Total System Performance Responsibility.
--Darleen Druyun, Principal Deputy Assistant Secretary of the Air Force for Acquisition and Management
The quest for the perfect acquisition can be synonymous with a field commander's quest for the decisive plan prior to battle. The field commander derives his strategy at the tactical level after the operational objective is clearly defined. Likewise, the program manager (PM) leads the development of the acquisition plan once approval is granted. In support of the PM, the contracting officer (CO) should be thinking about the business strategy to be used in support of the program's vision and goal. The PM and CO have no shortage of guidance from system program office (SPO) leadership, the program executive office (PEO), and legal experts. Moreover, today, the environment is influenced by Air Force Lightning Bolt initiatives that emphasize commercial practices to capture savings and the Year 2000 Department of Defense (DoD) acquisition goals that emphasize process improvement and gaining efficiencies. Ultimately, the team must ensure there is sound acquisition strategy tailored to the unique needs of the weapon system.
This article will look at one acquisition approach being used in weapon systems contracts known as Total System Performance Responsibility (TSPR). The focus on solely Air Force programs is not intended to imply that the TSPR approach does not exist throughout other DoD departments or agencies. One major portion of the Air Force Materiel Command's (AFMC) mission is to manage the integrated research, development, test, acquisition, and sustainment of weapon systems.  The programs being profiled belong to AFMC SPOs that support customers outside of the command.
Acquisition professionals receive consistent messages to make the next acquisition better than the last and to apply lessons learned. Why is this? The bottom line is we owe it to the taxpayers to spend wisely, and we owe it to the warfighter to deliver a mission-ready product on time. Faster, smarter, and stay within budget and on schedule--these words often resound in a PM's and CO's ears as they prepare to embark on a new acquisition or take over an existing weapon system program. Since the 1990s, acquisition reform has resulted not only in written guidance to acquisition professionals but also in creating a mindset and attitude to avoid the business-as-usual approach. We cannot afford to go back to the early days of acquisition when Chief of Staff General Merrill A. McPeak gave a harsh but realistic view of acquisition.
The acquisition system is much closer to failure .... The fact that military procurement provides steady work for more than 25,000 auditors is compelling evidence of a widespread skepticism about the defense acquisition process. 
The TSPR approach addresses General McPeak's assessment of acquisition and seeks to turn failures into successes.
Defining TSPR and Its Intent
TSPR is certainly more than a passing catchy phrase or acronym. It is an approach that is contractually and legally binding between the government and contractor. After reviewing various expectations of TSPR from the field, common themes surface that lead to at least one definition. Essentially, TSPR is the transfer of government tasks in order to gain efficiencies by taking advantage of a contractor's overall management approach and commercial practices with minimal government oversight. Gaining efficiencies can best be described as identifying redundant and/or unnecessary practices; eliminating those practices; and in their place, using commercial practices to improve the acquisition process.
TSPR is a very complex relationship to put on a contract that requires a champion at the highest agency levels to be successful. This overarching goal, however, is to reduce costs while maintaining or improving the quality or service levels. 
The decision to contractually implement TSPR is accomplished by placing a tailored clause (contractual term or condition) in Part I, Section H under the Uniform Contract Format.  It is placed in Section H because it is a special contract requirement and must be tailored to the needs of each specific program. Conversely, if the clause is not in the contract, TSPR can still be construed as philosophically binding between the government and contractor because a firm commitment was made prior to contract award. Of the three programs reviewed, one did have the TSPR clause in the contract, and two did not have it documented in Section H of the contract but were still advertised as TSPR contracts.
Identifying a universal definition of TSPR is impossible because TSPR means different things to different people. "The TSPR concept is one element of an acquisition strategy that must be tailored to fit each program"  --a possible explanation for a TSPR clause not being included in the Federal Acquisition Regulation (FAR), Part 52, "Solicitation Provisions and Contract Clauses." Although each SPO will define TSPR differently based on the unique needs of the program, common themes--such as eliminating redundant tasks, reducing costs, improving the quality of product or service, and gaining efficiencies--remain constant.
The CO of the Have Stare contract at Hanscom AFB, Massachusetts, provides this definition:
...requiring a contractor to propose, within existing constraints, a solution to fill a government requirement. Then, allowing the contractor, with minimal oversight and adequate funding to cover proposed costs, to implement the proposed solution. The contractor is held responsible for program success. 
