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WIOA pay for performance contracting guidance
Summary ETA explains how state and local WIOA Adult, Dislocated Worker, and Youth programs may use pay for performance contracts. Under these optional contracts, WIOA funds are paid after performance occurs and outcomes are validated. The letter and attachments describe policy, contracting, accounting, and reporting requirements for programs using this approach.
Document
Federal guidance
Agency
U.S. Department of Labor, Employment and Training Administration (ETA)
Document number
TEGL No. 08-20
Date issued
December 7, 2020
Status
Active
ETA lists this advisory as active. It prints an expiration date of Continuing and no rescissions.
Status last verified October 24, 2026
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About this page: The full text below is the official document from U.S. Department of Labor, Employment and Training Administration (ETA). Ezel adds the plain-English summary and tracks the document's status. The official source linked on this page is authoritative for any reliance.
CLASSIFICATION
EMPLOYMENT AND TRAINING ADMINISTRATION WIOA
ADVISORY SYSTEM CORRESPONDENCE SYMBOL
U.S. DEPARTMENT OF LABOR ETA-OWI
Washington, D.C. 20210 DATE
December 7, 2020
ADVISORY: TRAINING AND EMPLOYMENT GUIDANCE LETTER NO. 8-20
OPERATING GUIDANCE for the WORKFORCE INNOVATION AND
OPPORTUNITY ACT (referred to as WIOA)
TO: STATE WORKFORCE AGENCIES
STATE AND LOCAL STAKEHOLDERS IN THE WORKFORCE
INNOVATION AND OPPORTUNITY ACT
STATE WORKFORCE ADMINISTRATORS
STATE WORKFORCE LIAISONS
STATE AND LOCAL WORKFORCE BOARD CHAIRS AND DIRECTORS
AMERICAN JOB CENTER DIRECTORS
FROM: JOHN PALLASCH
Assistant Secretary
SUBJECT: Pay for Performance (PFP) Guidance for WIOA title I, subtitle B
1. Purpose. To provide guidance on PFP for state and local WIOA title I, subtitle B programs
that implement PFP contract strategies.
2. Action Requested. State agencies, state workforce development boards (WDBs), local
WDBs, and American Job Center (AJC, also called one-stop) partner programs must follow
the requirements in this guidance as they develop policies and procedures related to PFP.
3. Summary and Background.
a) Summary. This U.S. Department of Labor’s (DOL’s) Employment and Training
Administration (ETA) PFP guidance adheres closely to the applicable statutory and
regulatory provisions. PFP is a type of performance contract in which WIOA funds are
paid only after performance occurs and outcomes are validated.
b) Background. PFP contracting strategies seek to maximize the likelihood that the federal
government pays only for demonstrably effective services, and also seeks to secure
performance outcomes at a lower cost than might otherwise occur. WIOA introduced
PFP contract strategies as an optional activity for certain services allowable under WIOA
title I, subtitle B Adult, Dislocated Worker, and Youth programs.
RESCISSIONS EXPIRATION DATE
None Continuing
PFP evolved from Pay for Success (PFS) projects, which began in the U.S. in 2012. ETA
issued two of the first federal competitive grants to pilot test PFS in 2013. The U.S.
Government Accountability Office (GAO) conducted a major study of PFS including an
examination of several employment projects, which is helpful in understanding some of
the complexities involved in various types of performance based-contracting. PFP
presents an opportunity to only pay for outcomes achieved rather than for services that
may or may not result in positive outcomes. Such an approach can remove unintended
incentives for “creaming,” and explicitly direct payments towards employment success
for disadvantaged populations.
4. PFP Guidance. See Attachments I and III for all PFP guidance.
5. Inquiries. Please direct questions to the appropriate ETA regional office.
6. References.
WIOA, Public Law No. 113-128, enacted July 22, 2015, available at
https://www.gpo.gov/fdsys/pkg/PLAW-113publ128/pdf/PLAW-113publ128.pdf,
Sections 3(47), which references 116(b)(2)(A); 116(d)(2)(K); 116(d)(6)(D); 116(h);
129(c)(2), which references 128(b); 134(a)(3)(A)(xiv) and 134(c)(3)(G)(ii)(VI);
134(d)(1)(A)(iii), which references 133(b); and 189(g)(2)(D)
20 CFR 677.215(b)
20 CFR 683.500 through 683.540; 680.140(b)(4); 680.320(a)(5); 681.420(i); 682.210(l)
2 CFR 200 Uniform Administrative Requirements, Cost Principles, and Audit
Requirements for Federal Awards
U.S. Government Accountability Office, Pay for Success: Collaboration among Federal
Agencies Would Be Helpful as Governments Explore New Financing Mechanisms,
September 2015, GAO-15-646 (www.gao.gov/products/GAO-15-646)
ETA Performance TEGLs and TENs (Training and Employment Notice)
1. TEGL 14-18, Aligning Performance Accountability Reporting, Definitions, and
Policies Across Workforce Employment and Training Programs Administered by the
U.S. Department of Labor (DOL), March 25, 2019
(https://wdr.doleta.gov/directives/corr_doc.cfm?DOCN=7611)
2. TEGL 05-18, Workforce Innovation and Opportunity Act (WIOA) Annual Statewide
Performance Report Narrative, November 7, 2018
(https://wdr.doleta.gov/directives/corr_doc.cfm?docn=3118)
3. TEGL 03-18, Eligible Training Provider (ETP) Reporting Guidance under the
Workforce Innovation and Opportunity Act (WIOA), August 31, 2018
(https://wdr.doleta.gov/directives/corr_doc.cfm?docn=3527)
4. TEGL 10-16, Change 1, Performance Accountability Guidance for Workforce
Innovation and Opportunity Act (WIOA) Title I, Title II, Title III and Title IV Core
Programs, August 23, 2017
(https://wdr.doleta.gov/directives/corr_doc.cfm?DOCN=3255)
5. TEN 8-16, Implementation of an Integrated Performance Reporting System for
Multiple Employment and Training Administration (ETA) and Veterans’
Employment and Training Service (VETS) Administered Programs, August 24, 2016
(https://wdr.doleta.gov/directives/corr_doc.cfm?DOCN=5317)
