Method of payment used when the service provided is delivered based on an outcome for a set fixed amount verses a variable unit of measure (example hours worked).
This type of agreement is commonly used for janitorial services. Instead of paying for janitorial staff per hour per employee an outcome based statement of work with a fixed cost is developed. This allows the janitorial company to leverage their expertise to develop an optimized cleaning schedule and staffing level while achieving the desired outcome and results. This can result in elevated service levels for the same or less cost.
The benefits of this type of agreement are the supplier can leverage their expertise to formulate the best way to accomplish a task vs the customer prescribing the 'best' way to accomplish a task.
Keys to success in this type of agreement clear, measurable, outcomes and consistent and fair measurement of results.