A program manager at Raytheon for the Clear Radar Upgrade Program at Hanscom AFB sees TSPR as:
...a way for the government to minimize contract price increases as a result of contractor initiated claims or ECPs (engineering change proposals) by transferring responsibility ... 
The PM for the Integrated Logistics System (Supply) at Maxwell AFB, Gunter Annex, Alabama, says the purpose of TSPR:
...would seem to be to simplify the management structure for the acquisition of an information weapon system for the total performance of the system to a single management entity, thus simplifying the management structure and accountability for cost, schedule, and technical performance of the system. 
He further states, "The net result of this simplification would seem to be a reduction in acquisition oversight that might otherwise be required to manage the integration of multiple entities."  The Chief of the Contract Policy Division at AFMC views TSPR as:
... an acquisition strategy to have a single contractor manage the integration of all subelements of a system to ensure that the entire system meets performance requirements ... how the contractor meets the broad performance requirement is at their general discretion. 
After reviewing a few of the TSPR definitions in the field, common denominators mentioned earlier again become apparent--improve the quality of product or service, reduce costs, and gain efficiencies.
TSPR's Place in Acquisition Reform
TSPR is an acquisition approach that responds to the government's and industry's recognition of change needed in government procurement. In 1997, the president and chief executive officer of McDonnell Douglas said:
Both sides [government and industry] now realize that, to ensure we get the most bang for our buck during this great competition for dollars...we have to act as a team." 
Additionally, that same year, Ms Druyun gave the direction acquisition was headed after the Lightning Bolts were released to jump start acquisition reform. The direction "is basically toward creating a partnership with our contractors. They are not our enemy. If we erect a wall between us, then chances are we are going to walk away with a failure."  The expected outcomes of TSPR respond not only to Ms Druyun's message of partnership but also to industry's desire for the government to give contractors more responsibility for the overall management of weapon system development. A number of defense contractors have voiced a desire for less oversight and more management in developing the contract's deliverable.
The DoD announced two initiatives related to acquisition reform, and the principles of TSPR respond to both initiatives. First, in June 1994, the Secretary of Defense issued a memorandum requiring the use of performance specifications rather than military specifications. Military specifications can be used only if the appropriate milestone decision authority approves a waiver.  This memorandum paved the way for more performance-based acquisitions with the hope of giving the contractor the flexibility to use commercial practices and possibly reduce costs in the process. Stringent military specifications are discouraged, and contractors are given ample flexibility in determining the most cost effective means to supply a service or product.  The memorandum made it easier to justify and use outcome-based work documents such as a statement of objectives versus the traditionally lengthy statement of work, which tends to be a step-by-step or how-to document. Second, Pentagon Acquisition Chief Jacques Gansler sent out a 5 April 2000 memo on performance-based services acquisitions (PBSA). The policy guidance on performance-based requirements:
...allows offerors maximum flexibility to attain the greatest degree of innovation and creativity .... Studies have documented that service requirements converted to a performance-based approach have generated both significant savings and performance gains. 
The military specifications memorandum and the PBSA memorandum created opportunities for the government to obtain efficiencies through contractor innovation--TSPR responds to both DoD initiatives.
Industry has reacted to the two DoD initiatives, and there is strong indication they like what they see. In 1997, an industry survey was conducted by Coopers & Lybrand for DoD Service acquisition executives to assess the implementation of acquisition reform initiatives in DoD contracts. Ten major contractors participated in the study, resulting in 430 structured interviews. One of the survey recommendations was that government requirements be performance-based. Requirements, they stress, should be outcome oriented, not input oriented.  The survey further stated:
Acquisition reform is open communications, trust, teaming, partnering, and giving the managers at these contractor sites the opportunity to do what they were hired to do--manage. 
The 1997 survey emphasized industry's desire for the government to give contractors more opportunity to manage and the government to stay with performance-based requirements. TSPR responds to both desires because it provides an increased opportunity to manage with less oversight and the motivation to use commercial practices to meet an outcome-based requirement.
It is evident that industry wants more freedom to manage the delivery of a product or service and welcomes performance-based requirements. Likewise, DoD has set guidance for agencies to create more performance-based requirements wherever possible in order to gain innovation, savings, and overall efficiencies. Unquestionably, TSPR shifts a specified amount of responsibility, traditionally held by the government, to the contractor-for some SPOs this shift is a huge change in process and culture. Therefore, it is imperative, prior to the inclusion of a TSPR approach in an acquisition plan that the government include this transfer of responsibility in the program's risk assessment. This risk assessment is the process of subjectively determining the probability that a specific interplay of performance, schedule, and cost as an objective will or will not be attained along the planned course of action.  The process of assessing risk takes place after forming a risk assessment group consisting of the PM, CO, engi neers, acquisition development staff, and customer.
