INGENIEUR
Contracting for Performance
- 3 rd Generation Performance
Based Contract
By Datuk Ir. Kamarulzaman Zainal
Senior Associate, TDA Berhad, PBC Center of Reference
T
he Malaysian Government, as an asset
owner, invests huge sums of money to
develop the nation as part of its service
and social fulfilment to the rakyat. In certain
sectors, the investments involve acquisition of
strategic moveable assets that are expensive,
sophisticated, complex and have long life cycles.
This is especially prevalent in the defence/
security and transportation sectors where fleets of
aircrafts, naval vessels, armoured vehicles, rolling
stocks, ships and boats are purchased from time
to time for various agencies. Private asset owners
do the same but largely for business purposes.
To ensure the high value investments provide
the expected return, Government assets such as
the above platforms/systems must be managed
and maintained efficiently so that they can operate
at optimum levels to perform their intended
purposes throughout their entire life. Sustainment
of systems capability (Capability Sustainment)
is therefore an important function that an asset
owner must undertake, either internally or through
outsourcing. If the function is to be undertaken
internally, the associated capability sustainment
costs will be borne directly by the owner. If it is
outsourced, the owner can procure the services
from a contractor to perform the required
maintenance, repair and overhaul (MRO) as well
as other logistic support tasks on the whole
fleet, or sub-system of the fleet, or certain parts/
components of the fleet.
Most Government contracts related to life-
cycle support of moveable assets today are
transactional or prescriptive-based where
payment to the contractor is determined based on
“process”, i.e man-hours and materials consumed
to perform the work. However, after successful
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VOL
2018
VOL 76
55 OCTOBER-DECEMBER
JUNE 2013
Figure 1: The evolution of PBC
implementation on several contracts since 2012,
the 3 rd Generation Performance Based Contract
(PBC) is gaining the trust of Government buyers
as the preferred method for contracting for
performance.
PBC GEN 3
There is nothing new about PBC as the basic
methodology has been used in many contracts
previously. KPIs (Key Performance Indicators)
remain the main performance measure in a PBC
that will determine how the contractor performed
and how they will be paid. The 3 rd Generation
PBC however, has new features that are not yet
exposed to many. The evolution of PBC, as shown
in Figure 1, has come to a point where additional
performance measures are introduced to evaluate
other dimensions of a contractor’s performance