Why It Matters
Government workforce development agencies can achieve better outcomes through performance-based grants and contracts, also known as "outcomes-based." Payment to providers is tied to the achievement of key outputs and outcomes, instead of reimbursing for costs regardless of outcomes. Performance-based agreements are intertwined with evidence and data, because tying payment to results creates an incentive for providers to use approaches with evidence of effectiveness, and to collect high-quality data to show results. Additionally, the option to focus outcomes on specific populations can encourage service providers to make stronger efforts around recruiting, retention, and adjusting services to meet a population’s needs.
Overview
A single contract may combine performance- and cost-reimbursement payments or be fully performance-based. The U.S. Department of Labor’s Workforce Innovation and Opportunity Act (WIOA) Final Rule reminds workforce agencies that “performance-based contracts are still an available option for local areas and there is no limit on the use of funds for typical performance-based contracts, as defined in the Federal Acquisition Regulations (FAR), [Subpart 37.6 - Performance-Based Acquisition].”
Unlike traditional cost-reimbursement contracts, performance-based contracts link payment to the achievement of priority outputs and outcomes, ensuring better results for program participants. There are several ways in which a workforce agency might link payment to outcomes, as shown in the examples tab.