KPI
Acronym for Key Performance Indicator; measurable targets used to monitor contract performance.
Definition
KPI is the acronym for Key Performance Indicator, measurable targets used to monitor contract performance throughout delivery. Public sector contracts typically specify KPIs at the outset, expressed as targets the supplier must meet (response times, resolution times, availability, quality scores, satisfaction ratings, social value commitments). KPIs are usually tracked monthly or quarterly with a contract review meeting at each cadence; failure to meet KPIs can trigger performance penalties, service credits, or in extreme cases contract termination.
How it works in practice
See the detailed KPI glossary entry for substantive coverage. The short version: KPIs sit alongside SLAs in most public sector contracts; the contract specification lists each KPI with metric definition, measurement method, target value, reporting cadence, and consequence of underperformance. Common KPIs include response time, resolution time, service availability, call abandonment rate, customer satisfaction. For social value, KPIs increasingly track TOMs commitments quantitatively. PA 2023 introduces a public KPI reporting regime: contracting authorities must publish supplier performance data including KPI outcomes for above-threshold contracts, with poor performance contributing to the public supplier conduct record. Suppliers should treat bid-stage KPI commitments as binding contract obligations.
For suppliers entering UK public sector contracts under PA 2023, KPI commitments at bid stage need particular care because they feed directly into the public supplier conduct record. Over-promising on KPIs creates exposure both within the specific contract (service credits, performance improvement plans) and across the supplier's wider procurement portfolio (conduct record affecting future bids). Strong bid teams use conservative KPI commitments with explicit over-delivery plans rather than aggressive commitments with implicit under-delivery risk.
Common questions
What happens if I miss a KPI?
The contract states the consequence. Common mechanisms are service credits, performance improvement plans, and ultimately termination for sustained failure. PA 2023 also requires authorities to publish KPI outcomes, with sustained underperformance contributing to a public supplier conduct record.
How many KPIs should a contract have?
Typically 5 to 15 for a mid-sized service contract; more for complex outsourcing. Strong contracts focus on a small number of meaningful KPIs (response time, availability, satisfaction) and supplement with periodic reporting on operational metrics.
Are KPIs same as SLAs?
In practice the terms overlap heavily and many contracts use them interchangeably. Technically SLA is the formal commitment and KPI is the measurable indicator used to track it.