of sorts where investor's corporate social or philanthropical interests collide with public need.  To my knowledge they may have used their OT authority to do this, but I am not quite sure and so I was looking to see if anyone has any experience at all with this.  I will continue my research and thank you for y'all's time.  

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Actually there is a contract type in the FAR that is close to what you are asking, although not exactly the same. It is an Energy-Savings Performance Contract, or ESPC. It has its own statutory authority (42 USC 8287), and is implemented at FAR 23.205, although 23.205 simply sends you to the DoE ESPP regs, which are extensive. It has the features you mentioned -- performance is financed by an outside financier, and payment is based on achieving the savings guaranteed in the contract. 

It's not the general PFS authority you are looking for, since it is limited to energy saving projects by its special statutory authority, but if you are looking for ideas and experiences, the DoE web site has lots of reference material. Now, can you apply its concepts using an OT as the contract vehicle -- who knows?

 

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I don't have anywhere near Vern's experience or intellect, but I would do what I can with what I've got. I'd write up a normal, public-funded, FP performance-based contract, with strict quality levels equating to your success outcome. Deductions up to 100% of the contract value could be written in for specific undesirable outcomes (AQL).  I have done that before, though normally using deductions that are not so large as to leave contractors with absolutely nothing, for fairness' sake.

The contractor can still get private funding, and the funder can get paid first, by their going to a private party, such as a bank, and putting in an Assignment of Claims -- the contract, its payments, and maybe other things, as collateral. 

The result might not be equitable if the required outcomes aren't met, so Legal would need to be up to speed.  Still affected by apparent authority, constructive changes, terminations, and so forth.

I can imagine several other ways this could be done, too.  The overall price would be lower, I expect, if the contractor's reward/risk wasn't all or nothing.  I suppose one way do to this, other than avoiding a 100% AQL deduction, would be to consider an initial period an unpaid trial run/demo, and paid option periods as potential rewards, even a period as a Requirements contract.

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I think that the subject example in the thread is primarily an attempt to circumvent the FAR pricing and other government contracting requirements. The government and contractor agree on some amount, be it fixed or a rough order of magnitude or a not to exceed, and then government obligates the funds in order not to violate the Anti-Deficiency Act.

The government only agrees to pay for successful performance and delivery. Can’t that be done under a conventional contract? Various forms of performance based contracting have been done before (I think).

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It seems to me that the original posting is about social services outcomes with benefits for society as a whole, rather than traditional performance and delivery outcomes with benefits for an agency.  Maybe this is somewhat analogous to the difference between basic research and applied research, which is expressly accommodated in the FAR.

 

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34 minutes ago, joel hoffman said:

I think that the subject example in the thread is primarily an attempt to circumvent the FAR pricing and other government contracting requirements.

It's a way fund government programs when a legislature won't provide up-front funding.

From the article to which I provided a link, above:

Quote

Pay-for-success contracts, also known as social impact bonds, have been widely touted as a clever way to fill the funding gap plaguing social programs by attracting a tranche of the trillions of dollars in private return-seeking capital. 

As government funding for social welfare services diminishes, considerable attention has been focused on a new funding approach—social impact bonds and pay-for-success contracts—that holds out the promise of attracting private investment capital to serve society’s critical social needs. Instead of government paying nonprofit organizations to deliver services like job training, private investors provide the funding and are repaid later by the government (along with a potential profit) if the service meets agreed-on performance benchmarks.

I  do not believe that FAR provides for such an "acquisition" strategy. Moreover, this is not just the half-baked performance-based acquisition scheme in FAR. In the cases in question the programs have been something like this:

Quote

To understand how pay-for-success (PFS) and social impact bonds (SIBs) work, consider the example of recidivism. In 2014 the state of Massachusetts, the nonprofit Roca, the financial intermediary Third Sector Capital Partners, and a group of investors entered into a contract under which Roca was paid by investors to operate a program to keep formerly incarcerated young people from ending up back in jail. If Roca meets or exceeds the contract goals, the state will repay the investors their principal and potentially even a profit. (If the program fails, investors could lose some or all of their money because the government would not have to pay.) Massachusetts is willing to repay the loan with interest to investors because it saves even more money by keeping young people out of prison. Investors are willing to put their capital at risk because they believe that Roca’s program works, and because philanthropic funding is mitigating that risk. And Roca is eager to be a part of this complex scheme because it is a way to scale up its work with at-risk youths and young adults.

The benchmarks have been things like rate of recidivism. And note the boldface I added to the quote: Without congressional authorization, the Federal government cannot pay interest under a contract.

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On 9/8/2021 at 9:19 AM, Tzarina of Compliance said:

I am not assuming anything, just trying to figure out how this would work if at all.  I will look at Chapter 6 as you suggested, thanks.   I was thinking that funding would need to be allotted in full for both evaluator and the max payment amount to avoid ADA violation.     

In this case, the funding would be available at the outset. “Allotment” of funds”? 

