Towards a Better Understanding of Outcome-Based Contracts

August 17, 2020

Outcome-based contracting is an operational model that requires an ironclad relationship between customer and provider that provides the trust necessary to share risk and reward. If there is early misunderstanding around what outcome-based contracting is, the customer’s expectations will be out of alignment with that of the service provider’s.

Under true outcome-based models, considerable amounts of strategic planning are needed from customers before they engage with service providers. To determine if the same values are shared, the flow of information should go both ways. Information about business strategies and projections should be shared at a high level. Both customers and service providers will need senior stakeholders to be committed before the working relationship can begin. This early display of investment and trust is essential to a successful, working contract. Although outcome-based contracting is not appropriate for all services, the probability of success lies squarely on the strength of the relationship. Learn more about outcome-based contracts here.