Chris Hamm replied to the topic Examples Needed: Positive and/ or Negative Incentives in Performance Based Acquisitions in the forum Acquisition2.0 8 years ago
It really depends on your contract type. Certain contract types allow for more financial incentives and disincentives (FPIF, FPAF, CPIF, CPAF) than others (FFP, T&M, CPFF). I have a strong preference for financial incentives tied to service level agreements. My ideal project design has recurring, operations and maintenance tasks as FFP or FPIF, and developmental/surge requirements as CPIF or CPAF. In my incentive pools, I like about 70% of the total to be tied to objective SLAs, and 30%ish to management, customer satisfaction, etc.
Most disincentives kick in when an SLA or acceptable quality level is not met, and a % of fee is deducted.
Once you leave financial, you quickly move to past performance or award term. Option periods can also be connected to incentives and disincentives.
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