If after careful review the group's assessment concludes the benefits of implementing TSPR outweigh the traditional methods of government oversight, then and only then should a PM give the green light to proceed with this approach. If the decision is to implement TSPR, then one of two scenarios will likely be the outcome of the contract. It may play out like this on the who-takes-the blame/credit spectrum. On one end of the spectrum we have scenario one. Upon delivery of XX weapon system, the contractor assuredly says, "We delivered on schedule and within budget because we had the latitude to manage development, the government gave us the resources, and we had a solid requirement." On the other end of the spectrum we have scenario two. After receiving a phone call from the terminating contracting officer for XX weapon system, the contractor grudgingly says it could not deliver because the government did not provide the resources promised. The contractor may have gotten in over its head and feels that is why the government reverted to the oversight mode.
TSPR Is Put to the Test in the Field
The TSPR approach, with its common theme of delivering the required product or service to the customer in a more efficient and cost-saving manner, is alive and well in the Air Force. To determine how TSPR is doing in the field, three SPOs will be profiled to see how TSPR has affected each respective program. When TSPR is placed in a contract clause, it normally will state specifically what the contractor is being held responsible for (that is, research, development, integration, or sustainment of systems/ sub-systems). The government takes the lead when determining the responsibilities to be transferred to the contractor.
A survey was used because it was the best method for obtaining the most meaningful and current feedback from the PMs, COs, and contractor counterparts. The survey was the best means of giving each respondent time to think about TSPR and provide feedback. The SPOs selected were the C-17 and F-117 at Wright-Patterson AFB, Ohio, and the Space-Based Infrared System (SBIRS) SPO at Los Angeles AFB, California.
The C-17 SPO (ASC/YC) is located at the Aeronautical Systems Center (ASC), Wright-Patterson AFB. A press release from the Warner-Robins Air Logistics Center (ALC), Robins AFB, Georgia, stated the SPO is moving C-17 parts management from Defense Logistics Agency centers and other ALCs to the aircraft contractor, Boeing. This move is what the SPO referred to as flexible sustainment. The C-17 system support management office at Robins stated:
We're the lead-the-fleet operation in flexible sustainment and we're giving Boeing a trial period of about two years to let the contractor do all the support for the weapon system. 
The implementation of flexible sustainment and the subsequent transfer of responsibilities from the government to the contractor led to the application of TSPR. The ultimate goal is to support the C-17 weapon system more efficiently- a key tenet of TSPR. The C-17 aircraft flexible sustainment contract is a performance-based contract and does not have a TSPR clause, but the flexible sustainment "...concept is in itself a TSPR approach.  The flexible sustainment concept proposes that the government will transfer specific responsibilities normally held by the government-another tenet of TSPR.
The concept proposes the contractor will be held responsible for configuration control, materiel management, depot-level maintenance, support engineering, modifications, and just-in-time spares management. 
The CO's view of using the TSPR approach is to achieve cost savings, increased quality, and flexibility. The SPO has given Boeing the freedom and flexibility to manage the spares because the contract is performance based, and it is the contractor's responsibility to determine the how-to activities to arrive at the end-state. The PM's desired effect in giving Boeing TSPR responsibility is accountability.
Supplying the highest level of availability at the lowest total cost is the desired end-state. As a system integrator, the company [Boeing] must determine the best resource mix for support; that is, if competencies reside in a public source, the contractor must enter into partnering arrangements that provide the best value while maintaining levels of support. 
TSPR allows Boeing to determine the best resources to get the job done and use its own creativity to deliver the product. According to Boeing, the expected goals of TSPR in this contract are that it:
...optimizes performance and cost parameters and results in minimum organizations being accountable for a weapon system over its life cycle. 
Boeing has some key expectations with the TSPR approach, such as reducing system integration concerns by having a single person manage the integration tasks; reducing costs by eliminating redundant management systems; and finally, enhancing weapon system capability by ensuring accountability for key performance parameters.  The common link in the government's and Boeing's approach to TSPR is accountability and efficiency. Establishing this type of common understanding is critical prior to contract award and program execution.
