The Procurement Act 2023 places greater emphasis on what happens throughout the commercial lifecycle, including how contracts and supplier performance are managed after award. For contract and commercial managers, that makes effective contract performance management increasingly important.
Contract Award Is Just the Beginning
A well-run procurement process can establish strong foundations, but the real value of a contract is delivered over the months and years that follow.
That means organisations need to think beyond simply selecting the right supplier. They also need effective ways of measuring performance, addressing problems, managing contractual changes and demonstrating that commercial decisions have been made appropriately.
The Procurement Act reinforces this through increased transparency around contract performance. Government guidance describes the new contract performance notice as providing greater transparency during the contract period, including information about supplier performance and, in certain circumstances, breaches or failures to perform.
For those responsible for managing public contracts, decisions made after award can therefore become considerably more visible.
Greater Transparency Means Greater Accountability
Several themes run through the new procurement regime, including flexibility, transparency, accountability and proportionality.
For contract and commercial managers, transparency and accountability are particularly significant.
Public authorities need to be able to demonstrate that public money is being spent effectively, supplier performance is being appropriately managed and important commercial decisions are properly governed.
Contract changes also require careful consideration. Decisions need to be justifiable and supported by appropriate commercial reasoning rather than simply becoming part of the day-to-day administration of a long-running contract.
Good contract management has always involved many of these disciplines. What changes is the environment in which those decisions are being made, and the visibility surrounding them!
The Growing Importance of KPIs
One of the clearest examples is the Act’s approach to Key Performance Indicators. Under Section 52 of the Procurement Act 2023, before entering into a public contract with an estimated value of more than £5 million, contracting authorities are generally required to establish at least three KPIs against which supplier performance can be assessed. There are exceptions, including where performance cannot be fairly or accurately assessed using KPIs and for certain types of contracts.
And setting KPIs is only part of the requirement. Where the relevant provisions apply, contracting authorities must assess supplier performance against the KPIs at least once during every 12-month period throughout the contract’s lifetime and on termination. Information about performance is then published through contract performance notices.
This creates an important distinction… KPIs cannot simply be measures included in a contract because they seemed appropriate when it was drafted. They need to provide a meaningful framework through which performance can actually be assessed and managed.
From Compliance to Better Commercial Management
It would be easy to look at these requirements primarily as another layer of procurement compliance. But that risks missing the bigger opportunity:
A well-designed contract performance management regime can help organisations establish clearer expectations from the outset, identify problems earlier and create more constructive conversations with suppliers about performance and, of course, it can also support better decision-making.
Are suppliers delivering what was promised? Are the measures being used actually telling you something useful? Is poor performance being addressed appropriately? Are contractual changes necessary and properly governed? And, ultimately, is the organisation achieving the outcomes and value it expected when the contract was awarded?
These aren’t simply questions of compliance. They’re fundamental commercial management questions!
Designing Contract Performance Management That Works
The challenge for contract and commercial managers is therefore not simply understanding what the Procurement Act requires. It’s translating those requirements into a contract performance management regime that works in practice.
That means selecting meaningful measures, establishing appropriate governance, understanding reporting requirements and ensuring that performance management remains proportionate to the contract being managed.
Most importantly, it means creating an approach that supports better commercial outcomes rather than allowing contract management to become a box-ticking exercise.
The In-House Training Company’s Designing Contract Performance Management Regimes under the Requirements of the Procurement Act course has been developed specifically for contract and commercial managers facing these challenges.
The course explores how to design effective performance management arrangements within the requirements of the Procurement Act 2023, helping participants translate the legislation into practical, robust approaches to managing contracts and supplier performance.
To find out more about the course or discuss your organisation’s commercial training requirements, get in touch with The In-House Training Company team using our contact form or the details below.
