Category Archives: Basis of Payment

The Mathematics of a Performance Based Contract (PBC) – Part 2

In the previous article (see The Mathematics of a Performance Based Contract (PBC) – Part 1) I described how a standard Australian Department of Defence Non-Linear PBC Payment Curve could be described by 2 equations for straights lines of the … Continue reading

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Payment Curve (Part 3) – Alternate Payment Curves

In a previous post we looked at the common types of Payment Curves used in a Performance Based Contract (PBC). These were the All or None Payment Curves, Linear Payment Curves and the Non-Linear Payment Curves. In this post we … Continue reading

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Payment Curves (Part 2) – Common Performance Curves

In an earlier post we described the role and common features of a Payment Curve used in a Performance Based Contract (PBC), including the difference between Achieved Performance and the Adjusted Performance Score. In the first of two posts we will … Continue reading

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Payment Curves (Part 1)

Changes to Contractor payments based on Contractor performance is one of the fundamental tenets of the Performance Based Contracting (PBC) approach. While changing payment uses a variety  of methods, all typically use a Payment Curve to describe how to change the payments. But, before we look at … Continue reading

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Performance Measure Gate

One advanced, yet uncommon, approach to performance management in a Performance Based Contract (PBC) is the concept of a performance measure ‘gate’ which modifies the overall Weighted Performance Score (WPS) based on specific criteria. A gate can be used where … Continue reading

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Carrot and Stick (Part 2)

In part 1 of this article we spoke about the 2 types of approaches to incentives; Approach 1 being negative incentives (stick) and Approach 2 being positive incentives (carrot). We also introduced a behaviour called loss aversion which describes how … Continue reading

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PBC Penalty Shoot-Out!

In recent months I have been involved in a number of Performance Based Contracting (PBC) discussions between buyers and sellers. One consistent point of heated discussion is around the application of a reduction in seller payment as part of the … Continue reading

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