Supporting Performance-Based Contracting under the Workforce Innovation and Opportunity Act
Performance-based contracts are a powerful mechanism for driving better results from public spending. State and local governments are turning to this approach more and more, in fields ranging from child welfare to K-12 education, to connect funding directly to outcomes. Unlike traditional contracts, which reimburse costs regardless of results, performance-based contracts create real incentives for providers to adopt evidence-backed approaches. They also encourage providers to rethink recruitment, retention, and service delivery to better serve specific populations, since payment is tied to how well those populations are served. Despite this potential, performance-based contracting remains an underused lever for improving both impact and access in workforce development.
Within the public workforce system created by the federal Workforce Innovation and Opportunity Act (WIOA), many workforce boards and top-performing providers have pushed to expand this model as a way to strengthen outcomes and make more efficient use of resources. In practice, this means paying training providers based on meaningful results — job placement after training, earnings growth over time — while also prioritizing enrollment of underserved groups such as opportunity youth.
However, bureaucratic constraints have made it difficult for workforce boards to fully implement performance-based contracting under WIOA. Chief among these is the limited window for spending WIOA funds: local boards have just two years to use their allocations, after which unspent funds revert to the state for either statewide use or reallocation to other local areas. This narrow timeline often isn’t enough to see a performance-based contract through — eligibility determination, training completion, and tracking job placement and earnings growth all unfold over a longer arc than the funding cycle allows.
Results for America and America Forward are publishing a new guide and analysis that examines why performance-based contracting isn’t more widely used in the workforce system, and offers solutions that Congress & the Department of Labor can implement right now.
For questions: Email Kelsey Berkowitz at [email protected].