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Key Findings

1. Under the right circumstances, a performance-based accountability system (PBAS) can improve the effectiveness and efficiency of services for the public; however, existing evidence for PBAS effectiveness is rare.
2. PBASs are often created without consensus on key design issues.
3. The selection of incentives and performance measures has proved challenging.
4. Creating an effective PBAS requires careful attention to selecting an appropriate design, given the context in which it is to operate, and to monitoring, evaluating, and adjusting the system, as appropriate.

During the past two decades, performance-based accountability systems (PBASs), which link financial or other incentives to measured performance as a means of improving services, have gained popularity among policymakers. For example, the No Child Left Behind (NCLB) Act of 2001 (Pub. L. 107-110) combined explicit expectations for student performance with well-aligned tests to measure achievement, and it included strong consequences for schools that did not meet performance targets. In the transportation sector, cost plus time (A+B) contracting has become a popular means of streamlining and speeding up highway construction projects, while, in health care, there are more than 40 hospitals and more than 100 physician/medical group performance-based accountability programs (popularly dubbed pay-for-performance, or P4P) in the United States.