Are performance-based contracts worth the effort?

Why performance-based contracts are so hard to do

There's always a lot of talk in support of using performance-based contracts, in which vendors are paid according to the results they deliver. But the truth is performance-based contracts haven't caught fire in the federal market.

An IBM Center for the Business of Government blog by Katherine Barrett and Richard Greene identified six reasons performance-based contracts are so hard to make work.

1. It’s hard to measure performance.
2. Agencies are nervous about rigid performance expectations, even if they are for their contractors.
3. Too much pressure is put on vendors that might have long-term, friendly relationships with agency officials, who are, in turn, less likely to want to rock the boat.
4. A poorly negotiated contract can put financial strain on vendors.
5. It’s difficult to specify the outcome desired, and defining success can be elusive.
6. Agencies often lack the capacity and skills needed to negotiate these often-complex contracts.

Source: IBM Center for the Business of Government

Reader Comments

Please post your comments here. Comments are moderated, so they may not appear immediately after submitting. We will not post comments that we consider abusive or off-topic.

Please type the letters/numbers you see above

What is your e-mail address?

My e-mail address is:

Do you have a password?

Forgot your password? Click here
contracts DB


  • Dive into our Contract Award database

    In an exclusive for WT Insider members, we are collecting all of the contract awards we cover into a database that you can sort by contractor, agency, value and other parameters. You can also download it into a spreadsheet. Read More

  • Is SBA MIA on contractor fraud? Nick Wakeman

    Editor Nick Wakeman explores the puzzle of why SBA has been so silent on the latest contractor fraud scandal when it has been so quick to act in other cases. Read More


  • How Do You Support the Project Lifecycle?

    How do best-in-class project-based companies create and actively mature successful organizations? They find the right mix of people, processes and tools that enable them to effectively manage the project lifecycle. REGISTER for this webinar to hear how properly managing the cycle of capture, bid, accounting, execution, IPM and analysis will allow you to better manage your programs to stay on scope, schedule and budget. Learn More!

  • Sequestration, LPTA and the Top 100

    Join Washington Technology’s Editor-in-Chief Nick Wakeman as he analyzes the annual Top 100 list and reveals critical insights into how market trends have impacted its composition. You'll learn what movements of individual companies means and how the market overall is being impacted by the current budget environment, how the Top 100 rankings reflect the major trends in the market today and how the biggest companies in the market are adapting to today’s competitive environment. Learn More!