7. Attachments.
Attachment I. Pay for Performance Guidance
Attachment II. Summary of Selected Major Federal, State, and Local WIOA PFP Roles
Attachment III. Extended Disbursement Account
Attachment I. Pay for Performance Guidance
Section (click title to go to a section) Page
1. PFP Overview 4
2. Local and State Role 5
3. Feasibility Study Pre-Implementation Requirements 6
4. Funding and Contracting 7
A. Funding Sources 7
B. Duration of PFP Funding 8
C. General PFP Contracting Policies and Restrictions 9
D. Contract-Specific Requirements 10
5. Target Population 11
6. Eligible Service Providers 11
7. Services Provided 11
8. Performance and Performance Reporting 11
A. Reporting Requirements 12
B. Avoiding Adverse Incentives 13
C. Payment for Meeting or Exceeding Performance Outcomes 13
D. Use of Performance Indicators in Addition to the WIOA Indicators 13
E. Validation of Performance Outcomes 14
9. Evaluation 14
10. Financial Reporting 15
11. Administrative Costs 15
1. PFP Overview. WIOA assigned various roles and responsibilities to the federal, state, and
local levels regarding PFP. Attachment II provides a high-level summary of some of these
roles, which are described in more detail in the main body of this guidance.
WIOA authorizes, and ETA encourages, local WDBs to reserve not more than 10 percent of
the local allocation for WIOA title I Adult, Dislocated Worker, and Youth formula funds for
PFP contract strategies. Under WIOA, funds reserved from the Adult and Dislocated Worker
allocations can only be used for training services under WIOA Section 134(c)(3). Funds
reserved from the Youth allocation can be used for the Youth program activities in WIOA
Section 129(c)(2). While WIOA limits PFP contracts to the provision of training services
defined under Section 134(c)(3) for Adult and Dislocated Worker programs, PFP contract
recipients may provide additional services to help PFP participants succeed in their training
or employment or education programs through other sources of funding including their own
funds, WIOA formula funds, or other American Job Center partner programs, as long as
these services are supported by a non-PFP fund source. In keeping with the Department’s
One Workforce approach, states and local areas can collaborate with other public or private
partners to get PFP participants and all customers the services they need for employment.
WIOA Section 3(47) defines PFP contract strategies as procurement strategies that include:
1) contracts where a fixed amount is paid to an eligible provider based on the achievement of
specified levels of performance on WIOA’s primary indicators of performance for target
populations within a defined timetable; 2) an independent validation of the performance
achieved; and 3) a description of how state or local areas will reallocate funds to other PFP
contract strategies if the funds were not used because the performance outcomes were not
met. This guidance specifically addresses PFP contract strategies as defined in WIOA
Section 3(47) and 20 CFR part 683, subpart E. This guidance does not apply to types of
performance-based contracting other than PFP, and does not prohibit grantees from engaging
in other types of performance-based contracting.
WIOA supports both PFP contract strategies and PFP-related activities. For purposes of PFP
contract strategies, local areas may reserve not more than 10 percent of their formula
allocations which when used to carry out pay-for-performance contract strategies shall
remain available until expended. Pay-for-performance contract strategies include only the
activities listed in the definition of PFP contracting strategies at WIOA Section 3(47), such as
payments for performance outcomes and independent validation of results. PFP-related
activities include additional state and local activities related to pay-for-performance
contracting strategies, such as feasibility studies, technical assistance, and PFP evaluations,
and funds used for PFP-related activities do not count toward the 10 percent limitation. ETA
delineates two types of PFP activities, each of which can be funded by different sources.
The first – called PFP contract strategies – includes activities for which local areas may
reserve not more than 10 percent of a local area’s formula funds. ETA has interpreted this
requirement to apply only to activities that the WIOA statute and regulations specify parts of
a PFP contract strategy to include payments for performance outcomes including bonuses,
and independent validation. The second type of PFP activity – called PFP-related activities
– is associated with PFP contract strategies but is not part of the strategy (such as the
feasibility study, technical assistance, and PFP evaluations).
Local boards may pay for PFP contract strategies with funds that are reserved and set aside,
using the process described in Attachment III of this guidance. Funds reserved for PFP
contract strategies count toward the 10 percent limitation. PFP-related activities cannot be
paid for using these set-aside funds (see below for what funding sources can be used), and
WIOA expenditures for PFP-related activities do not count toward the 10 percent limitation.
Note that some PFP-related activities occur before a formal PFP contract exists.
