Category Archives: Definition

Definitions used within the field of Performance Based Contracting (PBC).

Supportability Performance Measures

“If you don’t understand how to run an efficient operation, new machinery will just give you new problems of operation and maintenance. The sure way to increase productivity is to better administrate man and machine.” Edwards Deming In earlier articles I … Continue reading

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Revisiting Performance Based Contracts vs. Outcome Based Contracts vs. Relational Contracts

When a man’s suit fits, when the construction is beautiful, when the sewing and fabrics are there… in the end, you’ll look the best in it. John Varvatos, American Designer In a previous article (see Performance Based Contracting vs Outcomes … 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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Performance Based Contract vs. Outcomes Based Contract vs. Relational Contract

My colleagues and I, probably like a number of you, have been to a number of presentations recently that have spoken about future of contracting being ‘outcomes’ based contracting. There are also a number of people talking about relational contracting. … 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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Objective vs Subjective Performance Measures

No sane person should believe that something is subjective merely because it cannot be settled beyond controversy . Hilary Putnam, American Philosopher In choosing ideal performance measures to be used in Performance Based Contracts (PBCs) there is much debate on … Continue reading

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Is Your Contract Fun?

Katherine Milkman, an associate professor at Wharton, University of Pennsylvania, starts her behavioural economics class with the following video. . Having watched this you may be wondering what this has to do with PBC? Let me explain. If you agree … Continue reading

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Defining a Performance Based Contract (PBC)

Over the past 12 months articles[1] have discussed the virtues of Performance Based Contracting (PBC), but may have led the reader to believe that PBCs are neither well understood nor used. This is not entirely true since forms of PBCs … Continue reading

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Designing Successful Performance Based Contracts

Successful contracts deliver the desired outcomes of both the buyers and seller through a form of commercial construct. This is the classic “win-win” outcome that we all strive for. In Performance Based Contracting (PBC) our goal is the same; delivering … Continue reading

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Measuring and Incentivising Sustainment in the Age of Asset Management

In the early 1990’s when various western defence organisations started outsourcing the sustainment of complex materiel[1] they focused heavily on measuring and incentivising the four related “ilities“; that is availability, reliability, maintainability and supportability. Through the “ilities” we make sure that … Continue reading

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