Pay for Performance (PFP) is a type of performance-based contract allowed under the Workforce Innovation and Opportunity Act (WIOA). It gives government agencies the opportunity to pay only for outcomes achieved, rather than for services that may or may not result in positive outcomes.
Advantages of the PFP Strategy
Using a Pay for Performance contract strategy can remove unintended incentives for agencies to “cream”, the practice of providing services motivated solely by profit.
This strategy also gives local WIOA boards access to funds set aside for Pay for Performance contracts for an extended period of time, beyond the usual two-year limit for such funds.
PFP Strategy Steps
There are six basic steps to implementing PFP contracts:
- Feasibility Study
A local area conducts a feasibility study or determination to identify the problem the project will address, the population that will be targeted, the services that will be provided, and the performance outcomes that will be used as criteria; and to estimate the acceptable cost to the government associated with achieving the projected performance outcomes.
- Funding Determination
The state submits a modification to its WIOA grant to ETA in order to set aside the funds that will be used for PFP and thus will have a longer obligation period, and establishes financial controls to track this fund use at the local level.
- Contract Negotiation
The Local area begins its PFP project, including negotiating and awarding a PFP contract.
- Contract Delivery
The local PFP project recruits participants and provides services.
An independent validator determines if the project has achieved its outcomes.
The local area pays for any outcomes as named in its PFP contract. If outcomes have not been achieved, the local area does not pay for outcomes.
Learn More about Pay for Performance
Use these resources to learn more about using a Pay for Performance contract strategy: