Across the globe, governments are opening up traditional public
services to the competitive marketplace. The government of the
future will be more a focuser of resources than an owner, and
more a purchaser and manager of services than a supervisor of
personnel and direct service provider. This dramatic change in
the nature of government requires fundamental organizational
changes. For governments to avoid failures and mishaps, they
must concentrate on becoming smarter shoppers. This means
creating contracting systems that are outcome based; writing
contracts that contain clear performance standards;
incorporating financial incentives and penalties into the
contract; and developing advanced measurement techniques. Such
state-of-the-art contracting is often referred to as
“performance-based-contracting.” When properly structured,
performance-based contracting holds great promise to reduce
contracting costs while increasing service quality. Performance-
based contracting systems have several key components: 1. Ou