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The performance of performance-based contracting in public outsourcing: a meta-regression analysis · The Leading Edge

• 0:03
  SPEAKER_00: Well, hello everyone, and welcome back to the Leading Edge, a series which offers in-depth insights into the key challenges, innovations, and evolving dynamics of the contract and commerce landscape.
• 0:16
  SPEAKER_00: I'm your host, Nikki Mackay, Chief Development Officer of the Commerce and Contract Management Institute.
• 0:24
  SPEAKER_00: Now, today's in today's episode, the performance of performance-based contracting in public outsourcing, a meta-regression analysis.
• 0:34
  SPEAKER_00: I am joined by today's special guest, Pedro S.
• 0:37
  SPEAKER_00: Bayet.
• 0:39
  SPEAKER_00: Performance-based contracting has become one of the defining approaches to public and commercial outsourcing.
• 0:47
  SPEAKER_00: The promise is really compelling.
• 0:49
  SPEAKER_00: Align us incentives to reward outcomes rather than activity, encourage innovation and improve accountability.
• 0:58
  SPEAKER_00: Yet, new research analysing nearly 40 studies across multiple industries suggests the reality is far more nuanced.
• 1:08
  SPEAKER_00: Simply paying for performance doesn't automatically improve performance.
• 1:15
  SPEAKER_00: Instead, success really depends on how contracts are designed, what organizations choose to measure, and how relationships are managed throughout delivery.
• 1:28
  SPEAKER_00: So today we will explore why so many performance-based contracts fall short, what distinguishes successful programs from unsuccessful ones, and why organisations may need to rethink not just their contracts, but their entire approach to commercial relationships.
• 1:49
  SPEAKER_00: It's a big topic, and Pedro is here to guide us through this episode.
• 1:54
  SPEAKER_00: So welcome to the leading edge, Pedro.
• 1:57
  SPEAKER_01: Thank you, Nikki.
• 1:58
  SPEAKER_01: Glad to be here, glad to be participating.
• 2:00
  SPEAKER_00: Wonderful.
• 2:01
  SPEAKER_00: So I'd like to begin, Pedro, by giving our audience really the context and the motivation around this topic, because performance-based contracting has been promoted for decades as you know, the answer to fiscal pressure and the demand for demonstrable value.
• 2:19
  SPEAKER_00: Without a doubt, an important research topic.
• 2:23
  SPEAKER_00: So tell us what led you to take it on and what the research actually involved.
• 2:29
  SPEAKER_01: Thank you, Nikki.
• 2:29
  SPEAKER_01: It's an excellent question.
• 2:30
  SPEAKER_01: And I think explaining to the audience the motivation is always important.
• 2:34
  SPEAKER_01: So as you mentioned, yes, BBC performance-based contracting has been around for decades, if not centuries.
• 2:40
  SPEAKER_01: You can even trace it back, sadly, to the 1700s when uh captains, uh, chip captains bound to Australia were paid by COMBEC ported or COMBEC landed.
• 2:52
  SPEAKER_01: And you can even see in the US in the 1950s, it was used in some vaccine deployment where people, providers were paying on infection rate reduction.
• 3:03
  SPEAKER_01: So definitely something that has been around for long.
• 3:06
  SPEAKER_01: So in terms of the motivation, we we first started out uh trying to comprehensively and empirically evaluate some of these newer models that you and your audience are probably familiar with.
• 3:18
  SPEAKER_01: Social impact bonds that started growing in the UK in 2010, and the whole outcome-based contracting, outcome-based commission.
• 3:27
  SPEAKER_01: We wanted to see what actually works, uh, what makes them work, uh what they were succeeding or failing, as you mentioned, but we quickly realized there was not enough evidence on these more newer and innovative models.
• 3:41
  SPEAKER_01: And we went to the predecessor, what we call performance-based contract, that is uh, in short, just the component of these more innovative models where you pay for performance.
• 3:51
  SPEAKER_01: This could be in a social impact bond, this could be an outcome contract or other types of contracts.
• 3:56
  SPEAKER_01: So we conducted a meta-analysis, and in plain terms, what a meta-analysis is, is just a combination of studies where you statistically combine results and you can test uh different determinants, different moderators to see what is driving uh the results.