So how is the contract doing thus far? The C-17 PM states, "So far so good! There have been some scope versus out of-scope issues, but not enough to endanger performance."  Boeing states the:
... flexible sustainment contracts have and continue to be huge success stories ... It is providing excellent customer support overall and showing the cost of support per aircraft is steadily decreasing. 
When asked if both the PM and Boeing liked the TSPR approach in government contracts, both agreed. The PM states it is the "best means that I have found to provide the carrot and stick in government contracting." Additionally, Boeing stated, "TSPR allows for a more efficient way of managing weapon systems. It is designed to provide timely support in a cost-efficient manner." 
One of the SPOs that stood Out from the others in terms of using TSPR as a core philosophy in managing its weapon system was the F-117 SPO (ASC/YN), located at the Aeronautical Systems Center. The SPO has a performance-based contract with Lockheed Martin to provide coverage for all aspects of acquisition and management for the F1.1.7 aircraft, the weapon system trainer, and the mission planning system. Interestingly, similar to the C-17 contract, the F-117 contract does not have a TSPR clause in it. The mutually agreed upon approach was established early on, and the TSPR philosophy approach permeates the contract's requirements document. Essentially, both the government and Lockheed Martin operate with the TSPR principles without a clause in the contract. The TSPR support approach for the contract came into being after the base realignment and closure decision to close McClellan AFB, California, necessitating relocation of the SPO to Wright-Patterson AFB. Afterwards, the Secretary of the Air Force, Acquisitio n office, directed the SPO to increase efficiencies in support via the TSPR concept. Throughout the relocation process, the transitioning had to be transparent to the users at Holloman AFB, New Mexico, who belong to the Air Force Air Combat Command (ACC). As a result of the TSPR approach, the SPO reduced its staff from 242 to 20 and realized a savings of $90M.
Under the F-l 17 contract, Lockheed Martin took responsibility for tasks historically performed by the Air Force (for example, item management).  According to the F-l17 CO:
Our goal in pursuing this TSPR philosophy was to continue sustainment and support of the F-117 weapon system at a lower total cost to the Air Force (including SPO manpower), while providing the same or better level of support to the user (ACC). 
Inclusion of the TSPR philosophy allowed for significant changes in the way weapon systems support is usually conducted at air logistics centers. Under the TSPR concept, management of the F-117 repair-cycle assets transferred to Lockheed Martin in order to improve asset availability. "We believe Lockheed Martin's market focus will help gain control of the repair cycle and drastically reduce cycle time."  The mandatory relocation of the SPO and the directive to implement a reduction in total ownership cost set the stage for the TSPR approach to flourish and take the F-117 out of the business-as-usual approach. The PM states:
The TSPR contract will provide depotlevel acquisition and sustainment requirements necessary to support the mission, operation, and continued combat capabilities of the F-117 weapon system into the next decade. 
Lockheed Martin sees the performance-based contract as a key to success. The business development integrator for Lockheed Martin-Aero states:
Let the results of what the user needs and requires be the foundation for the performance metrics, drive out no-value-added work, and eliminate any duplication of work, whether it's in the contractor or in the SPO. 
When implementing TSPR, a transfer of management responsibilities does occur, but so does risk sharing. Lockheed Martin's perspective on assuming risk is a realistic one in that, although more freedom now exists to manage with less government oversight, there is now an opportunity to experience the impact of not only good results but also bad ones. "Risk isn't bad as long as you have a plan to deal with each element that offers you risk in the execution of the contract." 
Lockheed and the SPO were both up front in letting it be known there are lessons to be learned since the TSPR concept was conceived. For instance there was the need for multiple acquisition strategy panels (ASP) to convince senior leadership the TSPR business approach was sound, address job security of government employees affected by the reorganization, and ensure contract incentives were sufficient to properly motivate the contractor. Without the approval of the acquisition plan by senior contracting officials at the ASP, the acquisition would not have moved forward.
So how is the contract doing thus far? According the PM:
The contractor has met the performance level in the first two years, under run cost the first two years by about $18M, the government has not had to revert back to any government oversight... the only drawback I see is we lost experienced government folks, and our ability to interpret the contract in a few vague areas has caused us some additional workload. 
When asked if both the government and Lockheed Martin favored TSPR in government contracts, both had similar comments. The PM stated TSPR "... is a great way for the government to reduce costs while providing the warfighter with as good or better support."  Lockheed added a tone of caution. As a result of TSPR:
... the aircraft has higher performance ratings, and the customer is happier than it has ever been... the figures speak for themselves: $82M in personnel cost savings, $80M in stabilized funding, and almost $20M in shared cost under run for the first two years. 
