Kevin lives in the Tampa Bay area. Several serious hurricanes blew through the area last Fall. While Kevin’s house was thankfully not damaged, many others were not so lucky. Many people used claims against their insurance to recover…with differing degrees of success.
Kevin and Paul use the experience of getting claims paid against that insurance, as a metaphor for performance risk under government contracts.
The three elements of an insurance policy are: the coverage, the premium, and the likelihood of the claim being paid (FYI: this is called “the claims payout ratio”). By comparison, the three elements in government contract are: the contract scope, the price, and the likelihood of successful delivery of the goods or services. The third one, the likelihood of successful delivery… that’s the performance risk.
In this episode, Kevin and Paul dig into the why, how and what of performance risk from both the government and the contractor point of view.