Bringing Performance Management

into Government Contracting


by Jesse W. Brogan, Management Engineer

President, The Management Upgrade Shop


The Challenge

Bob, at least that is the name on his coveralls, works at the corner gas station.  He makes many contracts every day, and rarely has problems seeing to performance.  He is using a few simple forms that were prepared for him back when he started business, and these have served him for over a decade.

The Government lets thousands of contracts, and has an army of superbly trained contracting experts who are paid over double what Bob is earning.  They are backed by an even greater source of technical and legal expertise.  Yet about one in ten of their contracts experience serious performance difficulties, and there are great challenges in assuring both performance and contract payment.


The cynical observation: “Perhaps it is better to put Bob in charge of Federal contracting.”


The present challenge of performance problems in Government contracts is not a simple continuation of problems from the past.  As part of the effort for reducing the size of the Federal workforce, the Government is increasing the amount of work that it is performing through contracts.  The number, size and complexity of Government contracts has been increasing.

To see this in another perspective, we find a general direction of Government initiative that we call performance management.  Contracting work out is a performance method that seems to avoid the need for performance management, which is now applied only to in-house performance efforts.  Shifting Government work to contract performance has become a way to avoid performance management.

Another aspect of this challenge is indicated by overruns in contracts that do not result in any person being held accountable for the failure in performance, the failure in planning, or the failure in management.  The purpose of this paper is establishing the means to properly affix accountability and responsibility for performance in a way that supports performance through contract.



A Direction for a Solution

Management engineering is the application of principles of performance-based industrial engineering to the structure and processes of management.  It approaches the gaining of performance through others as a work specialty, as what managers and administrators must do to gain a performance through others. 

Where more traditional studies of efficiency and effectiveness address productive efforts (what non-managers do), management engineering is focused on the work that managers and management systems do to gain performances through others.

The challenge can also be seen in terms of a management culture.  The existing management culture recognizes good management as “the proper and effective use of authority.”  In this perspective, management does not perform work, but gets others to do performance.

Much of the difference between past and suggested management culture is inherent in the difference between authority-based and performance-based management.  Management engineering approaches management as a set of value-adding efforts that assure a performance.  Management engineering is a way to put managers more in charge of performance, so that they can be held more-effectively accountable for gaining performances.


Background and Fundamental Definitions

Contracting is a method for organizations to use in gaining products and performances using only its financial resources.  Engineering approaches contracting as a method of performance.  Management engineering, which is founded on the same principles as performance management, provides the key to efficient and effective performance through contracting. 

The management engineering answer to performance through contract traces back to basic industrial engineering.  The principles of industrial engineering are the original source of our knowledge of performance management; but the original application was limited to the production environment.  Engineering was applied to production workers and work groups as a means to assure their performance.

One important, but relatively unrecognized, aspect of the initial application was that it resulted in reduced workload for workers.  The change accomplished was in work management, which better supported the performance of work by subordinates.  The 19th century boss-manager was replaced by a performance-based foreman.  This involved a purpose-level change from managers who represented owners to those who supported performance.  The change had more of an impact on work-group managers than upon the workers. 

One result was better organization; another was markedly increased support for the performance of work.  Work managers became responsible for the performance accomplished by working groups over which they managed, and they learned to take specific actions to assure effectiveness for subordinates.

The value of the productive work that workers could accomplish increased dramatically, but not by making them work longer days or with greater effort.  There was an intelligent effort to regulate workload to assure that workers would not become fatigued and lose effectiveness.  This was the start of management by working smarter instead of harder.

Management engineering brings the same basic logic and approach to managing over management.  Management engineering does for senior management what the original industrial engineering did for work management.  It markedly decreases the work being performed in management and internal support, at the same time that it increases superior-manager support for performance by subordinates.


Lessons from Performance Management

Performance management principles were applied with great effect in production areas.  This early application is not only our source of modern industrial engineering, but of our knowledge of effectiveness and efficiency.  The production area provided the testing ground for how work management could be most effective in gaining performance through workers.

One of the most important efficiency engineering rules is that there must be a product.  Performance is unmanageable unless there is something that must be gained through the efforts of those who are managed.  Without a product, there is no possibility of performance management.

