The Procurement Act 2023 has changed the landscape of public sector procurement. But one of its most important implications is not simply how organisations procure contracts – it is how those contracts are managed after award. For many years, considerable attention has been devoted to the procurement process: specifications, tendering, evaluation, supplier selection and contract award. Yet awarding the contract is only the beginning. A well-run procurement can still deliver poor value if the resulting contract is badly managed. Weak mobilisation, inappropriate KPIs, inadequate supplier management, uncontrolled contract changes and poor governance can quickly erode the benefits achieved during procurement.
From Procurement to Contract Performance
The direction of travel is increasingly clear: public bodies need to demonstrate not only that they purchased correctly, but that their contracts subsequently deliver the required outcomes and value for money. This places greater importance on effective contract performance management.
A good contract performance framework should establish a clear connection between:
Strategic Objectives → Contract Outcomes → Critical Success Factors → KPIs → SLAs → Management Information → Governance → Corrective Action
Unfortunately, organisations sometimes start at the wrong end of this process.
They ask:
What can we measure?
A better question is:
What are we trying to achieve?
Only after establishing the required business outcomes should the organisation decide which Key Performance Indicators (KPIs) and Service Level Agreements (SLAs) are needed.
KPIs Must Measure What Matters
The increased emphasis on supplier performance makes effective KPI design particularly important.
A contract may contain 20, 30 or even 50 performance measures and still provide very little useful management information.
Consider an IT support contract.
Measuring the number of engineers employed tells the authority something about the supplier’s resources. It does not necessarily demonstrate that users are receiving a reliable IT service.
More meaningful measures might include:
- system availability;
- critical incident response and resolution;
- first-time fix rates;
- repeat incidents;
- customer satisfaction; and
- compliance with security requirements.
The objective should not be to produce more data. It should be to produce better management information.
Beware of Supplier Gaming
Every KPI also creates an incentive. A poorly designed performance measure may unintentionally encourage behaviour that improves the supplier’s score without improving the service. For example, call-duration targets could encourage premature closure of incidents. First-time-fix measures could encourage inappropriate classification of repeat visits. Availability measures could result in arguments about excluded downtime. Before adopting a KPI, procurement and contract management teams should therefore apply a simple gaming test/
How could a rational supplier maximise its KPI score without necessarily delivering the outcome we actually want?
That question can identify weaknesses before they become contractual disputes.
Supply Chain Risk Goes Beyond the Prime Supplier. Effective supplier relationship management (SRM) also requires organisations to understand their wider supply chains.
An authority may have a contract with a major Tier 1 supplier while its greatest operational vulnerability sits with a much smaller subcontractor.
This creates an important contract management principle. You may contract with the prime supplier, but your operational risk may sit three tiers down the supply chain.
Contract managers should therefore understand critical subcontractors, single-source dependencies, business continuity arrangements, financial risks, cybersecurity dependencies and alternative sources of supply.
Contract Management Starts Before Contract Award
One of the biggest mistakes organisations make is believing that contract management starts when the contract is signed. By then, many of the most important decisions have already been made. If the specification is unclear, the contract manager inherits ambiguity. If KPIs are badly drafted, the contract manager inherits ineffective performance measures. If responsibilities are unclear, operational teams inherit disputes. If change-control arrangements are weak, uncontrolled additional work can develop. If mobilisation and exit requirements have not been considered, problems may already have been designed into the contract.
Good contract management therefore begins during procurement.
Procurement, commercial, operational and contract management teams need to work together when developing specifications, performance regimes, governance structures and contractual remedies.
The Real Test of Value for Money
Perhaps organisations should ask themselves one simple question:
Do we devote as much management attention to the years after contract award as we devote to the months before it? For many organisations, the answer may be uncomfortable. The Procurement Act 2023 and the growing emphasis on supplier performance provide an opportunity to change that. Effective public sector contract management requires clear outcomes, meaningful KPIs, appropriate SLAs, reliable management information, effective governance, disciplined change control and strong supplier relationship management.
Because ultimately:
Procurement selects the supplier, and contract management makes sure the promised value is delivered.