KVB-C2M®
Value-Based Contracting Control Model
What Is KVB-C2M®?
KVB-C2M® is a contracting methodology that aligns vendor incentives with actual business value—ensuring that capital projects deliver promised performance through outcome-based metrics and rigorous validation protocols.
The Problem
Traditional contracts specify equipment parameters: "pump shall deliver 500 GPM at 200 psi." But what the business actually needs is: "system shall maintain 95% uptime while delivering contracted production volume." The gap between technical specs and business outcomes creates two failures:
- →Vendors optimize for specifications, not value: They meet contractual parameters even when the system underperforms in real operational conditions
- →Risk is misallocated: Owners bear the risk of design errors or operational reality mismatches—even when vendors control these factors
Core Principles
Outcome-Based Metrics
Contracts specify business outcomes (uptime, efficiency, throughput, life-cycle cost) rather than just technical parameters
Performance Validation
Testing protocols that prove contractual commitments before final acceptance—not just vendor self-certification
Risk Allocation
Clear assignment of who bears risk for design errors, fabrication defects, or operational performance gaps
Life-Cycle Accountability
Warranty terms linked to operational reality, not arbitrary time periods
Implementation Process
- Value Definition: Identify the business outcomes that matter (production capacity, operating cost, reliability risk)
- Metric Translation: Convert business outcomes into measurable technical metrics that vendors can influence
- Validation Design: Establish testing protocols that prove performance under realistic operational conditions
- Risk Mapping: Explicitly assign risk for each failure mode (design, fabrication, installation, operation, external factors)
- Payment Structure: Link payment milestones to validated performance achievements, not just delivery
- Continuous Monitoring: Track performance against contractual commitments through operational life—enforcing warranty terms based on actual data
Case Study: Latin American Pipeline Operator Power Expansion
Challenge
A Latin American pipeline operator needed to expand power generation but had experienced equipment underperformance in previous projects—vendors met specifications but systems failed to deliver business value under real operational stress.
KVB-C2M® Application
- Shifted contract focus from equipment specs to guaranteed production capacity under defined operational scenarios
- Built LCC-based evaluation matrix for vendor selection—accounting for reliability risk, not just capital cost
- Established FAT protocols with independent validation across full operating envelope (load swings, ambient conditions, fuel variability)
- Structured payment milestones: 30% on delivery, 40% on FAT validation, 30% on 90-day operational performance demonstration
- Warranty terms tied to degradation mechanisms (operating hours, thermal cycles) rather than calendar time
Outcome
Project delivered on budget with equipment performing at contractually guaranteed levels. When minor performance gaps emerged during commissioning, vendor accountability was clear—and resolution was rapid because validation protocols were pre-agreed. The system achieved 98% availability in first year, exceeding business case assumptions.
When to Use KVB-C2M®
This methodology is essential when:
- →Capital projects have high-performance requirements where underperformance creates significant business risk
- →Custom-engineered systems where vendor design choices directly impact operational outcomes
- →History of vendor equipment underperformance despite meeting technical specifications
- →Operational conditions differ significantly from vendor test environments