The Fiscal Year 1996 Performance Based Incentive Program at the Savannah River Operations Office. Inspection report

In June 1993, the then Secretary of Energy established a Contract Reform Team to review the Department of Energy`s (DOE) contracting practices and to make recommendations to improve them. The need for contract reform was driven by a recognition that DOE did not have adequate control of its contractors, that contractors were not sufficiently accountable to DOE, and that there was an absence of well-defined performance measures and criteria for DOE contractors. In February 1994, DOE`s Contract Reform Team issued its report entitled Making Contracting Work Better and Cost Less. A key recommendation of the Contract Reform Team`s report was the establishment of a new form of Management and Operating (M&O) contract-the Performance Based Management Contract. The fundamental component of this new approach to contracting is the use of performance based contracting concepts, which emphasizes more definitive statements of work, specific performance objectives and measures, and linkage to appropriate performance incentives. Simply put, the purpose of performance based contracts is to clearly state what the Department expects from its contractors, establish financial incentives that motivate the contractors to perform, and provide ways for the Department to measure their performance. The thrust of the Contract Reform Team`s efforts was consistent with the August 1993 Government Performance Results Act which focused on improving the management of Federal programs and activities by establishing program goals and measuring the achievement of these goals