• 4:13
  SPEAKER_01: And this is very common in the medical science uh uh literature.
• 4:18
  SPEAKER_01: So what we are actually testing in our study is not just not if the performance-based contracting delivered on paper, if it actually landed on the performance metrics that were contracted, but if it has genuine performance.
• 4:34
  SPEAKER_01: And what do we mean by genuine performance?
• 4:37
  SPEAKER_01: So if you compare uh performance-based contracting that, let's say was getting paid for training people on AI skills versus an in-house uh training provider or some other contracting method method that is simpler, uh, was it actually delivering better results?
• 4:54
  SPEAKER_01: So, did it justify the effort to bring this more complicated, more uh uh labor-intensive, you could say, kind of model, um, where things actually just improving in paper, but not in reality, what's called a performance paradox.
• 5:12
  SPEAKER_01: So we we aim to test this.
• 5:15
  SPEAKER_01: And as you mentioned, we included over 40 studies and we cover around 12 public services.
• 5:21
  SPEAKER_01: These include child service, employment service, road maintenance, bus operations, even air force and prison uh operations.
• 5:32
  SPEAKER_00: Thank you.
• 5:33
  SPEAKER_00: That is absolutely fascinating, and I think one of the most interesting elements I want to jump to now, Pedro, is um the misunderstandings that have occurred around this topic.
• 5:47
  SPEAKER_00: Um, because one of the most surprising findings from the research is that performance-based contracts don't automatically produce results that uh than traditional contracting models, right?
• 6:00
  SPEAKER_00: Um, that challenges um a long-held assumption across both the public and private sectors.
• 6:07
  SPEAKER_00: The research also suggests that collaboration, shared goals, and effective governance have a greater influence on success than contractual incentives alone.
• 6:18
  SPEAKER_00: So, Pedro, what do you think organisations have misunderstood about performance-based contracting?
• 6:26
  SPEAKER_00: And to what extent does success depend less on contractual incentives and more on that balancing commercial discipline with collaboration and shared goals and effective governance?
• 6:41
  SPEAKER_01: Let me start with the with a surprise in finding.
• 6:43
  SPEAKER_01: I think indeed uh when we see that uh pain for performance by itself uh does not deliver this genuine performance I mentioned, what we see is it's not a silver bullet.
• 6:54
  SPEAKER_01: And what we uh as you say at the start, what the nuance behind this is that success is conditional on certain factors, factors like competition, measuring challenge, incentive design, even the study that we included itself, how how well it was conducted.
• 7:11
  SPEAKER_01: So when when you frame it like this, it becomes a more obvious result, no?
• 7:16
  SPEAKER_01: And I think in academia you're doing a good job when you explain something and people uh move to be, okay, this is kind of obvious why you didn't find that PVC is not a silver bullet.
• 7:26
  SPEAKER_01: It in short context matters.
• 7:29
  SPEAKER_01: And we know this, and most contract managers know this, they leave it every day.
• 7:34
  SPEAKER_01: I think the difference is that they're not actively thinking about it, about what context make things work, what set themselves for success.
• 7:44
  SPEAKER_01: So let me let me tackle when you when you say what has been misunderstood.
• 7:48
  SPEAKER_01: So I think the first thing is uh is the performance-based contracting actually achieving genuine performance or it's just achieving in paper?
• 7:58
  SPEAKER_01: You are delivering on certain uh uh metrics, but you're not really changing or moving the needle.
• 8:05
  SPEAKER_01: Um you can just a quick example, let's say you're a training service provider, uh, you can be paid to uh by the amount of people you trained, you can be paid maybe an even more substantial bonus by the people you put in in jobs or job placements, or you could simply be refunded for your costs.
• 8:26
  SPEAKER_01: But at the end, we don't know which of these three programs, uh three contracting models or delivery models, are delivering the actual genuine impact.
• 8:35
  SPEAKER_01: So I think this is an important question for contracts managers to know and something that we we try to answer.
• 8:41
  SPEAKER_01: And the second thing that more than being misunderstood, I think there has been a lack of reflection on it, is what are the conditions that increase your chance on this genuine impact?
• 8:54
  SPEAKER_01: And I think reflecting on those on those conditions are vital.
