What does performance-based contracting entail?

Performance-based contracting is designed to enhance the efficiency and effectiveness of contract management by aligning the interests of the contractor and the customer. The essence of this approach is to link contractor compensation directly to specified performance metrics. This means that payments to the contractor are contingent upon their ability to meet or exceed predetermined levels of service, quality, and outcomes, rather than merely the costs incurred or timelines met.

This method encourages contractors to deliver high-quality results, as their financial incentives are directly tied to their performance. It also helps in clearly defining expectations and measuring success based on objective, quantifiable metrics. By emphasizing results over efforts, performance-based contracting aims to foster a greater accountability framework for service delivery and project outcomes.

The other options do not align with the concept of performance-based contracting, which is heavily focused on measuring and rewarding performance rather than costs or timelines alone.