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This paper examines selection and matching incentives of performance-based contracting (PBC) in a model of patient heterogeneity, provider horizontal differentiation and asymmetric information. Treatment effectiveness is affected by the match between a patient's illness severity and a provider's treatment intensity. Before PBC, a provider's revenue is unrelated to treatment effectiveness; therefore, providers supply treatments even if their treatment intensities do not match with the patients' severities. Under PBC, budget allocation is positively related to treatment performance; patient-provider mismatch is reduced because patients are referred more often. Using data from the state of Maine, we show that PBC leads to more referrals and better match between illness severity and treatment intensity. Moreover, we find that PBC has a positive but insignificant effect on dumping. Copyright (C) 2002 John Wiley Sons, Ltd.

We construct a formal model on the general lines of the rent-seeking theory to explain the pattern of contractual and ownership arrangements and its evolution in China’s township and village enterprises. We show that because local government officials are not the residual claimants of TVEs and are corruptible, they may have incentives to make inefficient choices. But market competition will force them increasingly to adopt efficient arrangement.

The award fee is a unique incentive structure that provides the government a method of subjective, after the fact evaluation of contractor performance and affords the Government additional flexibility to reward a contractor for above average performance. Additionally, the award fee is not subject to the disputes clause of a Government contract. Use of award fee serves to enhance contractor performance in areas of quality, production management, ingenuity, timeliness, and cost effectiveness. Currently, the award fee is mostly utilized under cost reimbursement contracts. In order to obtain the full benefit of the award fee, its use in fixed price contracts should be considered. An analysis from the perspective of economic theory, motivational theory, and contracting theory was conducted. In addition, perspectives from Government and private sector contracting personnel were obtained to determine the most effective utilization of an FPAF contract., http://archive.org/details/fixedpriceawardf1094527662, Lieutenant Commander, United States Navy, Approved for public release; distribution is unlimited.

The use of the award fee contract is an unique incentive structure that provides the Government's method of subjective, after the fact evaluation of contractor performance and affords the Government additional flexibility to reward and motivate the contractor for above average performance. Use of cost-plus-award-fee and fixed-price-award-fee has many applications at the Field Contracting Activity level. The use of award fee contracts has many benefits and costs not associated with other types of incentives contracts. To better facilitate its use, barriers will need to be recognized that are preventing more applications at the field level and what can be done to overcome these barriers., http://archive.org/details/utilizationofwar1094524097, Lieutenant, United States Navy, Approved for public release; distribution is unlimited.