The New York State Office of Mental Health has implemented a 2-year demonstration to determine if performance-based contracting (PBC) improves rates of competitive employment for people with serious persistent mental health conditions, and promotes best practice among providers. This article reports the interim findings from the demonstration. Initial results suggest that PBC is reaching the target population and promoting employment for a significant proportion of participants. It is also stimulating agency re-evaluation of consumer recruitment strategies, job development models, staffing patterns, coordination with support services, methods of post-placement support, and commitment to competitive employment for consumers.