• 8:57
  SPEAKER_01: And the things that we add in the paper is um, as you mentioned, your question, uh, to think of the ideas of collaboration, shared goals, and governance as some of these conditions for success, and this is what we see in the research, to try to think of the tensions are at the buyer and seller, uh the buyer and provider, sorry, are they aligned in the goals?
• 9:19
  SPEAKER_01: Do they both understand what they're trying to deliver and capture?
• 9:23
  SPEAKER_01: Is the performance that you're including in your contract actually capturing the real value that you're trying to pursue?
• 9:30
  SPEAKER_01: And how do you balance enforcement of these performance metrics with trusting your providers and allow them to innovate?
• 9:36
  SPEAKER_01: So I think those are the things that we try to include.
• 9:39
  SPEAKER_01: And just to finish on this question, you also uh mentioned balancing commercial discipline.
• 9:44
  SPEAKER_01: And I think this is this is in the public sector is paramount, it's a must, because um, we know performance-based contracting has a negative side.
• 9:53
  SPEAKER_01: It can lead to gaming of the measures, it can lead to misreporting.
• 9:57
  SPEAKER_01: Um, so balancing uh contract rigor and enforcement with these uh values of really sharing the goals and be more collaborative and allowing innovation so you can uh really achieve genuine outcomes is definitely attention that we we put front and center in our paper.
• 10:17
  SPEAKER_00: Yeah, absolutely, Pedro.
• 10:19
  SPEAKER_00: So I I'd quite like to hone in on um those conditions that you spoke about.
• 10:24
  SPEAKER_00: So let's take some of those conditions in turn, and measurement is uh the obvious one.
• 10:30
  SPEAKER_00: Um there's a long-held assumption that more measurement leads to better performance when organizations may simply be measuring the wrong things.
• 10:41
  SPEAKER_00: How do you think, Pedro, should leaders really rethink what success looks like if they want contracts to create that long-term value rather than simply demonstrate compliance?
• 10:55
  SPEAKER_01: Yeah, and this is this is a crucial question.
• 10:57
  SPEAKER_01: I mean, and it's something that that we were lucky to empirically add and distinguish in our research.
• 11:02
  SPEAKER_01: One of the things is we uh separate each performance metric in the studies as if they were outcome or impact oriented, or if they were process or output-oriented.
• 11:13
  SPEAKER_01: And think again of the job training example, if job placement is an outcome versus training 100 people is more an output.
• 11:22
  SPEAKER_01: And what we find is that outcome impact metrics do uh outperform, do better than process and output-oriented metrics in this, what I'm calling genuine performance.
• 11:34
  SPEAKER_01: And let's just break this down.
• 11:36
  SPEAKER_01: Um, basically, what we're we're saying is that in those measures that are expected to be harder, that maybe some contract managers, some providers shy away because they're more elusive goals, they're more outcome impact, and they feel escape their uh the what they're to be held accountable for, is maybe on these areas that performance-based contracting do deliver uh more genuine uh results.
• 12:02
  SPEAKER_01: And I think this is a wonderful finding, especially going back to what I said at the beginning, the the outcome-based contracting movement that has been growing, and you hear it being taught more and more, and that we find this result really speaks to uh maybe we should think on outcome-based contracting as a more suitable environment for this.
• 12:24
  SPEAKER_01: And to address the the part of your question about measuring the right thing, I think yes, it's not about measuring everything we can and that it's easy and putting in the contract and just uh let yourself be carried away by just measuring and putting things in the contract, but it's going back to what I'm saying of are what you measuring and putting your contract, is it actually capturing the value that you're trying to achieve?
• 12:50
  SPEAKER_01: And going back to the workforce uh training example, when governments deploy workforce training, they want people to find jobs or increase their life.
• 12:59
  SPEAKER_01: They don't really care at the end that much of you train a thousand or two thousand people if they don't uh are getting uh a good outcome.
• 13:07
  SPEAKER_01: Um and the tension here is that yes, uh performance uh procurement teams, sorry, they usually want something that is more tangible, more uh enforceable, easier to measure, but it might be on these outcomes that are a little bit harder to verify, but not not impossible because then you don't do it, that were performance-based contracting delivers more uh more and better, we would say.
• 13:35
  SPEAKER_00: Yeah, that's really interesting because there are some who argue that many performance-based agreements are doomed to fail before they even start due to inadequate market engagement and weaknesses in supplier evaluation and selection.
• 13:50
  SPEAKER_00: So, is there any evidence uh for this, uh, Pedro?
• 13:55
  SPEAKER_00: And if there is, how can it be addressed?
• 13:58
  SPEAKER_01: So uh one of talking back uh on our the conditions that we added for success, uh for determining success in performance-based contracting, we did added uh competition, the level of competition, and this speaks to what you asked me on on market engagement.
• 14:14
  SPEAKER_01: Uh and we know from theory and from uh plenty of research and practitioners that under an environment of heightened competition, uh usually procurement tends to work better, and incentive-based schemes such as performance-based contracting, they're expected to work better.
• 14:31
  SPEAKER_01: In our research, we find uh non-statistically significant in a consistent way.
• 14:36
  SPEAKER_01: What I'm trying to say by this is that like in some of our tests we find that it was significant, in some we find it was not as significant, and in the academic world we were more conservative and didn't really uh highlight it as much.
• 14:49
  SPEAKER_01: However, I would not uh dismiss uh competition as a condition for success.
• 14:55
  SPEAKER_01: First, I think we we we were we we felt short on how we measure competition in our paper because we rely on a survey because there was not enough data on each performance-based contracting level of competition.
• 15:06
  SPEAKER_01: Um but also uh because we know the public sector has a market engagement problem.
• 15:14
  SPEAKER_01: We know that a lot of services, especially in human services, they have you have one or two providers that are willing to engage and participate.
• 15:23
  SPEAKER_00: Yeah.
• 15:23
  SPEAKER_01: Um and I could even say that this market engagement and problems with supplier selection are more a public procurement uh malady than a PVC-specific one, but I will say that performance-based contracting might exacerbate, might increase this uh problem.
• 15:44
  SPEAKER_01: And to deliver on how to address it, of course.
• 15:47
  SPEAKER_01: Um I think that there's a couple things uh uh contract managers and uh individuals in public procurement could do.
• 15:56
  SPEAKER_01: I think you have to engage your suppliers, the current suppliers, potential suppliers.
• 16:00
  SPEAKER_01: I think if you engage everybody, these keeps within the rules of fairness and transparency.
• 16:06
  SPEAKER_01: You have to sit with them and sell what you're trying to achieve with the performance-based contracting.
• 16:12
  SPEAKER_01: Try to create this uh performance and outcomes if you're pursuing together, and this will lead to a culture of learning, but it can also motivate some providers that were maybe ambivalent of applying or not, and then to be motivated to to really participate and increase competition.
• 16:31
  SPEAKER_01: Um, so so yeah, I think by engaging the supplier is how I would say you can address it.
• 16:37
  SPEAKER_00: Absolutely.
• 16:38
  SPEAKER_00: Um, I want to look at this now through through the AI lens, um, this this new era that we we are now very much in.
• 16:48
  SPEAKER_00: Because for years, measuring outcomes has been has been, as you say, one of the biggest challenges in performance-based contracting.
• 16:56
  SPEAKER_00: And now AI and real-time data really changing what's possible.
• 17:01
  SPEAKER_00: Do you think that these technologies are finally unlocking the full potential of performance-based contracting, or are actually they just simply exposing weaknesses that have always existed?
• 17:14
  SPEAKER_01: Well, I hope I hope so.
• 17:15
  SPEAKER_01: I think there's a lot of uh uh faith in AI, and I do have faith in it that it can unlock the potential of performance-based-based contracting and other functions across uh private and public sector.
• 17:28
  SPEAKER_01: Uh, in this specific uh topic, I I can see AI playing a positive role.
• 17:33
  SPEAKER_01: I think it it definitely can lower the cost of measuring and tracking performance.
• 17:38
  SPEAKER_01: Not just a monetary term, but it allows people that before didn't have the capability of maybe set up uh some database tracking, some uh performance tracking to just do it with the assistance of AI.
• 17:50
  SPEAKER_01: Um and I think AI is a wonderful partner uh for brainstorming, uh, so you can decide um to kind of develop some outcomes or metrics as a first pass on like think aloud with the AI.
• 18:05
  SPEAKER_01: And I see a lot of uh uh contract managers already using it even to edit the RFP to make it more invited, less over prescriptive.
