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Ever since legal affairs have become a staff element within the Federal Office of Bundeswehr Equipment, Information Technology and In-Service Support (BAAINBw) in 2017 (the Legal Affairs Staff), it has been in charge of quality assurance for legal documents of major projects and has also played an essential role in the modernisation of contract management as part of the Bundeswehr procurement system.

The Legal Affairs Staff (which evolved from the former BAAINBw Division Z3) is now subdivided into the Branches J1 (procurement law), J2 (contract law policy), J3 (intellectual property rights), and J4 (external support services).

Branch J1 is responsible for all general matters regarding procurement law. The tasks of Branch J1 also include advice on procurement law for the project divisions and the BAAINBw executive group as well as processing of the BAAINBw Procurement Procedure Work Instruction and the respective forms, such as the decision on the award procedure.
Branch J2 is responsible for contract law policy matters. Besides contract counseling for the individual contract branches in the field of civil law, J2’s policy development work especially involves the continuous updating of draft contracts for contracts with an estimated contract value of less than €25M.

Branch J3 is responsible for the functional area of Intellectual Property Rights (IPR). In this connection, J3 provides advice on user rights regulations in contracts in individual cases and also especially in the context of quality assurance in major projects. These are, among others, regulations in the field of copyright, software, industrial property rights and/or technical know-how.

Branch J4 is in charge of processing external support services rendered by industry and consultant services.

One of the main tasks of the Legal Affairs Staff and its individual branches, which work in close cooperation with each other, is to perform quality assurance in their respective areas of expertise for projects with an estimated contract value of more than €25M (“major projects”). This task begins as early as with the decision on the contract award procedure and ends with the finalised contract. The Legal Affairs Staff closely accompanies the various stages of this entire process, such as contract preparation, invitation to tender, contract negotiation and contract conclusion. Further, it supports the project legal advisors in their tasks and advises the project managers on the preparation of the statement of work as the centerpiece of the contract award documents.

The Legal Affairs Staff is not only responsible for quality assurance but also for other tasks, especially with regard to general contracting policy matters. In this context, the Legal Affairs Staff’s main task is to continuously modernise contract management within BAAINBw. An efficient procurement process must be able to guarantee timely availability of defence materiel and comply with all the quality requirements applicable to military equipment at economic conditions. Contract restructuring is therefore required to ensure adequate risk distribution and promote autonomous implementation by industry. This also includes a greater emphasis on more innovative approaches to contracting such as Performance Based Contracting (PBC) as well as on digitisation and simplification. The main goal is to improve availability, thereby promoting materiel readiness.

Based on medium- to long-term cooperative partnerships and a clear division of tasks between the parties involved, PBC aims to provide a result-driven rather than an input-driven statement of work, thus creating economic incentives for the contractor. In essence, PBC combines result-driven services with economic incentives (“PBC in the literal sense”).
An intensive and trustful partnership between the contracting parties is the basis for the implementation of a performance-based approach. The responsibility for the contracted service must therefore be transferred to the contractor clearly and distinctly. The contractor can perform the service autonomously and exploit optimisation potentials within a predefined framework.

While the responsibility may be transferred to the contractor, the customer still needs to actively monitor and supervise contracts. This is particularly true in the case of key performance indicator (KPI) monitoring as these indicators serve as a yardstick for the performance of the contract. Ideally, customers should be able to determine KPI themselves; however, the obligation to provide information and accountability still need to be included in the contract. Otherwise, it might not be possible to recognise and remedy any deficiencies in the performance of the services in good time.

As this short introduction proves, PBC is by no means a trivial, one-size-fits-all solution that works for any project regardless. Instead, it is important to understand that PBC is merely one of many different “tools” that – based on a thorough analysis – may be appropriate in certain cases and may then result in advantages for both the customer and the contractor.

Before the decision in favour of or against a performance-based approach is made, the project in question must be analysed to determine where deficiencies are likely to occur and how they can be remedied with a targeted performance based strategy, if necessary. If no deficiencies are determined, there is no need to modify the current approach. A performance-based approach does not necessarily have to cover an entire weapon system; a partial adaptation may be sufficient.

If one were to summarise the types of projects for which PBC is particularly suitable, such projects would include contracts concerning logistics or logistic services. The contractor takes on greater responsibility and receives guidelines (as well as limits set by the customer) to deliver and optimise the performance, if necessary.

Within the scope of the In-Service Support Agenda (subproject 5), the Legal Affairs Staff has delved deeper into issues in connection with PBC as well as other topics (i.e. negotiation of maintenance in stages, buy-back-provisions etc.) that primarily concern contract management optimisation in terms of in-service support. The goal has always been to integrate these insights as early as possible into the procurement process in order to ensure efficient and reliable contract preparation and implementation. Such accelerated procurement procedures offer advantageous contracts for customers and contractors alike and can increase the operational readiness of the Bundeswehr (especially with regard to in-service support), thus allowing the Bundeswehr to pursue far more ambitious goals than the “mere” optimisation of contract management.

Team of authors BAAINBw