In the remainder of this guidance, the term “PFP” is used to describe both PFP contract
strategies and PFP-related activities. The PFP contract is the required legal agreement
among all parties to a PFP contract strategy. The service provider is the entity that delivers
services (e.g., training) directly to participants in a PFP contract strategy.
The following definitions apply to the WIOA performance terms in this guidance.
"Performance indicators” refer to the primary indicators of performance in WIOA
§116(b)(2)(A) (Performance Accountability System).
“Performance outcomes” refer to the actual performance achieved by the PFP
contract strategy.
2. Local and State Roles. WIOA Section 129(c)(1)(D) states that implementation of PFP
contract strategies using funds allocated to the local area under WIOA Section 128(b)(2)(A)
is at the discretion of the local boards. PFP contract strategies are an optional WIOA local
activity, and therefore most of the decisions, policies, activities, and oversight of PFP will
occur in WIOA local areas. Consequently, most of this guidance concerns PFP
implementation at the local level.
If there is a PFP contract strategy in a state, the state must do the following.1
Collect and report to ETA:
o Participant-level data used to determine the performance outcomes of PFP service
providers, and the information and data to demonstrate that the service providers
meet all other performance requirements (see section 8 of this TEGL for more
information); and
o State and/or local evaluations of the PFP contract strategies (see section 9 of this
TEGL for more information).
Where possible, collect and report to ETA the employers’ and participants’ level of
satisfaction with the PFP contract strategy, per WIOA Section 116(d)(2)(K) and 20 CFR
677.160.
Monitor local PFP contract strategies to ensure:
o Compliance with 20 CFR 683.500, the contract specifications in 20 CFR 683.510,
and applicable procurement policies;
o No more than 10 percent of a local area’s WIOA title I Adult and Dislocated
Worker allocation, and no more than 10 percent of a local area’s WIOA title I
Youth allocation, are reserved for PFP contract strategies; and
o No conflicts of interest occur in the required validation of PFP contract strategy
outcomes.
3. Feasibility Study Pre-Implementation Requirements. Per 20 CFR 683.500(b), local areas
are required to study the feasibility of whether an intervention is suitable for a PFP contract
strategy. If a local area determines that a PFP contracting strategy will meet the requirements
of WIOA Section 3(47) and 20 CFR 683.500(a), it has fulfilled its obligation under 20 CFR
683.500(b). Prior to establishing a PFP contract strategy, a WIOA local area must complete a
feasibility determination which addresses the following required elements of a PFP contract
strategy.
a. Identify the workforce development problem that the project will address, per 20 CFR
683.500(a)(2);
b. Identify the target population, per 20 CFR 683.500(a)(2),and the projected number of
participants;
c. Specify the projected performance outcomes for the WIOA-required performance
indicators, per 20 CFR 683.500(a)(2);
d. Estimate the acceptable cost to the government associated with achieving the projected
performance outcomes, per 20 CFR 683.500(a)(2);
e. Describe the prospective services for participants, per 20 CFR 683.510(d).
1
20 CFR 683.540(c)
f. Describe how the local area will reallocate funds to other PFP contract strategies, if the
project does not achieve the projected performance outcomes, per 20 CFR 683.500(a)(4).
The feasibility determination or study assists state and local WIOA programs to ascertain the
suitability of a prospective contract strategy. There is no requirement that such a
determination or study be developed by a third party. As part of developing a PFP contract
strategy, state and local WIOA programs are required to identify baseline performance per 20
CFR 683.500(a)(2). However, state and local WIOA programs have broad flexibility in
determining the performance baseline to be used in a PFP contract provided they include
WIOA-required performance indicators. PFP contract strategies are required to include
services described in WIOA Section 134(c)(3) or 129(c)(2) but may include additional
activities or services. In completing its feasibility determination or study, the ETA research
publications database (https://wdr.doleta.gov/research), the U.S. Department of Labor’s
Clearinghouse for Labor Evaluation and Research (CLEAR) at https://clear.dol.gov, and
ETA’s Workforce System Strategies (https://strategies.workforcegps.org/) repository may be
useful.
While such a determination does not have to incur a new cost, WIOA formula funds may be
used for the feasibility study. Because ETA considers that the feasibility study is a PFP-
related activity, its costs may not be paid for with the PFP funds set-aside as described in
Attachment III. Additionally, feasibility study costs do not count toward the 10 percent cap
on local WIOA funds used for PFP contract strategies.
4. Funding and Contracting. Under a PFP contract strategy, payment with WIOA funds can
only occur after the contractually-specified performance outcomes have been met and
validated. Another source may supply the initial funds while services are being provided
(sometimes called capital or upfront funding). Local areas may use their WIOA allotments
for capital or upfront funding related to the provision of activities allowed under WIOA
Section 134(c) or 129(c)(2). Upfront funding for activities not allowable under WIOA
Section 134(c) or WIOA Section 129(c)(2) may include non-WIOA federal funds (if
authorized pursuant to the governing statute); state or local government funds; private sector
financing in which reimbursement and potentially a profit is returned to the investor; private
sector funds for which no reimbursement occurs, such as typical foundation financing; or
alternative sources of capital not identified in this guidance. The financing may consist of a
monetary and/or in-kind contribution.
A. Funding Sources
The table below summarizes the principal types of spending, and the allowable WIOA Title I
funding sources for each spending type, which are explained in more detail in the subsections
that follow.