Another lesson, one that has spread into management language without effective implementation, is that authority and responsibility are inseparable.  Unless the performance manager is personally responsible for his or her exercise of authority over subordinates, there is no way for senior management to manage performance through those subordinates. 

A second principle results from the same logic.  Unless the subordinate manager has authority over sufficient resources, he or she cannot be held accountable for gaining the desired result through them.

A final lesson is the value of abstinence.  This is no AA pledge, but a statement of practical management.  Once product responsibility is placed upon a subordinate manager, that manager is not to be drawn off to other tasks, nor are his performance resources to be redirected to other tasks selected by superiors.  The manager is given the performance responsibility, and the senior manager that assigned it takes responsibility for protecting that subordinate manager from others who would distract him or her from completing what was assigned.

The more important the assigned responsibility, the more intensive the protection.  The more intensive the protection, the more effective the senior manager will be at assuring that the subordinate can be held fully accountable for performance.


Wisdom from Management Engineering

Abstinence is one aspect of the engineered assignment process.  In that process, the assigning manager assures that the subordinate is able to perform, and then holds that subordinate’s feet to the fire until the desired result is accomplished.

Our next performance principle comes from the identity that exists between performance management and management engineering.  The principle is inherent in the First Rule of Management Engineering: Management is an essential.  There is no way to improve management by replacing it with something else.

As an immediate application, management cannot be effectively performed by contract.  It is a part of the performance.  If management is not performed by the one who has something to accomplish, it is likely that it will not be performed at all.


Restatement of the Challenge

The Federal contracting process is now managed by regulation and implemented through the FAR (Federal Acquisition Regulation).  It is so arranged that there is no individual who is both in authority over the resources needed to gain a performance, and who is also accountable for the accomplishment of that performance.   Basic management has been abandoned, and the result is an inability to effectively manage Government contracts.


Find anywhere else

where a 50% cost overrun

to a major contracting effort

would not lead to termination!


In more practical terms, there is no individual who is directly accountable for gaining performance through completing a government contract; there is no individual that a more-senior manager may hold accountable for a contracted performance.

It is a general rule of engineering that: the solution to a problem will be obvious once the problem is properly defined.  The solution to our problem with Government contracting turns out to be as simple and direct as the definition of the problem.  The resolution involves establishing effective management over performances accomplished through contract. 

Due to the obvious lack of knowledge of management witnessed in the existing direction, it is necessary to address this change in very basic terms.  I ask patience of those who do management for a living.

Management is gaining through the efforts of others.  Good management recognizes three essentials:

ü      something to gain,

ü      someone who is responsible to gain it,

ü      Authority in that someone to direct resources needed to gain it.

Without all three of these essentials, an effort will be technically unmanageable.  Under the first rule of management engineering, as stated above, these three essentials are also management engineering essentials.  Because of the connection to performance management, these are also the essentials for performance management.

Performance management viewpoint is necessary to bring this into focus.  Performance is to be assured by a manager, someone who has both something to accomplish, and directive control over sufficient resources to accomplish it.  To this person, contracting is just a method of performance.  Instead of directing employees to performance tasks, this manager will be directing dollars to a contract performance requirement.


Another View of The Challenge:

Under the current system, dollars are directed to a contracting officer, along with a definition of the product or result to be gained.

Here at the beginning is where management fails.  The contracting officer provides a “contracting service” to that manager.  He doesn’t work for the manager, and is not one of the resources that the manager can direct.  The manager with the need, and with resources to gain a performance, cannot direct his resources to meet his need.  He is required to shift his resources to the contracting officer, who is supposed to prepare a contract to assure a performance that will meet the manager’s need.  The contracting officer accepts no responsibility for producing anything but the contract document. 

To further prevent performance management, the contracting officer is required to create and manage the contract in accord with regulatory mandates and permissions.  He or she has no responsibility except for the competent completion of regulatory requirements. 

To put this into our performance management perspective, it would be like assigning a performance responsibility to a foreman, who only accepts responsibility for passing the instruction along to subordinates, and supervising them based while they do work to in accord with general instructions left by someone else.

