RISK 7: Performance monitoring and management regimes
Definition Inadequate performance mechanisms may not provide sufficient incentive to the contractor to deliver the service specified in the contract.
Reason for overall assessment of this risk category in the eight case study projects: Some risks to value for money In the case studies examined performance mechanisms were mixed in terms of their effectiveness. On four projects the payment mechanisms appeared effective. In one case, Defence Fixed Telecommunications System, the risk of incorrect performance recording materialised so that the Department had to subsequently recover £1.3 million from the contractor BT. In the Defence Animal Centre and Main Building Refurbishment projects the Department has been addressing specific issues about the payment mechanism. In these projects previous disagreements on the operation of the mechanisms had adversely affected the quality of the working relationships. NOTE 1 This project did not proceed to contract and is not part of the current Department portfolio. |
2.31 All of the case study projects we examined had performance management arrangements that set out mandatory standards of performance and detailed what deductions can be made if those standards are not met. We also found through our census that all 41 of the projects who responded had performance management arrangements in place as part of their contracts.
2.32 Our census found that 36 of the 41 project teams strongly agreed or agreed that the performance mechanism incentivised the contractor to deliver the specified service (Figure 16 overleaf).7 Only two project teams disagreed and one strongly disagreed that the performance mechanisms incentivised the contractor to provide the service required by the contract. In these cases, project teams felt that the performance mechanisms were not proportionate. Project teams felt that penalties were not sufficient, or the burden of performance monitoring outweighed the benefit.
2.33 Our case studies showed that project teams felt that a partnering ethos and good working relationships were a key part of the overall incentivisation of the contractor to perform at levels above the standard required by the contract.
2.34 Performance mechanisms in the case study projects varied, however, in their consistency and quality (Figure 17).
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7 Out of 39 responses to this specific part of our survey.