Performance-based contracting
Abstract
In this article a review of performance-based contracting will be presented. Performance-based contracting (PBC) is a product support strategy in which the procurement model is based on clearly defined objectives and key performance indicators (KPIs) [1]. These are the driving forces to encourage behaviours that achieve the required project objectives and procurement. Specific KPIs such as cost, quality and completion are the basis of consequences, in the form of risk and reward, for the involved contract participants. The concept of KPIs will also be studied in this article. In performance-based contracting the incentivized performance measures serve the purpose of motivating the supplier to improve performance and cost effectiveness through enhanced internal practices.
