IACCM Contract Management Forum

« view all forum posts

Sopra Steria
2017-07-10 08:37:16

Agreeing KPI's Reterospectively

Dear All,

I'd welcome any suggestions for this situation from the creative minds out there.

We are contracting with a software vendor who have proposed a set of performance related KPI's. We won't have had the opportunity to do the necessary UAT before signing the contract and therefore have no way determining if the service levels they've proposed are reasonable.

How do we commit the supplier to agree to change the KPI's after signature of the contract?

I'm considering asking for a period of baselining for 3 months and asking the supplier to commit to a KPI review where acting in good faith we'd agree to amend the KPI's via change control if necessary. However I'm concerned that this wouldn't have any teeth?
 •   2017-07-11 04:58:47
Stuart - I am not sure a UAT (assuming this is User Acceptance Test) would fully ensure the KPI's are ideal, as the UAT could potentially only assess whether there will be compliance to sub-optimal KPI's, leading to a sense of reasonableness but not necessarily effectiveness.

So, the ideal approach really needs to rely on a process. If you do not have an end-to-end contracting process the KPI's will usually prove problematic.

Early in the process, before ever approaching the contractor/supplier market, the customer entity needs to identify the overall objectives and goals from the project and related transaction - both from a relationship and contract document perspective. For example, one might identify risk mitigation, or cost leadership, or perhaps cyber-security as the key purpose and objective. Then the customer enterprise must identify the sub-objectives that enable the broader purpose. This all needs to be performed as a team, include those who will be leading the post-award phase. The KPI's need to then be included in the RFx/tender documents, as well as negotiated.

But, it sounds like you do not have the ability to take this steps now. The option that you suggest of a three-month trial period represents a potential solution. Plus, the three months might afford you time to undertake some of the above steps as well.
 •  Tullow Oil plc  •   2017-07-12 19:06:19
Hi Stuart, just a few of thoughts building on the below - They may not commit to any change of the KPIs as these are often standard for all customers - the below are just observations around the theme that may or may not be useful, and their strength will depend on what the software does, how much you've spent on it, how core to your business is etc.:

1) They'll be most open to discussions when annual maintenance renewal time comes around, as that's when there's normally money on the line - so if the user community can be corralled into speaking with one voice, they could be a powerful ally in helping review whether the KPI's are useful in the first place and then challenging those that aren't
2) Also consider whether there are other potential purchases or expansions into your business - the person who originally sold you the software will probably have some sort of target to sell you more (even if via an audit...), so if it turns out that you can use the opportunity of future sales to sharpen up their performance then that might help
3) My cynicism is that a number of vendors will deliberately sell software that hasn't been fully tested, and then their customers essentially complete the testing through raising support tickets and the supplier improving the software through trial and error. See if the supplier has a user support community where you can compare the number of tickets you're raising vs. others, and whether root causes of any issues that arise are training or software-based
4) Maybe compare the functional specification with performance in reality - given that vendors typically warrant that the software will perform with the documentation, the argument most likely to drive change is more likely to be whether the system isn't performing against spec rather than they're missing KPIs

Hope this is in some way helpful, let me know if there are aspects you'd like to follow up on.

 •  Toyota Material Handling USA  •   2017-07-19 16:42:01
Stuart, Agree completely with other's comments/ideas posted. Really think the key will be in communicating and documenting your overal objective. It doesn't sound as if you are certain that a clear overall objective has been communicated to your software provider,. If that i truly the case, would get to work on detailing it as soon as possible (at the time of the RFP would be best). Be prepared to have a conversation with the software provider after you're comfortable that the overall objective is clear. It may be that an amendment to the agreement will be needed.
Would also consider creating a process for determining your overal objective prior to your next RFP going out. For example, create a cheat sheet of gemeral key topics to be covered; legal entities to the agreement, key contacts, pricing, payment terms, purpose of the agreement, etc. Find that when a process has been defined and I follow the process everytime, there are fewer of those UhOh moments.
 •  Housing New Zealand  •   2017-07-20 22:07:27
Hi Stuart, All great comments to consider. having been in exactly the same position 1 year ago, these were some of the key lessons learnt.

1) Keep it simple - don't unnecessarily overcomplicate it.
2) Inputs or outputs based KPI's
3) What is your customer's / business key requirements - requires alignment
4) What's more important the KPI's or SLA's (there is a difference)
5) determine if the urgency to get the agreement signed outweighs the importance of fully developing the KPI's/SLAs.

While we don't have the full details, your proposed solution to this can be a way forward and can have teeth; provided you clearly articulate the review criteria in the agreement. But as mentioned before, vendors typically have standard SLA/KPI's and anything bespoke usually costs a premium especially after the fact. So I would urge you depending on the importance of this implementation and the impact on the business, to resolve this before you sign.
 •  Taystar Inc.  •   2017-07-28 14:57:24
Hi Stuart,
Perhaps this has resolved itself already, but perhaps consider looking at the 10 Pitfalls in the IACCM resources and working WITH the Contractor to identify (perhaps 5) KPIs that relate to the work being undertaken in the first calendar year. Then evolve those based on experience/needed improvements.

It is essential that measurement criteria be established and agreed up-front (documented in a Guide signed by both parties) and that measurement timelines are adhered to. Have experience with payouts against a x% holdback on a periodic basis based on a sliding scale scoring of measurement criteria - (significantly below expectation = full retention of holdback by Owner, significantly above expectation = 1.5 x holdback paid out, on par with expectations = holdback paid out.)

At least agree that some form of Perf Measurement will be undertaken (jointly developed) at the time of signing the contract. Implementation can follow asap thereafter.
 •  Academy Sports + Outdoors  •   2017-07-31 16:36:23
What about asking for some reference customers and reaching out to them?
 •  CGI  •   2018-06-04 21:09:37
Hi Stuart,

I suppose that this has been resolved in the meantime, however, I wanted to share My view. Your idea About a review after 3 months, or even 6 or 12 months, is quite common and would be My advice. Typically, KPIs have some specifics depending on the Environment, hence a review and Adjustment after somee time would be beneficial for both, the customer and the supplier.

Maybe, if you read this, can you share how this was finally approached and resolved?

 •  CAE  •   2018-07-09 05:52:40
Hi Stuart,

Clearly a lot of advice and this may get lost in the deluge. In contracts I negotiate we always a Performance Implementation Period (PIP) with the agreed aims (between the parties) of determining whether the KPIs are:
a. driving the desired behaviour,
b. measuring the the actual outcomes, and
c. are fair for both parties.
We would normally request 6 months, but this depends upon the length of the contract.
Remember that it is not in the client's interest for you to go bust.
Two things I always work towards:
1. Both you and the client have the same goal - a needed product. Both of you want the program to succeed.
2. KPIs should be output focussed - what is the client needs in the end. No more than 2 -3 KPIs.
Introduce System Health Indicates (SHI) as a tool to measure the detail.

Hope this helps

Replies: 8
Filter by category
Operations & Capabilities
Organization & People
Strategy & Management Tools