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Chapter 21 - Performance-Based Contracting and Service Level Agreements

21.1 Performance-based contracting

21.1.1 PBC is results-oriented

The most important element of a PBC, and what distinguishes it from other contracting methods, is the results that are desired. Many IT procurements are traditionally directed by the customer 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. In performance-based contracting, the results required of the supplier are described using a statement of work or a statement of objective. The key attributes of PBC are:

  • Outcome oriented
  • Clearly defined objectives
  • Clearly defined timeframes
  • Performance incentives
  • Performance monitoring