47. Government's ability to manage 'live' contracts is hindered by ineffective monitoring. The Ministry of Justice described how its electronic monitoring contract had key performance indicators but nothing that alerted managers to the overbilling problem, and how other contracts had far too many performance indicators.[67] The Cabinet Office also told us that government contracts have typically had too many KPIs, with staff measuring and managing hundreds of performance indicators but still missing what was important around performance.[68] The Cabinet Office cited good practice in the private sector of exception reports when KPI performance falls below a defined tolerance range, and said that Permanent Secretaries should get regular reports to see whether contracts are within or outside tolerance.[69] The NAO highlighted progress by the Ministry of Justice on improving the way it measures performance and validates payments, including the expansion of its internal audit coverage of contract management, introduction of 'data scorecards', and the likelihood that on some contracts it can reduce the amount of data it collects.[70]
48. Recommendation: The Cabinet Office standard operating procedures should require departments to set and regularly review KPI regimes, to ensure they are incentivising the right behaviours, with clearly specified indicators that are capable of highlighting poor performance at an early stage.
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67 AQ 191, AQ 196
68 BQ 85
69 BQ 121
70 C&AG's Report Ministry of Justice and the Home Office, Transforming Contract Management, paragraphs 36-37.