 

On 9/9/2021 at 7:31 AM, Tzarina of Compliance said:

Do you believe a transaction like this would be an OT?  Also, if an agency issues a Fixed Unit Price Contract for services and incrementally obligates and only pays for outcomes or not at all, would it not be possible?  Sorry for ignorance.    Also I am exploring this option for a defined up to 5 year period of performance and not an indefinite first-outcome type.  So an arrangement is basically achieve x within 5 years or get paid nothing.  

I believe that Incremental funding for  this would have to be otherwise authorized. However, it would appear that the funds are obligated , not obtained during or after the fact for payment for performance.

I’m not sure whether the second question above refers to this type of action or a conventional contract type:

“Also, if an agency issues a Fixed Unit Price Contract for services and incrementally obligates and only pays for outcomes or not at all, would it not be possible?”

So the scheme described in the initial post wouldn’t be appropriate, if it is designed for use when funding isn’t initially available. 

17 minutes ago, Vern Edwards said:

It's a way [to] fund government programs when a legislature won't provide up-front funding.

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 @ji20874 and @joel hoffman bring up interesting points.  The fact is that this is not an attempt to circumvent getting the funding upfront nor it is an interest payment.

 The agency in question would otherwise fund the same program, probably under cost type contract in hopes to achieve a social outcome:  train underemployed youth in specific skills in a specific area or decrease mortality for infants in a specific country.  This goal may benefit a private sector company, for example,  which is willing to invest to get skilled workers in a specific area for their plant or across a specific country for new market entry and it may benefit the funding agency because they have appropriated funding to reduce unemployment.      The investor is willing to put up the capital upfront and find someone to do this work and will only claim money + profit back if the program achieves the desired targets - various arrangements are possible for "+profit" - could be local tax breaks in lieu of profit, could be "each trained skilled worker" pays a small% back if fully employed by the investor....  etc.    The targets are desired by the Agency and the investor.   The update on this from the Federal Agency that uses this currently:  they are using OT for the agreement with the investor, but they say that potentially Fixed Amount Grant or a Performance Based Fixed Price Contract could be used where funding is obligated upfront, but the payment is made ONLY under no margin of error AQL, which is what I believe @Acquirersays. 

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@Tzarina of ComplianceIf you think you can do that under FAR, then put together a business case and send it up for approval through agency channels. Let us know what happens.

But I have a question:

21 minutes ago, Tzarina of Compliance said:

This goal may benefit a private sector company, for example,  which is willing to invest to get skilled workers in a specific area for their plant or across a specific country for new market entry...  

If this program, to be carried out in a foreign country, is of such value to the private sector, and if the private sector has funds to invest, why won't the private sector invest without a promise of U.S. taxpayer payback?

You say:

21 minutes ago, Tzarina of Compliance said:

The investor is willing to put up the capital upfront and find someone to do this work and will only claim money + profit back if the program achieves the desired targets - various arrangements are possible for "+profit" - could be local tax breaks in lieu of profit, could be "each trained skilled worker" pays a small% back if fully employed by the investor....  etc.

So, if the program works to the investor's benefit, then the U.S. taxpayer should pay the investor for investing, plus a profit on its investment. Is that right?

Please teach us about this.

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1 minute ago, Vern Edwards said:

@Tzarina of ComplianceIf you think you can do that under FAR, then put together a business case and send it up for approval through agency channels. Let us know what happens.

Question:

If this program, to be carried out in a foreign country, is of such value to the private sector, and if the private sector has funds to invest, why won't the private sector invest without a promise of U.S. taxpayer payback + profit?

You say:

So, if the program works to the investor's benefit, then the U.S. taxpayer should pay the investor for investing, plus a profit on its investment. Is that right?

Please teach us about this.

US Tax Payer is already paying for this.  They are paying under idiotic Government cost reimbursement contracts which have to accomplish nothing and the only people who get benefit are the Potomac residents.  Or it is done under "performance based" contracts where if you fail you will still get cost plus profit for "completed work".  

The point here is to leverage private sector interest in a specific area and align public financed programming by reducing the risk of funding crap ideas which complete nothing. The benefit to a private investor is putting their money to a social impact which may or may not affect where they live or their business and the agency's assistance in having the foreign government or (if at home) a state government buy-in to assist.    And yes, the risk the investor takes is rewarded by "profit" - this is America.  What is your point?  Government contractors pocketing gazzilions in profits for "fearlessly taking on" poorly designed contracts which accomplish nothing in perpetuity is better than someone only making a profit when stuff gets done?

I am making a case for real Performance Based Contracts here, where "performance based" is not just a fancy word for "we will pay you for work completed even if you completely fail."   I think the grant aspect is interesting but you can not fund "profit" under grants, so a FFP with 100% only AQL is probably the way to go here.

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21 minutes ago, Tzarina of Compliance said:

The point here is to leverage private sector interest in a specific area and align public financed programming by reducing the risk of funding crap ideas which complete nothing.

That's bureaucratese ("leverage" "align") except, of course, for "crap."

So we'll get the private sector to fund the crap ideas? Is that the idea?

If the work is such that performance can be both specified and achieved, then why is the government using cost-reimbursement contracts and not fixed-price contracts?

As for my question about profit, I was responding to your argument about investor benefit. If the performance outcome benefits the investor, if the investor gets what it wanted, then why should the government pay the investor a profit for its investment. Shouldn't the beneficial outcome be the investor's reward? Please elaborate.

