Chapter 21 - Performance-Based Contracting and Service Level Agreements

21.3.3 Performance measurement and metrics

A core strength of PBC is that it places the agency in a position to objectively evaluate performance. By clearly defining the performance metrics against which success will be measured, personalities and other subjective influences are taken out of the equation. Successful PBC allows for measurement of metrics in three stages:

• A baseline period allowing for due diligence by both parties;
• A ramp-up period, typically 90 days;
• Full execution of the metrics and associated incentives/disincentives.

An excellent example of a tiered measurement approach is the help desk, one of the most common performance-based contracts in effect today. By monitoring metrics such as call length and wait times, and applying those metrics to clearly defined baseline, ramp-up, and execution periods, procurement officials can create a firm foundation from which to negotiate if requirements change. Everything is up-front, in writing, and lasts the life of the project.

One critical caveat regarding metrics in contracting is the importance of adequate infrastructure. With the advent of metrics-driven, performance-based contracting, agency procurement management teams must have the capability to properly evaluate metrics in order to accurately evaluate success or the lack thereof.