For historical perspective, this approach to performance management was common during the 19th century.  The boss-manager was the effective agent of the business owner for assigning duties to workers and accepting work product; the boss-manager did not accept performance responsibility.

In the first few decades of the 20th century, performance managers (modern foremen), as defined by applying the principles of industrial engineering, replaced boss-managers.  Effective output from workers was more than doubled, even though they did not work any harder than before. 

This earlier “boss-based” management may be functional as a way to get things done; but the boss approach does not promote efficiency of operation.


Again, from a performance-manager’s perspective, the establishment of a contract accomplishes the same purpose as an assignment to a subordinate work group.  The essentials for a good assignment are the essentials for a good contract.

In current Federal process, the manager, the one who has something to accomplish, is not in authority to direct the performance, only the contracting officer has that authority.  The contracting officer does not have responsibility for performance, only for fulfillment of regulation and administration of the contract; and this is completed as a support service provided to the manager who has a need to be filled.  Again, the Government’s contracting approach has interfered with any application of performance management.

The challenge faced by someone who wants effective performance management applied to contracting is the basic process now used for establishing and managing Government Contracts.


The Answer to the Challenge:

Our answer is simple; almost too simple.  The answer is to put the manager in charge of the contracting process, with directive authority over those who apply that process.  If it is to be a performance process, then the one who has performance responsibility must be the one who has authority to direct the resources to accomplish that performance.  Under the first rule of management engineering, this describes the essentials.

The concept statement is indeed simple.  The application can be very complex and involved.  There are also many ancillary understandings that will help to define a “best” performance approach.

That is exactly what is now missing.  Authority over performance is given to a technical specialist, a contracting officer, who has no personal responsibility for the results gained through application of that authority.


Contracting Officers are not

Effective as Performance Managers


The performance manager now loses authority over the use of government resources once the decision has been made to perform through contract.

Rather than dwelling on what is wrong, we need to effectively put Bob from the service station in charge.  We can see what is right; and will certainly be effective.

The solution is “Management.”  Assign the performance manager responsibility for a performance, and give that manager directive authority over the resources that are necessary and convenient for assuring accomplishment.  That is basic management.

Good-management process includes non-interference with the performance process.  In this, a work-group manager’s superiors abstain from giving alternate instructions to those within the work group.  The assignor provides that subordinate manager with support, both in resources and in maintaining general independence in his or her internal-group management efforts. 

The subordinate manager is put in charge of the resources and how they are applied.  This is necessary if a senior manager is to hold the subordinate personally accountable for gaining the desired performance through use of those resources.

For the purposes of management, contracting is just a method of performance.  If the performance is to be done through a contract, the manager needs to be in direct control over the contracting process from its initiation to its fulfillment.  Only then can superior managers hold that subordinate manager fully accountable for the result.

The contracting officer is then no longer in charge, but works for the performance manager, the one who has something to accomplish through a contract.  The contracting officer is technical support, and is not to be given authority to manage the process for the performance manager.

We are addressing a change in business culture at the basest level.  Putting Federal managers in charge of contract performances is now considered not only improper, but under the FAR, it becomes illegal!


The Interim Solution

Our present method, management-by-regulation, is the problem; and further and better regulation cannot be the solution.  Making regulations more effective can only increase the problem.  Our interim solution will involve establishment of an alternative.  To make that alternative “legal” is not that difficult, as the law, The Federal Acquisition Regulation, is a legislated instrument.  It may be modified to establish the legality of a performance-based alternative.

For it to be effective, the following skeleton may be used:

First, there must be an alternative authority established and delegated to identifiable department and office chiefs.  This is an authority to personally authorize use of the alternative process wherever specified conditions are met.

The first condition is the identification of the performance manager, the one who will have direct authority over resources, and who will receive direct responsibility and accountability for pre-defined results. 

The second condition is a stated preference for performance by contract.  This is not to be an assignment in itself, as that would relieve the performance manager from a responsibility for failure due to inappropriate performance approach.  Performance management starts with a performance requirement, not with a process requirement.

This also leaves the door open to ancillary in-house performance if there are serious disadvantages to continuing with a contract.  It also leaves the door open to major contract modifications, or even termination and replacement of a contract that is found to be ineffective.  Giving the performance manager charge over all necessary resources and processes puts that manager more in charge of the performance.

