Implementing PBC as a procurement strategy in the public sector: Understanding strategy-structure fit

Abstract

Performance-based contracting (PBC) promises a win-win situation for suppliers and buyers in exchange relationships. It allows buyers to focus on their core competencies and shift responsibility for system sustainment to suppliers. The latter are expected to deliver services more efficiently and effectively, benefiting from higher profit margins and greater flexibility. However, successful implementation of PBC is vital to realise these advantages. This case study explores the contextual and structural factors influencing the implementation of PBC as a procurement strategy, drawing on implementation and strategic fit theory. The findings reveal seven critical factors influencing PBC implementation: strategic priorities, flexibility of legal requirements, the innovativeness of organisational culture, formalisation and centralisation of organisational structure, availability of organisational resources, and stakeholder communication. Moreover, the findings demonstrate that these factors are adaptable, with their case-specific composition determining which conceptual components of the PBC strategy are implemented. A strategy-structure fit for PBC implementation is achieved when the PBC concept and influencing factors are aligned.