The caution Lockheed states the "F-117 TSPR is not a contract that should be used as a template for the next TSPR contract."  Each acquisition team will have to determine what benefits they want from TSPR and then tailor it accordingly to meet their particular needs.
The SBIRS SPO (SMC/MT) is located at the Space and Missile Systems Center (SMC), Los Angeles AFB, California. This SPO is handling the Air Force Space Command's (AFSPC) top program, according to Brigadier General Michael A. Hamel, AFSPC Director of Requirements.  SBIRS is a consolidated, cost-effective, flexible, space-based system that, in time, will meet US infrared global surveillance needs through the next several decades.  The SBIRS program will replace the 30-year old Defense Support Program (DSP) satellites that watch the earth for the telltale heat signatures of intercontinental ballistic missile launches.  The focus here will be on the SBIRS High contract with the Lockheed Martin Space Systems Company. The contract is performance based and contains the TSPR clause in Section H. The SBIRS contract responds to the 1994 DoD military specifications memorandum since SBIRS has "no military standards or specifications used to define supportability engineering requirements."  Furthermore, the contract is in step with the April 2000 PBSA memorandum since "all documented supportability engineering requirements are performance-based statements reflecting a need rather than a solution."  The transfer of responsibility is clearly defined in the TSPR clause:
...the contractor agrees to assume TSPR in accordance with the terms and performance requirements of this contract, and to furnish all necessary effort, skills, and expertise within the estimated cost and award-fee pool of this contract. 
The TSPR clause for this contract goes on to state the responsibilities that fall under the TSPR umbrella. A point to be made is how the clause carefully limits Lockheed Martin's TSPR liability by virtue of the availability of funds to execute the program. The clause sets the standard that Lockheed Martin will carry out its TSPR responsibilities only "... within the estimated cost and award-fee pool of this contract." These few words in the TSPR clause illustrate the fact that the government's expectation of giving TSPR is directly related to its ability to secure proper funding from year to year. Budgeting to properly execute a program is a significant task in itself for the PM and financial staff. Hence, a CO actually receiving an approved funding document to keep the contract moving is a significant event. The SBIRS TSPR clause language lets both parties know TSPR performance is dictated by available government funding. Today's limited dollars for DoD acquisition will continue to be a challenge for the for eseeable future.
The expectations of TSPR by the SBIRS High PM and the Lockheed Martin contract administrator are very similar to the previously addressed programs. The PM stated:
...the desired outcome should be allowing the contractor flexibility...the government taking the insight and facilitator roles more strongly and the removal of direct government oversight and inter-agency coordination. 
As the party that has been given TSPR, the contractor has translated the government's expectations into its own vision for SBIRS High development. A few of the benefits being sought by Lockheed Martin as a result of putting TSPR in the contract are achieving system performance rather than unintegrated or difficult-to-integrate elements, reducing costs through more efficient contractor processes, less duplication of and more collaboration on functions between government and contractor, and greater risk sharing passed to the contractor in the areas of design and integration.  Throughout Lockheed Martin's survey, key points such as relative freedom, opportunity, and efficiency were mentioned--all common denominators of TSPR.
So how is the contract doing thus far? According to the PM:
...TSPR has been successful in allowing the contractor to determine approaches for interfacing...it has not shown to be successful in meeting acquisition program baseline parameters for delivery of the first increment consisting of a DSP compatible, consolidated ground system. 
Lockheed Martin recognizes the shortcomings mentioned by the SBIRS High PM and did not shy away from this fact. Lockheed Martin says that the contractor team was unsuccessful in bringing the first ground increment on line on schedule. The contractor recognizes the ramifications of this delay by stating that, as a result, there have been cost overruns, unplanned operation and maintenance expenditures by the user, and schedule delays with other elements in the program.  The impact of this delay was significant. According to the CO, no award fee was given during this time. This program has shown that the road to success is not an easy one despite the inclusion of TSPR in the contract. Complex weapon systems such as SBIRS High will challenge the best and brightest minds from both the government and contractors. Although not addressed in the TSPR clause, it is conceivable that, as a last resort, the government reassumes aspects of SBIRS High management if the delivery of the system is behind schedule or over b udget.
The prospect for placing TSPR in future government contracts is cautiously optimistic after reading the response from the SBIRS High PM.
