Output Based Aid/Contracts

Source: The International Fund for Agricultural Development (IFAD)

This financing model is based on payment for project outputs rather than the inputs required for the project. It has been used most widely for water, sanitation, electricity supply and medical services. It is particularly well adapted to services that are metered and/or have a user pay system. It has, however, been applied to roads with some success.

In Argentina, it has been applied to rural road maintenance. It has been so successful that they are now applying OBA to road rehabilitation projects as well. The application to rehabilitation has many of the same benefits of contracting a period of maintenance with a road construction project. It encourages good planning, good materials and quality control on the initial work to avoid high post-construction maintenance costs.

Read more in the gTKP Finance & Economics Topic Information Sheet on Output Based Aid/Contracts.

Key Documents:

• Output-based Aid: Supporting Infrastructure Delivery Through Explicit and Performance-based Subsidies, 2005, Global Partnership on Output-Based Aid (GPOBA)
• Smith Warrick, "Designing Out-based Aid Schemes: A Check List", GPOBA
• Liautaud, Gerard, "Maintaining Roads: Experience with Output-based Contracts in Argentina".