The contractor is paid for work on a graduated scale based on the quality and longevity of the work over time.
Difference from Traditional Method
Traditional specifications precribe the methods and/or means of producing or constructing an item. If the contractor complies with specifications but the final outcome is not acceptable, the contractor is not responsible for corrective action.
Pay for performance specifications rely on final outcomes that can be measured against performance criteria set forth in the contract. If the contractor fails to meet minimum performance criteria, payment is withheld and corrective action is required.
Eliminates blame when there is a problem with the quality of a specific work item
Shifts risk of providing a quality product to the contractor
Provides higher quality products for a longer duration
Time needed after project completion to ensure product performance
Product monitoring and inspection is time-consuming
Contractor may be required to finance a portion of the work during the performance period