TSPR can be favorably used in the right context for the right product set...the constraints [budget and schedule] placed on the contractor with TSPR tended to incentivize greater emphasis on meeting cost and schedule versus system performance. 
The PM continues his cautious tone when he says TSPR is not a universal solvent. Lockheed Martin looks favorably on taking on TSPR responsibility in government contracts. According to Lockheed Martin, TSPR is:
...a continuation of its longstanding role as an integrating contractor designing, developing, integrating, testing, and deploying large complex space and related systems. 
If the government continues with TSPR, then Lockheed Martin sees itself as being able to produce systems cheaper and better integrated for the user as a result of an incentive to expand the company's program management and engineering services with other resources and suppliers.
Contract Law Comments
An integral member of any acquisition team is the legal expert from the Staff Judge Advocate's Office. A legal review of the contract document and its file is a mandatory requirement that takes place prior to executing a large-dollar contract. Furthermore, most experienced acquisition teams will always invite the legal office when forming their acquisition strategy. Legal offices at Eglin AFB and Hanscom AFB were sent surveys in order to determine what cautions and concerns exist based on their experiences.
Getting the language right in a TSPR clause is paramount because of transfer of specific responsibilities from the government to the contractor. Establishing agreeable language is critical because the language sets the standards and guidelines for the contractor's acceptance of development, integration, or sustainment responsibility. Conversely, the language defines the parameters for which the government will provide the oversight and resources necessary for the contractor to meet the performance based requirement. An attorney at Hanscom AFB states:
... the biggest problem is getting the language right. The government wants the contractor to assume all the risk for everything, while the contractor wants to avoid as much of the risk as possible. In the end, the language is a compromise between these two extremes. 
Defining requirements is the highest risk, so that both parties have a clear understanding of expectations and likely costs to meet those expectations. 
Changes such as engineering change proposals will no doubt occur in most acquisitions, but constant changes due to uncertainty in what the user wants should be avoided. Besides getting the language right, it is prudent to review an interested offeror's past history with the weapon system.
The Director of Acquisition Law at Eglin AFB emphasizes the need to review the history the contractor has with the specific weapon system. Specifically, what role did the contractor previously have developing the system and what opportunity did the contractor have assessing the design of the weapon system for which it was not previously responsible.  The legal experts agree that both parties must sincerely understand where the TSPR boundaries or parameters lie prior to contract award. Establishing a mutual understanding of TSPR is even more important for those contracts that do not have a clause and rely solely on the spirit or buy-in of the TSPR concept.
An issue a CO may encounter when implementing TSPR is determining the right type of contract. Since COs may have wondered if a single contract type is preferred over another, the survey asked legal offices, "Is there a certain type of contract that makes more sense to use when implementing TSPR?" When deciding on a contractual approach, a CO considers many factors. Selecting a type of fixed-price contract may be chosen after the CO determines:
... performance uncertainties can be identified, and reasonable estimates of their cost can be made, and the contractor is willing to accept a firm fixed price representing assumption of the risks involved. 
Conversely, the CO may choose a cost-reimbursement type contract after determining the "... uncertainties involved in contract performance do not permit costs to be estimated with sufficient accuracy."  With the help of the PM, a CO can make the decision with relative ease as to what type of contract to use. However, including TSPR in the contract necessitates some further thought before a decision is made. On the surface, using a cost-type contract may appear to be the wrong type because it essentially results in the payment of all allowable and allocable costs. Consequently, one may conclude any competent contractor can take on TSPR as long as there is funds availability. Attaining cost efficiency in this scenario is then questionable. So what is legal's answer? The consensus from the legal responses is that there is no single contract type that works best with the TSPR approach. The key when selecting either a fixed-price or cost-reimbursement contract is to "create a balance of risks and benefits bet ween the parties, which contributes to and motivates a cooperative relationship." 
After determining the true risk in the program, the art for the CO is finding the right type and mix of incentives to place on either a fixed-price or cost-reimbursement contract that motivates the contractor. Once the incentives are identified, then both parties must clearly understand what areas will be evaluated for program success. For example, if using an award-fee plan, both parties must understand how the fee determining official will equate ratings of excellent, good, or unsatisfactory to dollars for the contractor and what performance evaluation areas will be evaluated to achieve program success. Either a fixed-price or cost-reimbursement contract can be used with TSPR. The key task for the CO is to find the proper balance of incentives to ensure the contractor is duly compensated, the government's interests are protected, and the TSPR clause has the teeth the government intended it to have.
