In what way does "performance-based contracting" differ from traditional contracting?

Performance-based contracting fundamentally shifts the focus of the contract from detailing the processes and methods used to complete a task ( inputs) to assessing the results and effectiveness of the service provided (outputs). This approach emphasizes specific outcomes that the service provider is responsible for achieving, ensuring that the contract is designed around delivering value rather than simply following prescribed procedures.

By tying payment directly to the successful outcomes of services rendered, performance-based contracting encourages accountability and incentivizes the contractor to meet or exceed performance standards. This model aligns the interests of both the contractor and the client, as contractors are motivated to achieve the best possible results to receive payment.

In contrast, traditional contracting often emphasizes adherence to a predetermined process or method, potentially leading to payment structures that reward compliance instead of outcomes. This can result in less focus on the effectiveness of the services provided.