Supply Chain Glossary

Glossary  >  C  >  Contract, Performance Based  


 

Contract, Performance Based


Source: Procurement Glossary
Author: Paul Rogers
Institute: CIPS - UK

Courtesy of


 

Performance based contracts seek to focus upon the output required from the contractor, and create measures and remuneration mechanisms which align the contractor’s performance with the outcomes desired.  This contrasts with traditional approaches in that the specifications focus less on the ‘how’ and more on the ‘what’ through a clear statement of expected work outcomes.  The statement of work shows the detailed work elements including a performance standard, acceptable quality levels, how performance will be measured and monitored, and the percentage of the contract price each service represents.  Performance based contracts require clear definition of what is needed and measurement processes which relate directly to actual performance levels.

For example, supposing a buyer pays a maintenance provider for supporting a pump.  The fees are 15% of the initial acquisition cost, and the fee is paid annually.  The fee structure is unrelated to the actual cost expended by the supplier, and the supplier may or may not focus on achieving the required uptime levels - assuming that these are specified and measured.  A performance-based contract might reward the provider for uptime, the provider will only be paid if the pump is functional, and the provider will be paid less - or not at all - if the pump reliability is less than specified.  This would be a performance-based contract, and align the contractor to delivering the required pump availability.  See also Risk and Reward.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 




Job Opportunities
 
Koordinator Operations- & Site Logistics (m/w/d)
     
     Zug - Rotkreuz  -  PERM  -  Roche

Addetto/a Ufficio Spedizioni - Lugano
     
     Lugano  -  PERM  -  Page Personnel

Buyer - Lugano
     
     Lugano  -  PERM  -  Page Personnel

Category management and strategic specialist - 1 year contract
     
     Geneva  -  TEMP  -  Page Personnel

Senior Supply Chain Engineer
     
     Zug - Rotkreuz  -  PERM  -  Roche

Procurement Specialist - Services
     
     United Kingdom  -  Home Counties  -  PERM  -  Beaumont Select

Senior Buyer - Indirects - Flexible Working
     
     United Kingdom  -  Home / Flexible Working  -  PERM  -  Cast UK

Demand Planner - Nath
     
     United Kingdom  -  Stevenage  -  PERM  -  Michael Page

Supply and Inventory Specialist
     
     United Kingdom  -  West London  -  PERM  -  Page Personnel

Warehouse Co-ordinator
     
     United Kingdom  -  Furness Vale  -  PERM  -  Cast UK

Senior Buyer
     
     United Kingdom  -  Essex  -  PERM  -  Procurement People

Head Of Customs & Logistics - Leading FMCG Manufacturing & Distribution Business
     
     United Kingdom  -  March  -  PERM  -  Michael Page

Procurement Policy and Process Specialist
     
     United Kingdom  -  South East  -  PERM  -  Beaumont Select

Procurement Manager - Public Sector
     
     United Kingdom  -  Oxfordshire  -  PERM  -  Cast UK

Night Operations Manager
     
     United Kingdom  -  South Yorkshire  -  PERM  -  Cast UK

 

Supply chain E-learning



Explore available supply chain e-learning modules by language and academy



News & Trends
 

Last update 7 Feb 2021
Global manufacturing upturn slows at start of 2021 as supply chain pressures continue to build
   Source: J.P.Morgan Global Manufacturing PMI   -  IHS Markit



Retail

The retail sector is always on the move. Whether this involves shopping centres, shops in inner city locations or at airports – trends change very quickly and the goods change just as rapidly too. To keep up with these developments, highly complex and process driven supply chains are needed. With our...

5 Keys to Managing Costs in the Automotive Supply Chain

Let’s say you’re a kid, and you’re trying to set up a lemonade stand in front of your parents’ house. You go to the store (possibly with parental supervision) to get lemons and sugar, you come ...


Education
 

Local & Regional Agenda
 


Resources
 
Erema: Gaining a competitive edge through preferential exports

Erema, an Austrian manufacturer of recycling systems, uses AEB software to accelerate the proper classification of its components, manage supplier’s declarations, and ensure compliance in its exports. Erema ship...

The Future of Procurement: Executive Overview

What do you think the future holds for procurement? And do you think your predictions line up with those of your peers?You can find out by downloading this overview of a recent Oxford Economics global survey involving mo...


International Agenda