TSPR has responded to Air Force expectations as dictated by the acquisition reform climate. However, TSPR is not the panacea for all programs and does not make a program immune to difficulties with cost, performance, or schedule. In the current environment of acquisition reform, greater industry, and government communication and budgetary constraints--which the Under Secretary of Defense for Acquisition and Technology describes as having "... unlimited demands for very limited resources"--TSPR is an acquisition approach that should not be ignored.  Further, TSPR fits right in line with the Air Force policy of clear accountability in design--"laying out what we want and not telling the contractor how to do it"--an outgrowth of the Defense Department's move toward performance-based contracting. 
The decision to use the TSPR approach in government contracts sets a tone characterized by avoiding a business-as-usual approach. Furthermore, TSPR fosters a fresh environment that is ready for innovation and creative thinking. It is very important that both parties agree on TSPR language in the contract. Agreeing on the right language to fit the needs of the program puts in writing the type of working relationship to which each level of the program will adhere. If conditions within a program dictate a change to any of the characteristics or desired outcomes of TSPR, then the CO can issue a change to the TSPR clause through a contract modification. The TSPR clause by no means has to remain stagnant throughout the period of performance. Conversely, the F-117 contract operates with the TSPR label but without a TSPR clause in the contract. In this program, both the government and contractor rely on the TSPR spirit or buy in to define their working relationship and determine how the program will be executed. Thi s is not to say that the F-117 SPO will not be successful. In fact, the program is doing quite well thus far, but not having a TSPR clause leaves the possibility of future disagreements on responsibility-related issues. A CO needs to have language in the contract that can be referred to so the contract can be properly administered, especially if scope-of-work issues arise between both parties. Personnel turnover and resulting loss of corporate history is a common source of conflict. Furthermore, changes in the needs of the user and the subsequent changes in design, production, or sustainment needs can lead to time-consuming conflict without a TSPR clause. The safest way to avoid conflict with TSPR is to put it in writing and avoid having to rely on the TSPR spirit that can wane over time due to personnel turnover.
Acquiring the freedom and flexibility to manage a program is something for which most contractors have longed. Once it gives TSPR, the government should proceed on the assumption that the contractor has the managerial ingenuity and technical expertise to deliver the product/service with minimal government oversight. The government's expectations become explicit once TSPR is included in the program, since in theory, the more responsibility the government can turn over to a contractor under a TSPR strategy, the greater the potential benefits." 
The TSPR approach is here to stay for the foreseeable future. The General Accounting Office "identifies 44 programs currently managed with a TSPR agreement" and "lists 31 programs planned for TSPR."  In future programs, COs should tailor a TSPR clause to meet the program's needs and place it in the contract to minimize the possibility of disagreements later in the program. As the program matures, the clause acts as a baseline and important placeholder that does more than set the tone for the execution of the program. If it makes sense to transfer responsibilities from the government to the contractor, then TSPR can and has proven to work. Given the right requirement, it is one acquisition approach that will help the SPO team get the very best product or service to the warfighter.
(1.) "Air Force Materiel Command," Air Force Magazine 83, No 5, May 00, 87.
(2.) Julie Bird, "McPeak Blasts Acquisition," Air Force Times, 27 Sep 93.
(3.) "Question and Answer Detail" Deskbook Ask a Professor, Question [Online] Available: https//.web2.deskbook.osd.mil, 19 Oct 99.
(4.) FAR, Part 14.201-1, 1 Jan 00, 242.
(5.) SMC/AX and HQ AFSPC/LG, Joint TSPR Working Group Final Report, Space Day Action Item 99-01, Feb 00, 5
(6.) Steve M. Meehan, ESC/NDK, Hanscom AFB, Massachusetts, TSPR Survey Response.
(7.) Murray Welch, Raytheon, Sudbury, Massachusetts, TSPR Survey Response.
(8.) Lt Col Jon C. Dittmer, SSG/ILSA, Maxwell AFB, Gunter Annex, Alabama, TSPR Survey Response.
(10.) Col Avery P. Sledge, AFMC/PKP, Wright-Patterson AFB, Ohio, TSPR Survey Response.
(11.) Quoted in James Kitfield, "Lightning Bolts," Air Force Magazine, Vol 80, No 4, Apr 97, 61.
