Question 1

Why do traditional contracts often fail to deliver real business results?

Accepted Answer

Traditional cost-plus based contracts pay for effort, hours, scope, and deliverables — not the business outcome that actually matters. Organisations end up buying work, not results. This leads to misaligned incentives, scope-and-hope delivery, weak accountability, and wasted spend on work that is technically complete but commercially useless.

Question 2

What is outcome-based contracting?

Accepted Answer

Outcome-based contracting ties payment to the achievement of a defined business result — uptime, throughput, cost reduction, productivity gain — rather than to the completion of a scope. The supplier assumes a share of the performance risk. The buyer pays for what they actually need.

Question 3

How is performance-based different from SLA-based contracting?

Accepted Answer

SLA-based contracts measure operational KPI — availability, response time, delivery rate. Performance-based contracts go one level deeper: they measure business outputs and the impact on outcomes. The distinction determines who bears the risk and who captures the upside.

Question 4

What size organization do you typically work with?

Accepted Answer

The method is designed for industrial SMEs and mid-market organisations — typically 50 to 5,000 employees — in manufacturing, logistics, energy, or supply chain.

Luis Prato Workspace — Performance-Based Contracting

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