The Procurement Act 2023 – Setting and Publishing KPIs

Key performance indicators (KPIs) form an important part of government tenders and public sector procurement. KPIs allow contracting authorities to set minimum levels of acceptable performance and monitor suppliers against this to ensure adherence to crucial parts of a contract – for instance, response times.

We have previously covered other topics included as part of the Procurement Act 2023, including an initial analysis, the new public debarment list and the future of social value under new procurement legislation.

The Act is currently due to come into force in 2025 – meaning bidders and buyers alike have already begun preparations to ensure compliance.

KPIs in the Procurement Act

While KPIs are commonly used as part of current public sector contracts, new legislation has formalised and strengthened existing requirements. These measures can be found in Section 52 of the Procurement Act, as described below:

“… Before entering into a public contract with an estimated value of more than £5 million, a contracting authority must set and publish at least three key performance indicators in respect of that contract.”

There is leeway for contracting authorities to set KPIs which align with the scope and purpose of the contract – meaning it could apply to any area of performance. Common KPIs suppliers and providers are measured include:

• Quality of delivery in accordance with the specification and relevant standards (e.g. British Standards)
• ‘First-time fix’ rates, reducing repeat visits due to repeat call-outs or rectification works
• Customer satisfaction rates, a crucial statistic for housing associations and local councils
• Health and safety performance, such as zero accidents, incidents and near misses.

Importantly, the social value tender commitments for each bidder will also form a contractual commitment and KPI over the contract term.

Furthermore, Section 71 of the Act gives additional guidance around assessing and publishing information on KPI performance:

“… At least once in every period of twelve months during the life-cycle of the contract and on termination of the contract the contracting authority must –

1. Assess [supplier] performance against the key performance indicators, and
2. Publish information specified in regulations under Section 95 in relation to that assessment.”

Consequently, statistics on KPIs for suppliers of eligible contracts will be subject to public scrutiny – allowing other clients and authorities to monitor their performance. In addition to the £5 million value threshold, framework agreements and contracts which qualify for the government’s ‘light touch’ regime – such as health and social care contracts – are excluded from this requirement. However, it is likely that authorities will also adopt these measures for non-qualifying government contracts, as part of a best practice approach.

What does this mean for bidders?

There are a number of outcomes stemming from the new KPI guidance under the Procurement Act which bidders should be aware of.

• A public list of supplier performance on relevant contracts will mean contracting authorities and other clients may regularly monitor these, increasing oversight and business scrutiny
• Greater scope for frequent mandatory reports on works in progress, including monthly KPI performance, from suppliers to inform the formal yearly publication
• More detailed KPIs may be included within tender documents and contractual agreements, ensuring bidders have full knowledge of expectations.

Suppliers who have extended or multiple non-compliance of contract-specific KPIs could risk inclusion on the public debarment list – where they will stay for a predetermined or unspecified amount of time.

How you can prepare for changes

As in the introduction, bidder organisations should begin preparing in advance of the Procurement Act coming into force in October 2024, minimising risk of non-compliance. By proactively addressing the list below, this should ensure a smooth transition into new procurement policy.

• Review performance on all current and existing contracts to ensure they align with the relevant authority’s KPIs and requirements
• Proactively address non-compliant performance with measures for rectification – for example, assigning additional staff if there have been peaks in demand and response times have dipped
• Increase internal measures for monitoring and measuring KPI performance to proactively mitigate any potential non-compliance and avoiding removal from the contract.

The tender process already subjects bidder organisations to significant scrutiny. However, the central government and contracting authorities are hopeful that changes will increase the quality of works and services taxpayers receive. Ultimately, it remains to be seen how changes will affect tendering. While other measures, such as increased use of AI in procurement, may result in increased bidding activity, the new KPI requirements may discourage some from submitting a bid.

As part of our position as thought leaders within the bid and tender writing industry, we will continue to provide analysis and explain change to the public procurement process in advance of the October 2024 ‘go live’ date for the Procurement Act 2023.

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