(13.) Maj Daniel Brink, "Acquisition Reform: Why? What? Is it Working?" Air Command and Staff College, Maxwell AFB, Alabama, Mar 97, 15.
(14.) "Air Force on Track to Meet New Performance-Based Contracting Goal," Inside the Air Force, Vol 11, No. 16, 21 Apr 00, 18.
(15.) "Air Force on Track to Meet New Performance-Based Contracting Goal, 17
(16.) Coopers & Lyband, Acquisition Reform Implementation--An Industry Survey, 1997 [Online] Available: http://www.acq.osd.mil/ar/clreport.htm.
(18.) Regina Mickells Bova, Desktop Guide to Basic Contracting Terms, Fifth Edition, 1999, 209.
(19.) Quoted in Hal McKenzie, "C-17 Parts Management Moves from DLA to Boeing" [Online] Available: http://www.afmcmil.wpafb.af.mil/HQ_AFMC/PA/news_sou/00news/07-03-00.
(20.) Martin Trent, CO, C-17 Flexible Sustainment Contract, ASC/YCKC, Wright-Patterson AFB, Ohio, TSPR Survey Response.
(21.) "Using Flexible Sustainment to Accomplish C-17's Mission." AFMC Leading Edge, No 4, Apr 001, 17.
(22.) Dan A. Bowman, PM, C-17 Flexible Sustainment Program, ASC/YCL, WPAFB, OH, TSPR Survey Response.
(23.) Tim Tessmer, Manager, Contracts and Pricing, Boeing, TSPR Survey Response.
(28.) Chris Telepak, CO for F-117, ASC/YNK, Wright-Patterson AFB, Ohio, TSPR Survey Response.
(30.) Capt Robert L. Mason, "Stealth Fighter Avionics: 2LM Versus 3LM." Air Force Journal of Logistics, Vol XXII, No 3, Fall 1998: 31
(31.) Lt Cal Thomas Skowronek, ASC/YN, Wright Patterson AFB, Ohio, TSPR Survey Response.
(32.) Scott Ogden, Business Development Integrator, Lockheed Martin-Aero, Palmdale, California, Response to TSPR survey Response.
(38.) John Tirpak, "The Fight for Space," Air Force Magazine, Vol 83, No 8, Aug 00, 63
(39.) Terrence D. O'Byrne, SBIRs High Contract Administrator, Lockheed Martin Space Systems Company, Sunnyvale, California, Survey Response.
(41.) Richard J. Fickes and Kenneth A. Good, PhD, "Space-Based Infrared System--Supportability Engineering and Acquisition Reform in an Existing Acquisition Environment," Air Force Journal of Logistics, Vol XXIII, No 1, Spring 1999, 23.
(43.) Contract No F04701-95-C-0017, P00035, SBIRS High Contract, SMC/MTK.
(44.) Lt Col Michael J. Wallace, SBIRS High PM, SMC/MTI, Los Angeles AFB, California. TSPR Survey Response
(50.) Edward L. Fitzmaurice, Jr., Attorney-Adviser, ESC/JA, Hanscom AEB, Massachusetts, TSPR Survey Response.
(52.) William Landsbcrg, AAC/JAQ, Eglin AFB, Florida, TSPR Survey Response
(53.) FAR, Jan 00, Part 16.202-2, 327.
(54.) FAR, Jan 00, Part 16.301-2, 331.
(56.) Quoted in Bruce D. Wyman, "A New Acquisition Reform Culture for the Air Force, Program Manager, Vol 28, No. 1, Jan-Feb 99, 62.
(57.) Statement of Clark G. Feister, Assistant Air Force Secretary for Acquisition, "Acquisition Executive Calls for Industry Empowerment," National Defense, Vol 79, No 506, Mar 95, 20.
(58.) SMC/AX and HQ AFSPC LG, Joint TSPR Working Group Final Report, Space Day Action Item 99-01, Feb 00, 5.
(59.) Amy Butler, "GAO Concludes Air Force Did Not Full Disclose Outsourcing Activities," Inside the Air Force, Vol 11, No 17, 28 Apr 00.
Major Pandes is a contracting staff officer in the Contracting Operations Division, Deputy Assistant Secretary of the Air Force, Contracting. At the time of the writing of this article, he was a student at the Air Command and Staff College.
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|Title Annotation:||defense logistics|
|Author:||P. PANDES, MAJOR HENRY|
|Publication:||Air Force Journal of Logistics|
|Date:||Jun 22, 2001|
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