Performance-Based Contracting: Past, Present, and Future

Abstract

In commemorating Morris Cohen’s illustrious research career, in this paper we examine the genesis and legacy of the research on Performance-Based Contracting, the subject Morris focused on in the years since 2004. Based on the written notes and voice recordings from the early days of research, we provide first-hand accounts of how the research got its start, memorable anecdotes, and the process through which research was developed and conducted. We then discuss the impact of our early research effort by reviewing some of the relevant articles that have appeared in the operations management literature since our collaboration started. The chapter concludes with a discussion of the current state of performance-based contracting in practice, how it may evolve in the future, and what we learned in the process of developing this project.

Keywords: performance based contracting, PBL, spare parts, incentives