The third condition is management over the performance, an assurance that there is a specific and pre-defined delivery to be accomplished through the contract.  There must be a predefined product such that receipt indicates the success of the performance that is being contracted.

You might face one challenge here, due to difficulty in defining a contract product.  A research effort will serve as the example, as the end result of the research will usually be defined and redefined during the research effort.

The answer is at the heart of the difference between performance and non-performance contracting.  If there is nothing to be gained through the efforts of the contractor, then contracting for its delivery would be inappropriate.  It could not be managed as a performance, and would not be amenable to performance management by any method.

Note that there is to be no additional and separated funding for the contracting effort.  If performance is the requirement, then the costs of contracting for performance should be funded just like any other part of the performance effort.  Contracting process is handled as a cost of management, a part of the cost of gaining a performance; and it is not to be costed separately from the performance.

Another necessary, but initially controversial, requirement is exemption from other FAR requirements.  The FAR is not a performance document; nor is regulatory management an efficient means for gaining performance through others.  Regulations have their own purposes, and should become “advisory” where the contract alternative is invoked.

Certain principles will need to be separately established as part of the alternative process.  The contracting officer is the only one who speaks “for the Government;” with the performance manager able to speak for the contracting officer only in his or her supervisory capacity.  All other authority, including the authority to enter into a contract, will come by contracting officer signature.

Competition among contractors may still be required; but this is probably best left as a guiding principle rather than a mandate.  It should be an item for the contracting officer’s technical support of the manager. 

Contract inspection is still required, but inspection authority rests with the performance manager, the one who has something to accomplish.  This addresses inspection as supervision rather than contract process.  The present FAR purpose for inspection is fulfillment of the contract; the alternative purpose is to assure the contracted performance.

The performance manager needs authority to obligate the Government through his or her dealings with the contractor, up to the limits of the resources made available to gain the performance.  This can specifically include authority for alterations to the contract, including changes to its scope, or even to termination and replacement. 

Where a Government signature is required, the contracting officer’s signature should still be necessary.

As a final condition, the funds committed to the manager under the alternative process need to be treated as fenced, and not subject to reprogramming without very stringent approval criteria, or until performance is accomplished.



What to Contract

Performance contracting only applies to actions where there is something to gain through the efforts of a contractor.  If there is no definition of what it is that the contractor is to provide, then there is no manageable result to provide a basis for performance contracting.

This limits the subject of the performance contract alternative even as it would an assignment to a work group.  If there is nothing that a work-group has to accomplish, there is no good purpose in assigning an effort to accomplish it.

This understanding puts limits on some types of contracts.  A contract can still be let for delivery orders, under the idea that the products are to be in a defined class, and also to be requested with a particular level of definition when ordered.

The primary restriction will be on process-based activities, as in “operating a production facility,” or “base operations.”  Such operations cannot be effectively managed without something definable that has to be gained through that operation. 

The attempted direction of having a defined level of effort is a step in the right direction, but is still inadequate.  Management is gaining a performance, not assuring a level of effort.

Application of performance management does not prevent the management of these areas, but it does put performance definition requirements on the ones who wish to use the alternative approach to contracting.


Federal Contracting Rules

Regulation is not a method for supporting performance management.  Those who are given authority to prepare regulation are not those who have something to accomplish through the use of contracts.  Those who are given authority to regulate contract actions are not responsible for a resulting performance, or lack thereof.  Basic management fails unless there is an alternative approach to regulation-based contracting.

The FAR is regulation; and the FAR is also law.  There is no good purpose for a “special law” that will apply to Government contracting efforts, but not to the public. 

A question can highlight the logical challenge: “Is our public law good enough to protect the rights and privileges of taxpaying citizens when it comes to contracting?”  If it is, then Government needs to use it.  If it is not, then Government needs to do something to make it good enough. 

The cynical idea, that the use of our legal system to support Government contracts, needs different (and supposedly better) rules than those provided to the public (those who pay the bill in terms of tax dollars), is highly questionable.  If our system of business law doesn’t work, then repairing it for everyone is the job of our legislatures.  If not, then abandoning the general application of business law to write a “special” version for Government contracting is probably counter-productive.

