Industry Success with Outcome-Based Contracting
Background
ACT-IAC is exploring innovative contracting approaches to better align contractor performance requirements and payment to achieving government objectives and targeted outcomes. This project is in support of the General Services Administration (GSA) Center of Excellence for Outcome-Based Contracting. Given the shift towards greater adoption of Outcome-Based Contracting (OBC) models, the GSA is interested in understanding how these models are driving success across industries, particularly in comparison to traditional Performance-Based Contracting (PBC).
To support this effort, the ACT-IAC Acquisition Community of Interest (COI) has proposed an initiative to assist GSA in gathering data, perspectives, and best practices for OBC across high-priority sectors. The project focuses on evaluating successful payment structures, risk-sharing mechanisms, and strategies for fostering collaborative partnerships between industry and government. This research will provide actionable insights for GSA decision-makers to refine their approaches to professional services procurement, drive mission success, and maximize value for taxpayers.
Project Objective
The objective of this project is to gather, analyze, and present insights into the application of Outcome-Based Contracting (OBC) within key service sectors, with a focus on understanding its role in fostering success, its differences from PBC, and its feasibility as a commercial and governmental practice. These insights will support the GSA Professional Services Category in developing refined, actionable strategies for implementing OBC principles in federal acquisitions.
Scope
The research will explore OBC's application within the following high-priority sectors to identify best practices and lessons learned:
- Construction
- Professional Services (e.g., business administration, financial, legal, advisory, and marketing services)
- Health/Medical Services
- Information Technology (IT) Services
- Complex services crossing multiple categories
In addition to exploring the application of OBC in federal contracting, the research will include an analysis of B2B outcome-based contracting in private industry, particularly cases where long-term impacts are prioritized over short-term outcomes.
Research Methodology
The ACT-IAC Acquisition COI, in collaboration with GSA and industry stakeholders, will undertake the following tasks:
- Conducting surveys, interviews, and focus groups with industry experts and government acquisition professionals.
- Collecting case studies highlighting successful implementations of OBC in the public and private sectors.
- Exploring the application of Agile methods in service contracts and their adaptability to OBC frameworks.
- Analyzing data to identify trends, success factors, and areas for improvement in OBC implementation.
Core Questions to Explore
The following questions will be addressed to guide the research and conversation:
- Defining Outcome-Based Contracting:
- What is Outcome-Based Contracting, and what does it entail in practice?
- How does OBC differ from Performance-Based Contracting (PBC) in both structure and execution?
- How common is OBC in commercial industry—is it truly a recognized and regular practice?
- Payment Structures and Success Factors:
- What payment structures (e.g., milestone-based, risk-sharing, incentives) have been most successful in achieving long-term outcomes?
- How are payments structured in B2B outcomes-based contracts that prioritize long-term impacts over immediate deliverables?
- What role does risk transfer play in structuring payments, and how does it impact project outcomes?
- Measuring Needs vs. Expertise:
- Does industry generally define its needs in contracts, or does it tend to focus more on the expertise and labor being provided?
- How does the definition of needs versus inputs affect the development of contracting strategies?
- Government-Industry Collaboration:
- What methods have been successful in building strong partnerships between industry and government in OBC?
- How can the government encourage the co-creation of requirements with industry while preserving transparency and competitiveness?
- What baseline level of information and ongoing transparency must the government provide to facilitate collaboration?
- How would industry likely react to competitors participating in requirement co-creation following an award?
- Flexibility in Performance Management:
- How would industry respond to a shifting performance management framework where metrics, targets, or priorities are adjusted after contract award?
- Agile Methods in Service Sectors:
- To what extent are various service sectors (outside IT) applying Agile methodologies (e.g., iterative sprints, prioritized backlogs, or definitions of done) to services contracts?
- How do Agile principles align with or enhance the implementation of OBC in professional services and other sectors?
Potential Deliverables
The ACT-IAC Acquisition COI project team will provide the following deliverables:
- Findings Report - Detailed insights into OBC across the listed sectors, comparing practices to PBC and exploring both federal and commercial applications.
- Case Studies - Industry examples of OBC, including successful B2B contracts emphasizing long-term impact.
- Best Practices Guide - Practical recommendations for structuring payments, managing risk, enabling co-creation, and fostering collaboration in OBC.
- Agile Applications Assessment - An exploration of how Agile methods are utilized in professional services contracting and their relevance to OBC.
- Presentation to GSA Leadership - Summary of findings, recommendations, and actionable insights tailored to federal procurement objectives.
Anticipated Outcomes
The insights gained through this initiative will help the GSA Professional Services Category:
- Develop acquisition strategies that enable greater alignment with mission objectives.
- Understand how to foster strong, outcomes-focused partnerships with industry.
- Innovate payment structures and management approaches for federal contracts.
- Evaluate the feasibility of integrating Agile principles into OBC practices.
Timeline
- Months 1-2: Planning and stakeholder engagement (develop survey tools; prioritize workshops).
- Months 3-4: Execute surveys, interviews, and collect case studies on OBC implementation.
- Month 5: Develop findings report, best practices guide, and presentation materials.
- Month 6: Finalize and deliver all outputs to GSA Professional Services Category.
Call to Action
The ACT-IAC Acquisition COI calls on relevant stakeholders to participate, provide data, and engage in this collaborative research effort. Together, we can shape smarter, more effective acquisition practices for the future.