3.27 Authorities also need to reassess the appropriateness of performance indicators. They should consider whether the targets for performance indicators are set too high or too low, provide perverse incentives or result in unreasonable performance deductions. Our survey found that 51 per cent of authorities did reassess performance indicators and that 18 per cent of those negotiated new ones. For example, Her Majesty's Prison Service keep the performance measurement system under constant review and have made significant changes to performance indicators so they are more closely aligned with their overall goals.
3.28 Authorities should place priority on seeking an excellent service rather than financial penalty payments. A number of contractors, however, consider that performance mechanisms penalise failure instead of creating an incentive to provide even better performance than required. For example, on the PRIME deal, the authority accepted that there were some anomalies in the performance measurement system which resulted in scores which gave a disproportionate perspective on performance. The authority had spent three years trying to develop an incentive only system based primarily on results, without success. The authority and contractor continue, however, to seek improvements to the system.