The Cabinet Office’s updated July 2026 guidance confirms that KPIs play a central role in the Procurement Act’s new contract performance regime.
For contracts within Section 52, contracting authorities must establish KPIs before entering into the contract. Performance against the three KPIs considered most material at the time of reporting must subsequently be published using the prescribed rating system. This creates an important risk for contractors: a poorly drafted KPI may become the basis of a publicly reported performance assessment.
When does a KPI become commercially dangerous?
Case Study:
A professional services contractor delivering consultancy support to a government department. The contract includes the following KPI:
“All consultancy reports must be delivered within ten working days.”
The contractor consistently meets this deadline. However, many reports are incomplete, contain errors and require substantial reworking. The KPI measures timeliness but fails to assess quality or acceptance.
Now consider a different KPI:
“All reports must be delivered to the complete satisfaction of the contracting authority.”
This creates a different problem. The term complete satisfaction is subjective and does not establish an objective acceptance standard.
Both examples demonstrate how weak performance measures can generate disputes and misleading assessments.
What should contractors negotiate?
I believe that suppliers should ensure that performance measures clearly define the required outcome, the method of measurement, the evidence required, reporting periods, target levels and acceptable tolerances. They should also establish how customer-caused delays, changes in scope and other contractual dependencies will be treated.
A contractor should not accept responsibility for achieving targets that depend upon activities outside its contractual control without appropriate qualifications.
The Procurement Act has increased the importance of getting performance measurement right at the contracting stage. Contractors need KPIs that reflect actual service delivery, allocate responsibility fairly and produce reliable performance information. 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 courses here