Performance-Based Incentive(PBI)
A contractual mechanism that rewards contractors for exceeding performance targets or achieving specified outcomes, aligning payment with results.
Overview
A Performance-Based Incentive (PBI) is a contract provision that provides additional fee or payment when the contractor achieves or exceeds defined performance objectives. PBIs align contractor motivation with government goals, creating financial rewards for superior delivery. They are commonly paired with Performance Work Statements in performance-based contracts.
Why It Matters in GovCon
PBIs can significantly increase contract value for high performers. Understanding the incentive structure during proposal preparation helps you price accordingly and design your approach to maximize the likelihood of earning incentives. Conversely, contracts may include negative incentives or deductions for falling short of standards.
Key Details
- Types: Positive incentives for exceeding targets; negative incentives (deductions) for non-performance.
- Metrics: Tied to measurable outcomes such as uptime, response times, customer satisfaction, or cost savings.
- Fee Structure: May be a percentage of contract value or fixed dollar amounts per metric.
- Documentation: Incentive criteria and measurement methods must be clearly defined in the contract.
Related Terms
- Performance-Based Acquisition (PBA)
- Performance Work Statement (PWS)
- Quality Assurance Surveillance Plan (QASP)
- Service Level Agreement (SLA)
More Contracts Terms
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