I read the Federal Page article on performance-based budgeting with some amusement {"Washington May Reap the Fiscal Method it Sowed," Nov. 28}. The article points to the success Sunnyvale, Calif., has had in setting minimum standards for its government agencies in return for their appropriated level of funding. Nothing is new about this concept. For decades government service contractors have been expected to maintain contractual levels of performance in order to receive payment.

Performance-based contracting has been widely used since 1975, when the Office of Federal Procurement Policy developed guidelines based on a successful Air Force program for use in the Office of Management and Budget Circular A-76, which is a standard used to study the possible conversion of federal commercial activities to the private sector.

The program has been extremely successful not just at maintaining levels of performance, but also at improving efficiency and reducing costs of federal services. The OMB estimates that for each position studied, regardless of whether the position is converted to private sector performance or remains as a government function, $9,600 is saved.

The problem with performance-based budgeting (as opposed to contracting) is that it has no teeth. If certain levels of service are not maintained 80 percent or 90 percent of the time, agencies don't lose money -- ever. On the other hand, performance-based contracting absolutely requires contractor compliance -- otherwise the contractor doesn't receive payment.

An excellent tool has long existed for converting federal services to the performance-based philosophy. But Congress and OMB take every opportunity to side-step the issue.

Even OMB Director Richard Darman hasn't shown any interest in OMB Circular A-76. Since he's been on board, OMB has twice downgraded the office responsible for implementing the program. However, we are pleased to see him advocating this "new" concept. The question is, will Mr. Darman and Congress get serious about this proven philosophy, or will they treat it as just another trendy idea worthy only of lip service instead of the real action it deserves?

GARY D. ENGEBRETSON President, Contract Services Association Washington