How is 'performance risk' assessed in contract management?

Performance risk in contract management is primarily assessed by evaluating contractor capabilities. This process involves a thorough analysis of the contractor’s experience, resources, qualifications, and overall ability to deliver the required goods or services as specified in the contract. Understanding a contractor's past performance, technical expertise, financial stability, and organizational structure is essential in determining whether they can fulfill their contractual obligations effectively.

By focusing on these capabilities, contract managers can identify potential risks that may arise from the contractor's performance, which could impact the project’s success. This assessment helps management make informed decisions when selecting contractors and implementing risk mitigation strategies throughout the project lifecycle. Evaluating contractor capabilities is critical as it directly relates to the likelihood of successful project delivery.