Performance-based contracting (PBC) is a procurement method that structures all aspects of the procurement around the purposes of the work to be performed instead of describing the manner by which the work is to be performed. PBC allows agencies to acquire products and/or services via contracts that define what is to be achieved, not how it is done. PBC gives suppliers the freedom to bring new approaches to the project. When a contract is based on performance, all aspects of the procurement are structured around the mission of the project, rather than the manner in which it is to be done. The procurement seeks to elicit the best performance the private sector has to offer, at a reasonable price or cost, by stating the project's objectives and giving suppliers both latitude in determining how to achieve them and incentives for achieving them.
The SOW will provide performance standards, rather than spell out what the supplier is to do. PBCs normally contain a plan for control and a plan for quality assurance surveillance. In addition, the contract typically includes positive and negative performance incentives. This is accomplished through clear, specific, and objective contract requirements and measurable outcomes, instead of dictating the manner by which the work is to be performed or broad and imprecise statements of work. PBC describes the work in terms of the results to be achieved and looks to the supplier to best organize the workforce to achieve those results.
Additional suggestions for preparing the PBC-based SOW include:
The most important element of a PBC, and what distinguishes it from other contracting methods, is the results that are desired. Many procurements are directed by the agency in the form of exact specifications or requiring "key personnel" to be assigned to a service contract. Attempts by the supplier to suggest alternative ways of approaching the work are usually rejected with the suspicion that the supplier is trying to reduce costs to increase profits resulting in an inferior outcome. The key attributes of PBC are-outcome oriented; clearly defined objectives; clearly defined timeframes; performance incentives, and performance monitoring. By describing requirements in terms of performance outcomes, and not requiring detailed specifications, agencies can help achieve the following objectives: