Key Performance Indicators (KPIs) in Procurement

The Procurement Act 2023 extends the transparency regime beyond the procurement competition itself into the life of the contract. For significant contracts, buyers must define measurable performance metrics, report against them publicly, and take action when performance falls short. Key Performance Indicators (KPIs) are the mechanism through which this contract management transparency is delivered.

What are KPIs in procurement?

In the context of the Procurement Act 2023, KPIs are quantifiable performance measures that a covered buyer must define for contracts with a value at or above GBP 5 million. The buyer must publish these KPIs when the contract is awarded (or as soon as practicable if they are agreed after award) and report against them at intervals specified in the contract or by the Act's requirements.

KPIs must be objective and measurable. Examples include: percentage of deliverables completed on time; cost performance against agreed milestones; user satisfaction scores from service recipients; environmental performance metrics such as carbon emissions per unit; social value delivery against committed outcomes; and payment compliance metrics including the rate of on-time payment to subcontractors.

The Act requires buyers to publish performance reports showing actual performance against KPIs at regular intervals during the contract. Poor performance must be disclosed publicly, not managed behind closed doors. This creates accountability for both the supplier (whose performance record becomes part of the public domain) and the buyer (who must demonstrate that it is actively managing contracts and holding suppliers to account).

Why it matters for bidders

KPIs create both obligations and opportunities for suppliers. As an obligation, suppliers must deliver against the specific metrics committed in the contract, knowing that their performance will be published. A poor KPI record becomes part of your publicly accessible track record and may influence future buyers when they consider your bids.

As an opportunity, KPIs that are well-designed and achievable give suppliers clarity about what success looks like and enable commercial conversations about the resources needed to deliver it. Suppliers who engage constructively in KPI-setting during contract negotiations, pushing back on unrealistic targets and proposing meaningful alternatives, generally perform better over the contract term.

For new market entrants, the published KPI reports on existing contracts provide useful intelligence: they show how incumbents are performing, which contracts are struggling, and where a competitive challenge at renewal could be based on demonstrated service improvement.

Example

A government department awards a GBP 20 million digital services contract and publishes five KPIs: system availability (target 99.5%), incident resolution time (target 95% within 4 hours), user satisfaction (target 80% satisfied or better), data security incidents (target zero), and social value delivery (target 10 apprenticeship starts per year). Six months into the contract, the buyer publishes the first performance report showing 99.7% availability, 93% incident resolution on time (below target), 82% user satisfaction, zero security incidents, and 6 apprenticeship starts (behind target). The buyer initiates a formal performance improvement discussion with the supplier on the two underperforming metrics.

Frequently Asked Questions

Do KPIs apply to all public contracts?

The mandatory KPI publication and reporting requirements under the Procurement Act 2023 apply to contracts at or above GBP 5 million. Below this threshold, buyers may choose to use KPIs as a contract management tool without the mandatory publication obligation, and many do so as a matter of good practice.

Can KPI targets be renegotiated during the contract?

Yes, where there are genuine operational reasons for adjustment (such as a change in scope or an external event affecting delivery). However, any material change to published KPIs must itself be published, ensuring transparency about the change. Buyers and suppliers must not use KPI renegotiation as a mechanism to avoid accountability for poor performance.

How does the KPI regime interact with contract remedies?

KPI targets typically feed into the contract's performance management regime, which may include service credits, termination for persistent underperformance, or step-in rights for the buyer. The public reporting obligation runs in parallel: even where the contract's commercial remedies have been applied, the buyer must still publish accurate performance data against the KPIs.