Performance-based contracting and the road less traveled by Andy Akrouche

Posted on July 28, 2014

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Editor’s Note: Interesting post from Andy Akrouche’s Relational Contracting Intelligence blog regarding performance-based contracting.

Relational Contracting Intelligence Blog

According to a World Bank report titled Performance-Based Contracting for Health Services in Developing Countries: A Toolkit, performance-based contracting is a type of contracting with;

  1. a clear set of objectives and indicators,
  2. systematic efforts to collect data on the progress of the selected indicators, and
  3. consequences, either rewards or sanctions for the contractor, that are based on performance.

Given the above, performance-based contracting seems to be fairly straight forward.

Unfortunately the world is anything but straight forward in terms of variables that can and do effect the original criteria upon which a performance-based contract is structured.  In short, there are natural changes in buyer requirements and supplier capabilities that occur over the life of a contract that cannot be anticipated from the outset.  This includes political, economic, social, technological and environmental changes.  As a result, what were once a clear and useful set of objectives, is no longer applicable…

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