What characterizes a performance-based contract?

A performance-based contract is characterized by its emphasis on outcomes and performance standards. This type of contract is designed to ensure that the contractor is held accountable for delivering results that meet specified performance criteria, rather than simply completing tasks based on predetermined methods. By focusing on the desired outcomes, performance-based contracts motivate contractors to innovate and utilize the best approaches to achieve those outcomes, aligning their incentives with the needs and goals of the agency.

In this context, the specification of outcomes and performance standards helps ensure clarity in what is expected from the contractor, promoting efficiency and effectiveness in service delivery. By defining success through measurable performance indicators, both the government and the contractor can assess whether the expectations of the contract have been met, thus enabling better management and oversight of the contract.

Other options do not align with the foundational principles of a performance-based contract. Emphasizing cost over results, focusing solely on tasks and methods, or mandating fixed pricing for all services do not capture the essence of performance-based contracting, which prioritizes results and outcomes as critical factors in achieving contract success.