Appropriate specifications and performance measures are the foundation of a good contract. With the right KPIs in place, it should follow that contracts are designed to incentivise delivery of the things that matter, minimise perverse or unintended incentives and promote good relationships.
Contractual KPIs are used to measure progress and performance of suppliers in the delivery phases of a project (e.g. during design, construction, and testing and commissioning). It is important that KPIs are relevant and proportionate to the size and complexity of the project or programme. Getting this wrong can create confusion and tension. For instance, having too many KPIs will lead to over-complicated contracts and ambiguity with suppliers. KPIs should drive both a focus on outcomes and continuous improvement, aligning with the Project Scorecard where appropriate, and the intended benefits to be realised during contract delivery.
Misunderstandings about how KPIs work or how they are measured can make it difficult for bidders to price them. It is important to work closely with bidders and suppliers to ensure KPIs are jointly shaped and understood. Using quantifiable and measurable KPIs drives common understanding in what matters and supports a successful relationship between all parties (see chapter 11).
In developing KPIs, contracting authorities should have regard to cross-government construction metrics under development by the IPA and the Government Construction Board. These will help to improve visibility of performance across the government's public works portfolio and are aligned to the government's strategic objectives.
In line with the cross-government transparency agenda, the top three KPIs from government's most important contracts should be made publicly available. These should be the three most relevant to demonstrating whether the contract is delivering its objectives. They should be measured regularly, and performance against them should be published quarterly.