Type of Spending Allowable WIOA Title I Funding Sources
Feasibility study WIOA title I, subtitle B: Local or Governor’s Reserve
Technical assistance WIOA title I, subtitle B: Local or Governor’s Reserve
Gubernatorial incentives to encourage PFP Non-Federal funds only
WIOA title I, subtitle B: Local or Governor’s Reserve
PFP contract
for activities consistent with WIOA §134(a)
Type of Spending Allowable WIOA Title I Funding Sources
WIOA performance payments (including any WIOA title I, subtitle B: Local, or Governor’s
bonuses) Reserve for activities consistent with WIOA §134(a)
WIOA title I, subtitle B: Local, or Governor’s
PFP performance validation
Reserve for activities consistent with WIOA §134(a)
PFP evaluation (including
WIOA title I, subtitle B: Local or Governor’s Reserve
employer/participant satisfaction survey)
Reporting: performance WIOA title I, subtitle B: Local or Governor’s Reserve
Reporting: financial WIOA title I, subtitle B: Local or Governor’s Reserve
PFP cost-plus-a-percentage-of-costs contracts Not allowed with any WIOA funds
Local adult and dislocated worker programs. For these programs,
Funds allocated under WIOA Section 133(b)(2)–(3) may be reserved and used for a
PFP contract strategy, and used for PFP-related activities;
No more than 10 percent of the combined total of the local WIOA title I Adult and
Dislocated Worker allocation for each local area for a single year may be reserved
and used for PFP contract strategies for the adult and dislocated worker training
services described in WIOA §134(c)(3); and
PFP contract strategy funds reserved from Adult/Dislocated Worker funds must be
spent on Adult and/or Dislocated Worker-eligible participants.
Local youth programs. For these programs,
Funds allocated under WIOA Section 128(b) may be reserved and used for a PFP
contract strategy, and may be used for PFP-related activities;
No more than 10 percent of the local WIOA title I Youth allocation for each local
area for a single year may be reserved and used for PFP contract strategies for youth
training services and other activities described in WIOA §129(c)(2); and
The PFP contract strategy funds reserved from Youth funds must be spent on Youth-
eligible participants.
Governor’s Reserve Fund for statewide activities. States may, with the WIOA Governor’s
Reserve funds for statewide activities, expend money on the following PFP-related
activities:2
Providing technical assistance to local areas considering PFP contract strategies,
including general assistance regarding a PFP contracting strategy, performance data
collection, meeting performance data entry requirements, and identifying
performance levels;
Evaluating local PFP contract strategies; and
Other activities that comply with limitations on the use of the Governor’s Reserve
funds for statewide activities.
States may use Governor’s Reserve funds for any activities that are a part of a PFP contract
strategy to the extent that such activities are consistent with the requirements of WIOA
§134(a). The Governor’s Reserve funds used for PFP activities retain the same period of
availability as all Governor’s Reserve funds (governed by WIOA Section 189(g)(2)(A)); they
may not be reserved under the procedure explained in Attachment III of this TEGL.
2
20 CFR 683.540(a)
Non-federal funds. Per WIOA §116(h), governors may use non-federal funds to establish
incentives for local WDBs to implement PFP contract strategies.
B. Duration of PFP Funding
Because of the length of time necessary to complete PFP contracting strategies, including the
validation of performance outcomes and the reallocation of PFP funds for other PFP
activities if performance outcomes are not met, WIOA allows funds reserved for a PFP
contract strategy to remain available to local areas until expended. In contrast, under normal
WIOA funding, local areas have only two years to spend their allocations. Any statewide
funds that are used for PFP do not remain available until expended; they have the same
durational limit as all WIOA state funds.
Funding before and after PY 2019. In the Federal Award Terms for PY 2017 and PY 2018
for the WIOA Adult, Dislocated Worker, and Youth programs, ETA stated the following.
A forthcoming Training and Employment Guidance Letter (TEGL) will provide
information and procedural requirements on the implementation of PFP Contract
Strategies using the WIOA formula funding streams. After the PFP TEGL is published,
this grant will be modified to incorporate the PFP Federal Award Terms, which would
become effective when a state has received approval of a grant modification request to
implement PFP.
As no state has received prior approval for implementation of a PFP contract strategy, no
funds from the program years prior to PY 2019 are available for PFP contract strategies or
for the accompanying extended disbursement. However, as noted above, these funds could
still be used for other types of performance-based contracting, but the life of those funds
remains the normal two-year limit for local WIOA grant funds.
WIOA funding from PY 2019 forward may be made available for extended disbursement by
notifying ETA (see Attachment III). Because a single year’s WIOA allocation might be
insufficient to fund a PFP contract strategy – given the 10 percent cap for each year – the set-
aside funds may accumulate over multiple years provided that the process for reserving funds
in Attachment III is followed, including the timeline. Funds reserved for PFP contract
strategies only count against the 10 percent limitation for the appropriation from which they
are reserved.
Local funds reserved for PFP contract strategies remain available until expended.3 If funds
reserved for PFP contract strategies under Attachment III are not spent because the
performance outcomes were not met, they may be reallocated only to other PFP contract
strategies (see Attachment III for additional requirements regarding reallocations).4
WIOA formula funds used for PFP-related activities are subject to the usual time limitations,
and do not remain available until expended.
3
However, a PFP account may be closed and any remaining balance cancelled pursuant to 31 USC 1555, if applicable.
