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Performance-Based Contracts: Maximizing Success, Sharing Risk

Author(s):

Lorrie K. Mitchell, C.P.M., A.P.P.
Lorrie K. Mitchell, C.P.M., A.P.P., Partner, Mitchell Enterprises, 770/448-4544, 404/808-8804; lorriekm@bellsouth.net

90th Annual International Conference Proceedings - 2005 - San Antonio, TX
Abstract

In the past, contracts were negotiated solely with a set fee structure. Occasionally, a penalty clause would be negotiated into the arrangement, and less seldom an incentive clause was included. A Performance Based Contract (PBC) is the true Win/Win scenario of the perfect union of these concepts. Topics that warrant discussion include: Is a Performance Based Contract beneficial, can/should all contracts be performance based, what type of relationship should exist/be developed with the supplier and how does a customer/end-user participate in this process, what type of environment is conducive to making this type of relationship work, what do you base performance on, what characteristics should the buyer and supplier possess, and how do you implement this type of program?

Performance-Based Contracts: Maximizing Success, Sharing Risk — 69 KB (PDF)