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Balancing Incentives and Risks in Performance Based Contracts

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Journal Article - Open Access

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28th Munitions Squadron Ellsworth AFB United States

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Performance-Based Life Cycle Support PBL as a sustainment strategy for weapon systems has been mandated by the Department of Defense DoDand employed by acquisition and contracting professionals in both government and private industry. Despite its apparent success, DoD implementers of PBL often face an inherent conflict the PBL goal of developing long-term partnerships that encourage investment from commercial partners is best achieved through lengthy, guaranteed contractsbut such contracts increase the DoDs risk in an environment that is intended to transfer more risk to the contractor. This exploratory research examines issues associated with thetype and length of PBL contracts, addressing the question of how the DoD can balance PBL contracts mitigating operational and financial risks while simultaneously building long-term partnerships that encourage investment from commercial contractors. The results reveal five areas in which the government should focus its efforts to improve PBL implementation.

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  • Administration and Management

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