• 18:14
  SPEAKER_01: And I think uh a final positive thing that I can think of is can it can even make the process more accessible because you you may have some providers that they feel they can deliver on the outcomes, but they might not have the expertise or knowledge to really do a good bit, a good application process for for this public procurement, and they might be more motivated with the help of AI.
• 18:40
  SPEAKER_01: Um at the same time, we have to recognize that AI has a negative side, and this is not just of course for procurement, but but across sectors.
• 18:50
  SPEAKER_01: And one of the things that I might worry for for performance-based contracting is that we might get lost on the trees.
• 18:57
  SPEAKER_01: And this goes back to the over-measuring question you asked me.
• 19:01
  SPEAKER_01: If we are able to measure and track more things, we might become even more over-prescripted, more measurement-heavy in the contracts.
• 19:09
  SPEAKER_01: But we are then forgetting are we actually measuring the things that are delivering the value that we want them to achieve?
• 19:16
  SPEAKER_01: So I think I hope AI doesn't lead to more measuring of things to be for the sake of measurement rather than to actually capturing impact.
• 19:24
  SPEAKER_01: And I think um two more things that I can think of on the negative side, I think are important.
• 19:29
  SPEAKER_01: I talk about that it makes uh accessibility of suppliers easier, but this is a double-edged sword because you could have suppliers that maybe are not qualified to actually deliver on the performance-based contracting, but they go through all the hoops of the contracting process, and by the time you realize they're not delivering, especially in the public sector, to revert back that decision or to cancel a contract can be quite challenging.
• 19:54
  SPEAKER_01: And the last thing that I feel a little bit worried about is that I hope uh AI doesn't become a world that things are automated uh decisions, that the RFP, the evaluation, everything is given a score by AI and pass.
• 20:11
  SPEAKER_01: I think we still need a human in the loop.
• 20:13
  SPEAKER_01: I think this kind of process they need to be collaborative, you need to engage your provider in in person, video, anything but have a real conversation to understand uh what is it that you're trying to achieve.
• 20:26
  SPEAKER_00: Indeed, indeed.
• 20:28
  SPEAKER_00: So let's just um zero in on the capability aspect of this because um the research suggests that performance-based contracting is ultimately an organizational capability, not just a contracting model.
• 20:44
  SPEAKER_00: So if an organization wanted to become truly effective at performance-based contracting, um, what capability would you invest in first?
• 20:56
  SPEAKER_01: Yes, definitely an organizational capability.
• 20:58
  SPEAKER_01: I mean, the performance-based contract, it just doesn't stop once you put the metrics in the contract and sign the contract.
• 21:04
  SPEAKER_01: This is like a very uh constant engagement kind of process.
• 21:09
  SPEAKER_01: If I have to name one um capability, and this would be no surprise, would be measurement capability.
• 21:16
  SPEAKER_01: And and again, I don't mean just uh picking the right metrics.
• 21:19
  SPEAKER_01: I think it's about really reflecting and being clear about what is that you're trying to pursue uh with this uh procurement and what you're contracting, what the performance measure you're specifying, is it actually helping you get there?
• 21:34
  SPEAKER_01: And just to add as a bonus, other two things that I will probably invest in.
• 21:40
  SPEAKER_01: I think there should be a collaboration and learning culture.
• 21:43
  SPEAKER_01: Again, saying like this incentive design, this performance, choosing the performance, it should not be done to the providers.
• 21:50
  SPEAKER_01: You should not just walk into the room with like this is what we're gonna do.
• 21:53
  SPEAKER_01: It should be done with them in a fair and inclusive and transparent manner.
• 21:57
  SPEAKER_01: And I think, of course, something that Can always be more developed in public procurement general is to invest in contract management capabilities.
• 22:07
  SPEAKER_01: Someone has to enforce and honestly monitor uh these contracts.
• 22:12
  SPEAKER_01: And we see in our research and other research that one of the pitfalls is that sometimes contract managers don't enforce penalty and are a little bit stingent with the incentives.
• 22:21
  SPEAKER_01: So you're not providing strong incentives because budget problems, and you also don't want to penalize because you don't want to alienate suppliers because it's more it's hard in the public sector to actually penalize.
