PBC is an initiative by the Ministry of Finance (MOF) to enhance Government contracting method. PBC approach enables reward and remedy to be linked to monetary and non-monetary measures based on achieved performance. This concept has gaining the thrust of the Government as the preferred option and method for contracting for performance by replacing the legacy of the conventional contracts.
PBC is an outcome-oriented contracting method that ties a range of monetary and non-monetary consequences to the contractor based on their accomplishment of measureable and achievable performance requirements.
PBC model introduced within the Australian DoD has evolved from the First and Second Generation PBC and currently into Third Generation PBC with additional new features which comprise of:
- Key Performance Indicators (KPIs)
- System Health Indicators (SHIs)
- Strategic Performance Measures (SPMs)
This has transformed the contractor from a mere “seller” to “supplier” and ultimately “partner” to the Government (See Figure 1).
Five key characteristics of PBC are
- Requirements are focused on the contractual outcomes instead of how the work is performed;
- Set of indicators are tied to the outcome;
- Achievable performance standard for each indicator;
- Defined process to collect, analyse and report data for the selected indicator; and
- Range of monetary and non-monetary consequences, either rewards or sanctions for the contractor, based on achieved performance.
Major features of the Third Generation PBC are
- Provides balance/fairness between buyer (GOM) and seller (Provider);
- Shapes the behavior of the seller;
- Promotes true long-term partnership;
- Pays for the result (outcome), not the process;
- Fosters industry development and competitiveness; and
- Commensurate monetary rewards with commercial risk.
The strategic intent are as follows
- Realising Value for Money on outsourced Through-life Support services;
- Assuring consistent Availability and Operational Capability of complex Government’s asset or system; and
- Achieving full potential of Government Investment/Assets for the nation.