4
20 CFR 683.530
C. General PFP Contracting Policies and Restrictions
Only local Adult, Dislocated Worker, and Youth WIOA title I, subtitle B allocations
may be reserved for PFP contract strategies. Statewide activities funds may be used
for PFP, but they cannot be reserved.
PFP contract strategies are optional, but if used must provide the adult and dislocated
worker program training services in WIOA §134(c)(3), and/or the youth program
activities in WIOA §129(c)(2).
Payment for achievement of the performance outcomes (including bonus payments,
explained in the next subsection), and for independent validation of the performance
outcomes, are subject to the annual 10 percent limitation on the reservation of the
WIOA local allocations. Grantees must use funds reserved and set aside for PFP
contract strategies (see Attachment III) to make such payments.
D. Contract-Specific Requirements
Funds used as part of a PFP contract strategy must be obligated in legally binding contracts
that specify a fixed amount to be paid to an eligible service provider, per WIOA §3(47)(A).
In addition, the following are applicable to PFP contracts.
The contract must include the required elements of the PFP contract strategy
addressed in the feasibility determination or study described in section 3 of this
guidance. For the purpose of making the content of these elements more current and
accurate, the elements’ content can be revised from the version submitted in the
feasibility study. The nature of the work under PFP contracts must be sufficiently
precise to permit clear delivery specifications and a reasonable price valuation.
Payments cannot be made for reasons other than meeting or exceeding the
contractually-specified performance outcomes. Unless the contract strategy meets or
exceeds these outcome levels, WIOA programs do not owe PFP payment to the
contractor or any other entity, regardless of the costs incurred.
Contracts may include bonus payments to contractors (see section 8.C of this
guidance). The performance outcomes necessary for payments and bonuses must be
separately identified.
Parties are encouraged to negotiate circumstances that would necessitate outcomes
being adjusted and include them in the contract before it is finalized.
Cost-plus-a-percentage-of-cost contracts are prohibited for PFP contract strategies.5
PFP contracts that are consistent with this guidance, however, do not constitute a
cost-plus-a-percentage-of-costs contract, as stated in 2 CFR 200.323.
Contracts must identify the timetable within which it will achieve the performance
outcomes, per WIOA §3(47)(A).
PFP contract strategies should be written precisely enough so that it is clear to the
local board, the contractor, the validator, and any oversight bodies what specific
outcomes should be used to determine a PFP payment, differentiated from any other
tasks or budgets or payment schedules. The PFP portion of the contract must only be
paid out using performance based payments and not cost reimbursement. This will
5
2 CFR 200.323
usually require a separate contract from other WIOA services, but a very clearly
delineated contract provision may suffice.
PFP contract strategies must maintain documentation related to all PFP contracts,
including records pertaining to the contracts that precede and follow the primary
contract, and must make such documentation available to local, state and federal
authorities upon request.
The statement of work (SOW) must specify the period of performance, or the start
and end date of the contract and the levels of performance descried in WIOA
§116(b)(2)(A) for the identified target population, plus any additional performance
outcomes.
Contracts, agreements, and memoranda of understanding (MOUs) must include
standard terms and conditions that are required by the state, local area, and the federal
government.
The signatures and dates of persons authorized to enter into such agreements must be
included. Authorized officials are persons authorized to enter into and sign legally
binding agreements, and must be on record as the signatory officials. Signatures of
the offeror/bidder and offeree local WDB must be in the written contract.
5. Target Population. A PFP contract strategy must define the target population for its
services. The contract strategy may serve only WIOA participants determined eligible for
training services under WIOA title I Adult and Dislocated Worker programs, and the
allowable services under Youth grant programs, or any subset of these participants that the
state or local areas chooses to target. ETA encourages PFP contract strategies to serve
individuals with barriers to employment. Eligible veterans and eligible spouses are entitled
to receive priority of service for PFP contract strategies, per 38 USC 4215.
6. Eligible Service Providers. PFP service providers must be eligible providers pursuant to
WIOA §122 or 123, as applicable. Providers may include local or national community-based
organizations or intermediaries, community colleges, or other providers eligible under WIOA
§122 or 123, as appropriate.6
7. Services Provided. PFP contract strategies must be used to provide Adult and Dislocated
Worker training services in WIOA §134(c)(3) and/or Youth activities in §129(c)(2), as
applicable.7 For the Adult and Dislocated Worker contract strategies, such services are the
“allowable training” listed in WIOA §134(c)(3), which includes occupational skills training,
on-the-job training, incumbent worker training, cooperative education, private sector
training, skill upgrading and retraining, entrepreneurial training, transitional jobs, job
readiness training, adult education and literacy activities, and customized training. The
permitted Youth services are much broader, including not only training but tutoring, work
experience, supportive services, counseling, entrepreneurship, labor market information,
financial literacy, and other services listed in WIOA §129(c)(2).
8. Performance and Performance Reporting. PFP contractually-specified performance
outcomes must be based on the primary performance indicators in WIOA §116(b)(2)(A) as
defined in OMB control number 1205-0526 and described in Training and Employment
6
20 CFR 683.510(f)
7
20 CFR 683.510(d)
Guidance Letter (TEGL) 10-16, Change 1 and TEGL 14-18. The indicators must be applied
to the relevant target population, within the same WIOA timeframes identified in
§116(b)(2)(A) for these indicators. PFP contract strategies are subject to the same
performance statutory and regulatory provisions and guidance applicable to other WIOA title
I, subtitle B activities. PFP contract strategies also have additional statutory performance
requirements, described below.