• 22:33
  SPEAKER_01: You get sued, you get a lot of other things.
• 22:35
  SPEAKER_01: So I think these contract management capabilities are also important.
• 22:39
  SPEAKER_01: Yeah.
• 22:39
  SPEAKER_00: Yeah, yeah, absolutely.
• 22:41
  SPEAKER_00: So given all of this, Pedro, why don't we flip the script and ask when an organization should decide not to use performance-based contract?
• 22:53
  SPEAKER_01: And that's a that's a good question.
• 22:54
  SPEAKER_01: I think I think yes, a performance-based contract is not always the right tool.
• 22:58
  SPEAKER_01: Uh, and I think there's a few uh moments uh that that as a contract manager I will pause and and reflect if it's this is the right model to implement.
• 23:08
  SPEAKER_01: And I think first, um when you cannot define or attribute the outcome to the measure, and again, I I keep going back to this uh topic of measurement.
• 23:20
  SPEAKER_01: I think there is there's hard things to measure to achieve, but they can still be measured.
• 23:25
  SPEAKER_01: But if there's something that is hard to achieve and you cannot really track or measure, you should not be using performance-based contracting, because then you will just invite uh gaming, misreporting, or or failure from the start.
• 23:37
  SPEAKER_01: Um and I think the second moment will I will also think and reflect is if you if the market is too thin or specialized, or if the incentives you know will not change behavior, because the goal of performance-based contracting, of using incentives, is that you want to change behavior to towards the goal you're trying to achieve.
• 23:56
  SPEAKER_01: So if you have few providers or they really are very powerful and trench and won't change their behavior, maybe you are better having a more cooperative relational arrangement in which you can still apply a per a performance measurement culture without having to pay for performance.
• 24:14
  SPEAKER_01: And we have seen this in practice and and with uh certain uh more and more contract managers, they build things around performance, but it's not necessarily a performance-based contract.
• 24:25
  SPEAKER_01: Uh so I think that's something you can this those two those two conditions I will pause before implementing uh performance-based contracting.
• 24:33
  SPEAKER_00: Yeah, great, great.
• 24:34
  SPEAKER_00: Thank you, Pedro.
• 24:36
  SPEAKER_00: So uh let's just move on to our final question.
• 24:38
  SPEAKER_00: Um, your research focuses on public sector performance-based contracting.
• 24:44
  SPEAKER_00: But what can private-to-private arrangements learn from your research and what transfers?
• 24:51
  SPEAKER_01: Yeah, this is this is an important distinction, and academic.
• 24:55
  SPEAKER_01: There is uh so many papers on this distinction on how different uh private and public contracting is.
• 25:01
  SPEAKER_01: And I will even give a free promotion to one of your podcasts that you recently had, I think, with Andreas Patrucko, that talks about uh the difference between public sector and private sector contracting.
• 25:13
  SPEAKER_01: But in short, public contracting is multi-stakeholder.
• 25:16
  SPEAKER_01: You have politicians, you have the clients, you have the providers, you have the buyers.
• 25:20
  SPEAKER_01: Um, it's politically contested.
• 25:22
  SPEAKER_01: Sometimes you're pursuing different goals that at times could be conflicting with one another.
• 25:28
  SPEAKER_01: Well, private tends to be just more oriented to profit maximizing, and at most, it's a conversation between two parties.
• 25:34
  SPEAKER_01: So there's definitely some big difference.
• 25:36
  SPEAKER_01: But I think there's still some learnings that can be transferred.
• 25:40
  SPEAKER_01: And I have to say that the private sector also has a long tradition on implementing performance-based contracting, and a tradition that, if anything, has been even, I could say, more innovative at times, more thinking outside the box on these hard to uh these outcomes that you want to achieve and and how do you capture them.
• 25:59
  SPEAKER_01: And just to give two quick quick examples that are that are very in use today, I mean, some airlines uh pay engine makers by flight time, flight hours of the engine.
• 26:10
  SPEAKER_01: So, how much um I pay you if the engine works?
• 26:14
  SPEAKER_01: This is a very innovative thinking that whoever came up with was thinking outside the bus box.
• 26:18
  SPEAKER_01: And you see now with renewable energies and solar panels, there is more and more energy performance contracts in which you only get pay.
