Editor’s Note: Interesting post from Andy Akrouche’s Relational Contracting Intelligence blog regarding performance-based contracting.
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;
- a clear set of objectives and indicators,
- systematic efforts to collect data on the progress of the selected indicators, and
- 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 As a result, what were once a clear and useful set of objectives, is no longer applicable…
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