A. Reporting Requirements
States that include PFP contract strategies must annually submit a separate PFP Report form
ETA-9174
(https://www.doleta.gov/performance/pfdocs/ETA_9174_Pay_for_Performance_acc.pdf) for
each PFP contract strategy. 8 This is a narrative report that requests information on the PFP
target population and the populations or baselines used for comparison purposes to determine
performance standards; the performance indicators used; and the actual performance
outcomes. The narrative report also includes the research questions addressed in the
evaluation, and the evaluation challenges encountered; the design of PFP contracts and
contract strategies; the methodology used to measure outcomes of the intervention; the
methodology used to determine the success of the PFP contract; and the technical assistance
provided by the state.
An electronic copy of ETA-9174 must be e-mailed to [email protected] by December 1
(or the following business day, if December 1 falls on a weekend) of each year. The report
must be submitted as a single document, and must include the completed ETA-9174 for each
PFP contract strategy in the state plus the state-completed ETA-9174 describing the state’s
PFP strategies. States must also submit an electronic copy to their respective ETA Regional
Administrator, and a copy to their Federal Project Officer (FPO). Hard copies of the report
may also be submitted, but are not required. ETA will publish each state’s report at
www.doleta.gov/performance. Because each state’s report will be posted on ETA’s
performance website, all WIOA PFP reports must be submitted electronically in a machine-
readable format that complies with the Rehabilitation Act, Section 508.
In addition to the required report ETA-9174, TEGL 14-18 requires that “state and local staff
must ensure that participants receiving services funded by a pay-for-performance strategy are
coded as a “1” in the data element PIRL #930 “Pay-for-Performance” and that the Pay-for-
Performance provider identification (ID) number is reported in the data element PIRL #107
“Special Project ID – 3.”
General performance policy and reporting requirements, which also apply to participants
served by PFP contract strategies, are in TEGL 14-18 and TEGL 10-16, Change 1.
TEGL 05-18 (Annual Statewide Performance Report) states (on p. 5) that in the annual
statewide performance report, states should consider providing information on “Any
strategies/polices relating to Pay-for-Performance contracting, which may include examples
from local areas.”
8
OMB Control Number 1205-0521 (DOL-Only Performance Accountability, Information, and Reporting System),
available at https://doleta.gov/performance/reporting/eta_default.cfm.
TEGL 03-18 (Eligible Training Provider (ETP) Reporting Guidance) requires states to report
on the performance of ETPs for the WIOA Adult, WIOA Dislocated Worker, and WIOA
Youth (Out-of-School Youth only) programs. If an ETP conducts a PFP contract strategy,
the ETP must include that performance information in the report.
B. Avoiding Adverse Incentives
Making payment contingent upon performance can encourage manipulated performance
outcomes. ETA encourages state and local boards to implement measures to preclude this.
Such pre-emptive measures should include enrollment thresholds for the number and/or
percentage of enrollees who must be served and considered exiters in PFP contracts, and
other measures necessary to prevent manipulation of enrollment and performance or
performance-related data. The required validation (see below) is another measure to
minimize potential adverse incentives.
C. Payment for Meeting or Exceeding Performance Outcomes
PFP contract strategies must meet or exceed all contractually-specified performance
outcomes for the WIOA §116(b)(2)(A) indicators for the population served, in order to
receive any performance payments, including bonus payments. Bonuses may be considered
for a reasonable level of performance that exceeds the negotiated performance outcomes
contained in the agreement. PFP contract strategies have the flexibility to design bonus
payments for some or all of the performance indicators. Additionally, bonus payments can
be provided if a service provider achieves the necessary outcomes for a bonus payment for
one indicator but fails to achieve the necessary outcome for a bonus payment on other
indicators. If included, bonus payments must be used by the service provider to expand their
capacity to provide effective training.9
Contract strategies have the flexibility to design payment amounts for each performance
outcome across all the applicable WIOA performance indicators, but ETA encourages the
use of higher payments for those performance indicators that the local WIOA area believes
are more difficult to meet. Contract strategies can also include a scale of payments, e.g. a
certain payout amount for one level of performance and a higher payout amount for higher
levels of performance. Such “scaling” is not considered a bonus payment, and not subject to
the restrictions above on the use of bonus payments.
D. Use of Performance Indicators in Addition to the WIOA Indicators
PFP contract strategies may utilize performance indicators in addition to the WIOA primary
indicators of performance. No payments can be made to the PFP contractor until
performance meets or exceeds the performance outcomes specified in the PFP contract on the
primary indicators of performance. However, PFP contract strategies can require that
performance also meet additional indicators prior to payment. Such additional performance
indicators must be clearly specified; capable of independent, objective measurement; and
must be set at performance levels that likely would not be attainable without the services
9
20 CFR 683.510(h)
provided in the PFP contract strategy. These additional performance indicators must be
related to the WIOA title I, subtitle B allowable PFP activities. If such additional
performance indicators are used, information about them must be included in the ETA-9174
report described above.
