(a) The purpose of performance-based standards is to allow the agency to effectively measure the level of performance provided by the contractor at various stages of the contract.

(b) It is recommended that all services contracts include performance standards.

(c) All services contracts that have a contract amount of at least one million dollars ($1,000,000) in a single contract year or a total projected contract amount, including any amendments to or possible extensions of the contract, of at least seven million dollars ($7,000,000), including any amendments or possible extensions, shall include performance standards.

(d) Performance standards, as a general rule, are highly recommended as an element of any service contract and may be standardized for use with similar service contracts or may be specifically developed for unique requirements. However, performance-based standards are mandatory and must be specifically tailored to the services being provided under any services contract whenever a state agency, board, commission, or institution of higher education that enters into a contract to procure services that has a contract amount of at least one million dollars ($1,000,000) in a single contract year or a total projected contract amount, including any amendments to or possible extensions of the contract, of at least seven million dollars ($7,000,000).

(e) Performance standards should measure, at prescribed points throughout the term of the contract, the quality, quantity, and timeliness of work being performed.

(f) Performance standards may be refined by the agency and the provider as a part of the contract negotiations.

(g) A provider's inability to meet established performance standards may be sufficient cause for declaring default and may also result in cancellation of the contract.