As for your comment about "real Performance Based Contracts," if such can be done, then why go through the rigmarole of a three-party relationship? What is your plan? Will the government contract with the investor or the service provider? Will the service provider be a subcontractor to the investor? Or will the government contract with the service provider and, separately, with the investor? Can the government award a contract under the FAR in which the deliverable will be funding?

If funding is not the objective, or one of them, then why not just change your current acquisition strategy?

I am asking you some of the questions I'd ask if you came to me seeking approval of a PFS contracting business case.

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So, it appears to me that what Tzarina might be proposing would look somewhat similar to an industry “guaranteed maximum price” (GMP) contract (but with the differences described below) to successfully perform a requirement

The GMP would provide  for 100% government share of any cost underrun and 100% contractor share of any cost overrun.

And there would be no payment prior to successful completion of the requirement.

The contractor would bear the cost of financing the performance as an investment, in return for some future benefits to the contractor.

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18 minutes ago, Vern Edwards said:

 

That's bureaucratese ("leverage" "align") except, of course, for "crap."

So we'll get the private sector to fund the crap ideas? Is that the idea?

If the work is such that performance can be both specified and achieved, then why is the government using cost-reimbursement contracts and not fixed-price contracts?

As for my question about profit, I was responding to your argument about investor benefit. If the performance outcome benefits the investor, if the investor gets what it wanted, then why should the government pay the investor a profit for its investment. Shouldn't the beneficial outcome be the investor's reward? Please elaborate.

As for your comment about "real Performance Based Contracts," if such can be done, then why go through the rigmarole of a three-party relationship? What is your plan? Will the government contract with the investor or the service provider? Will the service provider be a subcontractor to the investor? Or will the government contract with the service provider and, separately, with the investor? Can the government award a contract under the FAR in which the deliverable will be funding?

If funding is not the objective, or one of them, then why not just change your current acquisition strategy?

I am asking you some of the questions I'd ask if you came to me seeking approval of a PFS contracting business case.

Private Sector is a little more attune of what "crap idea is", plus yes, to answer your question, I would rather private money fund far fetched "do good social impact" ideas first before tax payer gets to pay.  

As to why the Government is using cost type contracts is because the work method can not be specified and achievement of results is a maybe.  Under the proposed PFS scenario, the Government (tax payer) does not care about how the work is done (except for maybe ethical considerations and applicable laws), because the payment is only due when desired outcome is confirmed.  No outcome, no payment.  No settlement, no re-procurement, nothing.

If you give me a regular FFP contract and the scope says I get paid when the final deliverable is done, but the final deliverable fails the criteria for acceptance - do I get paid anything if you terminate? Do I have to pay you anything to re-procure?

As far as the profit is concerned, the investor is an "impact investor" - so they have money which they could put in fixed income bonds or some other conventional instrument and sit pretty waiting for ROI.  They would like to instead invest in something that that would help others, create some kind visible good or achieve progress for their desired cause without sacrificing the ability to earn a return  It is not a donation, they already probably doing that.  This is just another way to make money but by also doing something of value. 

In this scenario, the Government can contract with investor (evidently using OT at the moment) and investor contracts service provider.  Investor pays the service provider to do the work.  The Government gets a third party monitor and only pays the investor when outcomes are achieved.   

Or the Government can contract with intermediary who then contracts with Investor and a Service Provider. 

The funding is not the objective,  the outcome is the objective.    In the first instance where the Government contracts with Investor, the contracts says that If X is achieved the payment is $$ (includes cost plus fee).  Investor is not interested in making certifications under any of the FAR clauses, or complying with No texting when driving, since it is already taking all the risk of not getting any of the money back.  What instrument would that be - an OT?

In the second instance, there may be more flexibility since the intermediary may be willing to accept a Fixed Price or Fixed Unit Price contract with FAR clauses but we are back to what happens if the intermediary fails to produce outcomes, do they get anything under a regular FP contract?  Could you set up payments ONLY at 100% achievement with no AQL deviation and if contractor fails to deliver 100%, not settlement of any kind?

 

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5 minutes ago, joel hoffman said:

So, it appears to me that what Tzarina might be proposing would look somewhat similar to an industry “guaranteed maximum price” (GMP) contract (but with the differences described below) to successfully perform a requirement

The GMP would provide  for 100% government share of any cost underrun and 100% contractor share of any cost overrun.

And there would be no payment prior to successful completion of the requirement.

The contractor would bear the cost of financing the performance as an investment, in return for some future benefits to the contractor.

Government pays nothing, not even cost if the objective fails. 

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8 minutes ago, Tzarina of Compliance said:

Government pays nothing, not even cost if the objective fails. 

Correct, under the scenario that I described.

Its a variation of both a fixed price incentive with fixed target (FPIF), where the target equals the maximum price and what industry refers to as a Guaranteed Maximum Price (GMP).

No payment unless and until the object/requirement is successful.

(Edit: Profit or fee also payable but only upon success).

Edited by joel hoffman
Noted that profit or fee is also included
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