E. Validation of Performance Outcomes
Validation of performance outcomes by an entity independent of the contract strategy is
required prior to payment to PFP contract strategies. The validation must be based on high-
quality, reliable, and verified data.10 The independent validation must include a
determination that a PFP contract strategy is in compliance with the DOL performance
accountability provisions in TEGL 14-18, TEGL 03-18, and TEGL 10-16, Change 1. If the
contract strategy includes performance indicators in addition to the WIOA primary indicators
of performance, independent validation of these additional indicators must occur prior to
payment. Independent validations must be conducted in accordance with the usual
professional standards applicable to validations and audits. Individuals and organizations
that have conflicts of interest with the PFP contract strategy (all parties to the PFP contract
and subcontracts) cannot conduct the validation. Therefore the validation must involve a
separate contract.
9. Evaluation. If a PFP contract strategy exists in a state, WIOA requires that states report to
ETA an evaluation of the design of the programs and performance of the strategies of such
PFP contract strategies. PFP contract strategy evaluations must comply with the WIOA
evaluations provisions in the WIOA Section 116(e) and 20 CFR 682.220. States may
conduct their own evaluations of the WIOA PFP contract strategies, or procure an evaluator.
For an objective and independent evaluation, ETA recommends that the state ascertain actual
and potential conflicts of interests, and preclude entities and individuals with a conflict of
interest (all signatories to the PFP contract) from conducting the evaluation, whether the
evaluation is conducted by the state or an external party. In the required performance report
(form ETA-9174), there are two required evaluation topics that must be described: 1) the
research questions addressed by the evaluation(s); and 2) the challenges to evaluating PFP
contract strategies, either at the project level or across projects.
WIOA’s PFP evaluation requirements are flexible, but ETA emphasizes the importance of
quality research and evaluations, and thus encourages evaluations that are rigorous,
independent, objective, and conducted according to professional standards. The evaluation
regulations in 20 CFR 682.220 require that state evaluations must be developed in
collaboration with state and local boards and other state agencies, should be as rigorous as
possible, and result in reports made electronically available to the state board and the public
during the program year that the reports are completed. The regulations clarify that states
have tremendous flexibility in conducting evaluations, and may use a wide range of types
and methods.
Payments for an evaluation are not subject to the 10 percent limitation. Consequently, funds
reserved for PFP contract strategies (which are subject to the cap) cannot pay for evaluation
costs. WIOA title I, subtitle B formula funds, Governor’s Reserve funds, and other funding
10
20 CFR 683.510(e) and (j)
sources per 20 CFR 682.220(f) may be used to pay for PFP contract strategy evaluations
(including technical assistance to support the evaluation). If the same entity conducts both
the evaluation and the performance validation (the latter is part of the contract strategy), then
the contracts for these two functions must be separate.
10. Financial Reporting. For the funds reserved and set aside for PFP contract strategies (see
Attachment III), states must submit quarterly ETA 9130 basic reports on behalf of the local
areas (https://www.doleta.gov/grants/pdf/ETA-9130-Basic.pdf). States must submit an ETA
9130 basic report for each WIOA funding source utilized, which could include funding from
local Youth, local Adult (July and October funding), and local Dislocated Worker (July and
October funding).
Because funds reserved and set aside for PFP contract strategies will be moved to a separate
PFP grant document (but not a separate grant), grantees should not list any PFP contract
strategies expenditures on the designated PFP lines in section 11 of the applicable WIOA
9130 financial reports listed immediately below. Grantees also should not report PFP-related
activities costs on line 11 of the WIOA 9130 financial reports, and must instead include costs
for PFP-related activities (as opposed to be PFP contract strategy costs) with other WIOA
costs, in the reports listed below.
Adult (https://doleta.gov/grants/pdf/ETA-9130-D.pdf)
Statewide Adult (https://www.doleta.gov/grants/pdf/ETA-9130-C.pdf)
Dislocated Worker (https://doleta.gov/grants/pdf/ETA-9130-F.pdf)
Statewide Dislocated Worker (https://www.doleta.gov/grants/pdf/ETA-9130-E.pdf)
Youth (https://doleta.gov/grants/pdf/ETA-9130-B.pdf)
Statewide Youth (https://www.doleta.gov/grants/pdf/ETA-9130-A.pdf)
11. Administrative Costs. ETA considers all costs for PFP contract strategies to be program
costs, because such costs are not included in the 20 CFR 683.215 definition of administrative
costs. Therefore, ETA is not requesting that states report administrative costs for activities
that are part of a PFP contract strategy. However, PFP related-activities should be classified
as program costs or administrative costs based on 20 CFR 683.215.
Attachment II. Summary of Selected Major Federal, State, and Local PFP Roles Under
WIOA
This table serves as a simplified explanation of selected federal, state, and local PFP roles under
WIOA, for the convenience of readers. It is not a substitute for the TEGL and Attachments I and
III, whose guidance is the definitive interpretation of ETA’s policy on PFP.
Function Federal Role State Role Local Role
States may use Governor’s
ETA moves PFP Reserve fund for statewide Local boards may reserve a
funds from the activities for allowable PFP maximum of 10 percent of
original WIOA grant related activities (which do not their combined local Adult
Reservation and
document to a PFP- remain available until and Dislocated Worker
expenditure of
specific grant expended). Some states are allocations, and 10 per of
WIOA funds for
document with a single area states, and in these their local Youth allocation.
PFP
specific subaccount cases the state board acts as a Such PFP contract strategy
and Payment local board for the purpose of funds remain available until
Management System administering a PFP contract expended.
account strategy.
