Performance-Based Contracting

Published: December 22, 2012

NOTE: This toolkit was published by Building Changes in 2013 to help counties meet a 2014 state mandate that all counties have a coordinated entry system for clients entering the homeless system. It has not been updated since then and does not necessarily reflect current or best practice.


Historically, most government and private grants were focused on programs and services provided. What was reported back to funders was how the program worked, outputs (how many were served), and basic demographics.

Over the past decade, as homeless issues have come to the forefront and attracted interest, research and studies have gone into improving systems to better address homelessness. The primary method of determining the efficacy of new programming such as coordinated entry and rapid re-housing is a performance measurement on the quality and outcome of those services. That specific measurement process, otherwise known as performance-based contracting, emphasizes:

  • Services provided
  • Quality of those services
  • Results of what was provided

HEARTH funding requirements include reporting on the outcomes, not the outputs, of programs. Performance-based contracting holds grantees responsible to report outcomes rather than outputs. Clearly, adapting performance-based contracting as a tool to measure the effectiveness of systems is necessary for counties and states to remain eligible for HEARTH funding.

But it is an opportunity too. It offers a chance to have a vivid commentary on how the work performed affects those receiving the services. Counties should begin adapting contracts to a performance-based model to meet HEARTH requirements and to ensure that new programming is meeting the goal of reducing homelessness.

Before adapting performance-based contracting, consider the following as identified by the Charities Aid Foundation in the United Kingdom:

  • Avoid numerous complex indicators; use a small number of clear indicators as outcomes.
  • Work with grantees on the content of the performance-based contract to ensure that outcomes are relevant to the project and that all parties fully understand the contract.
  • Be realistic about the time frame necessary for achieving desired outcomes.
  • Allow for up-front funding to support implementation of projects.
  • Encourage grantees to have contingency funds should there be a gap between potential reimbursement and actual reimbursement due to unmet performance outcomes.
  • Evaluate the performance-based contract itself; if many grantees are not meeting outcome goals, the contract and/or programming design may need adjustment.

The Charities Aid Foundation offers their experience with performance-based contracting (called performance-based results in the UK) in their report, “Funding Good Outcomes.”

For an in-depth look into a performance-based contract, review an example from Columbus, Ohio. Also, for an additional perspective, read up on Hennepin County, Minnesota’s recommendations for adapting performance based contracting measurements.

Next: Setting Performance Measures

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