The government has confirmed how public authorities must assess and report contractor performance under the Procurement Act 2023.

For most new public contracts valued at more than £5 million, contracting authorities must establish at least three Key Performance Indicators (KPIs), unless a statutory exception applies. Section 71 requires performance against the relevant KPIs to be assessed and reported at least once every 12 months and on termination.

The reporting regime uses five classifications.

Published rating                   Meaning

Good                                     Meeting or exceeding the KPI

Approaching target            Close to meeting the KPI

Requires improvement    Below the KPI

Inadequate                             Significantly below the KPI

Case Study

IT services contractor providing a £12 million managed service to an NHS organisation. Its contractual performance measures include system availability, incident resolution and customer satisfaction. If the contractor consistently fails to achieve the agreed targets, the contracting authority may have to publish ratings such as Requires improvement or Inadequate. These ratings could be visible to other potential public sector customers.

I believe that Contractors should no longer regard KPI reporting simply as an internal management exercise. Performance measurement can affect reputation, customer confidence, contract renewal discussions and the evidence considered in future tender evaluations. Suppliers therefore need to ensure that KPIs are relevant, measurable, achievable and supported by reliable evidence. They must also challenge ambiguous targets and unrealistic performance thresholds before accepting contractual commitments. We know from our experience that the financial and reputational consequences of poorly designed KPIs can be substantial for contractors. Our course “Contractors Guide: Contract Performance Management Regime Requirements of the Procurement Act” places particular emphasis on understanding the new requirements imposed by the Act and how to ensure that contractors are able to respond to these challenges.

Check out our course here