Value-based arrangements could change the future of government contracting because they provide the means to achieve the mission more efficiently, and they give agencies the opportunity to align their budget with a new fiscal reality with moderate investment. By design, value-based arrangements are a significant departure from the traditional “incentive” approach of the past. Rather than providing a “bonus” for a job well done, value-based arrangements are ruthlessly focused on generating outcomes. The vendor may have the majority of their fees at risk. This aligns both the risk of the project with the rewards, which will ultimately be shared by both parties. In this way, it is a true partnership that encourages shared commitment to be a key component in the relationship and aligns incentives.
Federal agencies today want to maximize the effectiveness of their spend. They need to balance budget and realize tangible benefits. The ability to use value-based arrangements to share risk, reduce up-front investment and increase the focus on successful outcomes offers organizations across the world an opportunity to revolutionize the way they contract.