A final cure will involve elimination of the FAR, either by changing business law to something better for everyone to use, or by the Federal Government using the law that now seems “good enough” for its citizens.

There will still be a need for general rules for government contracting, and these should fulfill only two distinct purposes.  The first is seeing to the interest of the public and private citizens who are not parties to Federal contracts.  The second is behavior regulation that puts responsibility on those who exercise authority.  This should make those who have authority to contract personally responsible (and accountable) for assuring the results, and make them personally answerable for the impact of their actions.


Managing the Contract Effort

Performance-based contracting is the equivalent of Management-based contracting, with management defined as gaining performance through others.  Contracting, when addressed as a performance process, will always be manageable; there will then be something to gain through the contract action.

If there is nothing to gain, then there is no reason to contract for it.  The clear start is to have someone with something to gain.  That person is given authority over the resources necessary to gain the result.  If the performance requirement includes a need to perform through contract, then the contracting authority answers to the manager as do other resources.

The contracting officer should always work for the manager, and is only relieved from responsibility to implement that manager’s instructions where they are illegal, immoral, or a source of public danger.  In specific, the procedural preferences of the contracting officer should not govern the contracting action.  The contracting action is no longer a stand-alone performance, but a method of performance exercised by a manager who has something to accomplish.  The contracting officer becomes technical support for the one who has performance responsibility.




Performance and Special Interest Programs

Placing mandates and restrictions on Federal Contracting, such as through supporting small businesses, is a highly questionable practice.  It mandates that less-than-optimum contracting be entered into by an office funded for one purpose, in support of the SBA office that is inadequately funded to support its own programs.

This approach makes it difficult to get true costs for any purpose, and higher-level management is forced to make decisions with unrealistic cost data.  Congress is unable to rely upon the cost data fed back from efforts that are forced to pay for special interest programs through additional contract costs.  This problem will increase as Government increases its contracting efforts.

The alternate performance contract should either be exempt from all such restrictions and mandates, or cost differences should be shifted from the funds that are appropriated for the special interest program, to those affected.

In either case, performance management requires true costing for managers, and also for Congress, to use in making good economic decisions.



Performance management is not an experiment, it is a direction.  When applied to management, it is a completely different direction than that now being pursued for Government contracting.  Implementation needs to be bold, with controls referenced to good management practices rather than attempting to control management through regulation.

Implementation should be a basic exemption put into the FAR for a defined performance-based alternative contracting method.  It should specifically eliminate other FAR mandates and controls for approved alternative contracts in favor of general practice of business law.

The authority to implement this exemption should be given to specific senior officers, with conditions for acceptance of personal responsibility for activation of the alternative method.  At a minimum, this should include:

ü      Adequacy of a performance product definition to support management,

ü      Signed acceptance of responsibility by a named subordinate,

ü      Stated limits on resources available for assuring performance.

ü      Assignment of supervisory authority over a contracting officer.

A witness to special training would also be reasonable.


In Summation

We don’t have to put Bob from the gas station in charge of Government contracts in order to get performance.  Management engineering has a better solution.  Our Federal managers are more than up to the task; we just have to put them in charge. 

In the same sense, we don’t have to reinvent the wheel.  Bob would be using regular business contracting to gain performance.  The Federal Government is certainly competent to use this same approach, with expectation of even better performance management than Bob could have accomplished.

Management engineering is an expansion of traditional work-based industrial engineering into the work of gaining performance through others.  It is no fad, and no recipe-book application that is supposed to improve management.  Engineering application results in a fully synergistic set of tools that serve the working manager.  These are technical support that will put the manager more in charge of performance, and increase his or her ability to assure performance at a reasonable cost.

Performance management will result from applying industrial engineering principles to the process of contracting.  It results in the working manager being put more in charge, and given a set of effective understandings and approaches for assuring a performance result.


Management Engineering is an emerging specialty for industrial engineers; and provides a working set of efficiency-engineered tools for managers and management specialists.  It is documented in works available through  Additional materials and information on management engineering are available at



Jesse W. Brogan, President

The Management Upgrade Shop

70 Tarragon Lane

Edgewater, MD  21037

Ph 443-994-3783