Paper info

Analysing Performance-based Contracting from an IMP perspective: conceptual development and empirical insights

Florian C. Kleemann and Michael Essig

The paper was published at the 28th IMP-conference in Rome, Italy in 2012.

The IMP Relationship Model has been widely used for almost 30 years. Tremendous change has happened in the business world since then. While focusing on their core competencies, companies today require their suppliers to extend their offerings from individual products or services towards providing complete solutions. One way of offering such “solutions” is “Performance-based Contracting” (PBC). Its core elements are a focus on outcomes (as the customer value provided by a solution), and a clear link of provider compensation to achieving these outcomes. This contribution will discuss PBC and its implications on relationships among the parties along the supply chain applying the IMP Relationship Model and related research.A twofold approach was applied for the paper: first, a conceptual understanding of PBC based on the existing literature was developed and then aligned with the IMP model. Second, initial empirical findings from case-based research were added to illustrate the current practical challenges and to enhance the model by adding the perspective of practical challenges currently existing for PBC providers of involving their suppliers.The findings show that the IMP Interaction Model matches with the PBC core ideas to a large extent, but also that some aspects should be added (“interest alignment”, “flexibility” and “risk transfer”), and that the perspective of the sub-suppliers is currently under-represented. A “double dyad” was developed from this. This was then mirrored against case evidence from typical PBC industries. The empirical results illustrate that many suppliers are not yet ready to get involved in PBC offerings – or providers are not willing to involve them. The transfer of risk seems to be a major issue in that respect.The study will help both suppliers and providers in the increasingly important field of complex industrial service solutions to better prepare themselves for integrated offerings such as PBC. From an academic perspective, the paper will enhance the applicability of the IMP model in the context of industrial service solutions, increase the knowledge in the field of complex service procurement and respective supplier relationships as well as expand the analysis of PBC as an innovative procurement and marketing concept.