ETA issues States must monitor and Local areas set PFP policy
regulations and oversee WIOA activities in the within the local area, and
General authority
guidance to establish state, including PFP contract oversee individual PFP
general PFP policy. strategies contract strategies.
Local boards may receive the
Governor’s incentive
Governors (using non-federal
payments. Local programs
money) may establish
may also provide bonus
Incentives and incentives for local boards to
N/A payments to contractors who
bonuses implement PFP for allowable
exceed the contractually-
adult training and youth
specified performance
activities.
outcomes (bonus payments
are separate from incentives).
Local boards may receive
States may utilize Governor’s
ETA will provide state technical assistance
Reserve funds for statewide
Technical technical assistance funds, or use their own
activities to provide technical
assistance on PFP to states and WIOA formula funds to
assistance to PFP contract
localities. provide technical assistance
strategies.
to PFP contract strategies.
ETA may publish States must submit Local boards must provide
Performance
information on PFP performance outcome reports PFP performance data to the
outcome reports
performance. (form 9174) to ETA. state, for the state report.
Function Federal Role State Role Local Role
Local boards must provide
information and any
States must include an assistance necessary for a
DOL possesses evaluation of the design of PFP state to include an evaluation
Evaluation general authority to contract strategies and success of the design of the PFP
evaluate programs. of PFP contract strategies in the contract strategies and
state performance reports. performance of PFP contract
strategies in the state
performance report.
States must ascertain, where
Customer possible, the level of
N/A N/A
satisfaction satisfaction of PFP among
employers and participants.
PFP funds not distributed
Reallocation of
because performance
PFP funds which
State monitors that the locals outcomes were not met
are not expended
N/A adhere to the reallocation remain available until
for the original
requirement expended, but if reallocated
PFP contract
can only be spent on PFP
strategy
contract strategies.
Both DOL and U.S.
Department of
Recommendations Education may make
N/A N/A
to Congress recommendations for
improvements and
adjustments to PFP.
Attachment III. Extended Disbursement Account
To keep PY 2019 and future program year funds for PFP contract strategies available past the
normal period of performance (POP) for WIOA grants, states must complete the following
actions.
If local areas within a state seek to use funding for PFP contract strategies, the state must notify
ETA prior to December 31 of the expiration of the two-year POP availability, so that ETA can
move PFP funds to a separate grant document to permit their availability until expended. Prior
to December 31 of the expiration of the two-year POP, the state’s authorizing official must
submit a letter to its regional FPO notifying ETA of the amount that local areas intend to reserve
for PFP contract strategies. The letter must identify the specific formula grant source of the PFP
funding stream (WIOA title I Adult, Dislocated Worker, and/or Youth); the applicable program
or fiscal year designation and the associated document number; and include the following
information for each local area that seeks to reserve PFP funding:
a) the name of the local area;
b) the state’s assurance that it has analyzed the proposed contract strategy and confirms
that it is consistent with WIOA PFP provisions and state procurement policies or can
be adjusted to do so before finalizing the contract;
c) a WIOA title I Adult, Dislocated Worker, and/or Youth SF-424 Application for
Federal Assistance for the total amount to be transferred for the PFP contract strategy
or strategies; and
d) state assurance that the amount the area intends to use for WIOA PFP contract
strategies does not exceed 10 percent of its combined local allocations for the Adult
and Dislocated Worker program, and its local allocation for the Youth program.
Bullets a and b above must be provided again whenever there is a need to reallocate PFP contract
strategy funding that was previously reserved but not utilized for a payout.
ETA looks forward to reviewing requests for reserving WIOA funds for PFP contract strategies,
and plans to review such requests promptly. For applicants that meet the above requirements,
ETA will administratively move PFP funds from the original WIOA grant document to a PFP-
specific grant document with the same Treasury account (but a different subaccount) and a
separate Payment Management System account. The PFP grant document and PMS account
effectively do not expire. These accounts have the following characteristics and conditions.
The state will have only one PFP grant document with no POP end date: not a
separate PFP grant document for each program year.
ETA’s transfer of funds from the original WIOA grant document to the PFP grant
document will take approximately two months (during January and February of each
year), during which time these funds cannot be drawn down. During the interval
between the submission and the transfer, the state should coordinate with the formula-
grant FPO to ensure that all required information is available to ETA to execute the
action. ETA expects to complete the transfers by the end of February of each year.
Following ETA’s approval of a state’s PFP account, ETA will issue the following two
Notices of Award (NOAs).
o NOA #1 will confirm ETA’s approval of the removal of PFP funds from the
applicable WIOA formula grant and specified program.
o NOA #2 will create and/or add new monies to the PFP grant document.
Once a state receives NOA #2, the state cannot move PFP funds back to a WIOA
grant document, but can only expend them on a PFP contract strategy or strategies.
States must submit quarterly ETA 9130 financial reports for the PFP grant document
funds, including separate tracking by – as relevant – local Adult, local Dislocated
Worker, and local Youth funding streams. However, states will use the ETA 9130
basic financial reports instead of the applicable WIOA 9130 financial report.
Once there is no unexpended balance remaining on a specific funding stream, the
report for that stream can be marked as final. When a state wishes to close part or all
of a PFP grant document, the state authorizing official must notify the FPO via a
letter requesting this action, including the end date.
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