• 26:27
  SPEAKER_01: If I sold you a solar renewable energy kind of system, you only get pay if I save on energy.
• 26:33
  SPEAKER_01: So I think that the private sector has a lot to teach.
• 26:36
  SPEAKER_01: And I think uh second, we see also more and more nowadays that the private sector is increasingly being asked or even demanded to play a more active role in delivering social value as government does and having more due diligence with the supply change, and and you can think the environment social governments, ECGs, climate compliance within the European Union and UK, the CBAMP uh carbon-related uh monitoring that that is going in place.
• 27:06
  SPEAKER_01: We see the requirements for buying and producing local, and even now with AI, and how do you safely deploy tools, how do you safely process information?
• 27:16
  SPEAKER_01: So they're they're being asked more and more to deliver on things that the public sector has been more familiar with on this multidimensional, hard-to-measure, very contested goals.
• 27:30
  SPEAKER_01: So um I think given this the private sector having expertise on these and being demanded more and more to act on this more harder to deliver outcomes, I think the learnings from this research actually do transfer.
• 27:47
  SPEAKER_01: And I will just repeat two of the points.
• 27:49
  SPEAKER_01: Uh one I think is uh treat procurement as a strategic capability that can help you deliver on outcomes, not just as an administrative function to get from A to B.
• 28:00
  SPEAKER_01: And again, rely on your providers to guide you to what outcomes or measures will be achieved to be innovative.
• 28:07
  SPEAKER_01: And again, going back to the flight engine per hour, I think uh those kind of things come when you engage suppliers on what you're trying to achieve.
• 28:17
  SPEAKER_00: Wonderful, Pedro.
• 28:20
  SPEAKER_00: Fantastic piece of research.
• 28:22
  SPEAKER_00: I would encourage our listeners to delve into.
• 28:24
  SPEAKER_00: We'll be providing an accompanying article, and you can delve into the entire research if you wish to.
• 28:31
  SPEAKER_00: Uh, but let's take a moment to recognize your co-authors as well, right, Pedro?
• 28:35
  SPEAKER_01: Yes, thank you.
• 28:36
  SPEAKER_01: Yeah, well, I would like to thank.
• 28:37
  SPEAKER_01: I mean, this research was not uh a one-man show.
• 28:39
  SPEAKER_01: I would like to recognize Dr.
• 28:40
  SPEAKER_01: Marcus Tev and Dr.
• 28:42
  SPEAKER_01: Dr.
• 28:42
  SPEAKER_01: Jim Mabel, which are also helping this research.
• 28:44
  SPEAKER_01: And I guess I think it was a wonderful piece that took a lot of hard work, but I think it definitely delivers value.
• 28:50
  SPEAKER_00: Absolutely.
• 28:51
  SPEAKER_00: Well, listen, thank you so much, Pedro.
• 28:53
  SPEAKER_00: Unfortunately, that's all we have time for in this episode of The Leading Edge.
• 28:58
  SPEAKER_00: Um, you know, today's discussion reminds us that simply thinking linking payment to performance isn't enough.
• 29:05
  SPEAKER_00: Success depends on creating the right conditions, choosing meaningful outcomes, engaging suppliers effectively, and building trusting relationships and developing the organizational capability to manage contracts throughout their life cycle.
• 29:22
  SPEAKER_00: And as we've heard, the real challenge isn't whether organizations should adopt performance-based contracting, but whether they're equipped to make it work.
• 29:33
  SPEAKER_00: And that means balancing commercial discipline with collaboration, measuring what truly matters rather than what's easiest to count, and using technology to support better decisions, not replace sound judgment.
• 29:48
  SPEAKER_00: So thank you to Pedro for joining us and sharing the insights from this important research and helping us separate the promise of performance-based contracting with the realities of putting it into practice.
• 30:00
  SPEAKER_00: Thank you, Pedro.
• 30:01
  SPEAKER_01: Thank you, Nikki.
• 30:03
  SPEAKER_00: And thank you for listening.
• 30:04
  SPEAKER_00: And if you like what you heard, stay tuned for our next episode of the Leading Edge, where we'll continue exploring the ideas, innovations, and leadership shifts shaping the future of commerce and contracting.
• 30:17
  SPEAKER_00: Until the next time, keep collaborating, keep innovating, and keep leading.