Performance-based Contracts

Performance-based contracts are agreements between a client and a service provider where the compensation is contingent upon the achievement of predefined performance metrics or outcomes. Unlike traditional contracts that focus on inputs or activities, performance-based contracts incentivize service providers to deliver measurable results that align with the client’s objectives. These contracts typically include key performance indicators (KPIs) and service level agreements (SLAs) that define the expected outcomes and establish criteria for measuring performance. Performance-based contracts are commonly used in various industries, including outsourcing, consulting, construction, and government procurement.