key performance indicator

A key performance indicator (KPI) is a measurable value that shows how effectively an organisation is achieving its objectives in procurement. In public procurement, KPIs are used to track everything from process efficiency and cost savings to sustainability outcomes, helping contracting authorities demonstrate the value of good purchasing practices to senior management.

How do key performance indicators work?

KPIs work by translating strategic procurement goals into concrete, measurable targets. The process begins with identifying what the organisation aims to achieve — for example, greater framework agreement coverage, reduced cycle times, or improved environmental outcomes. Each goal is then paired with a specific metric and a formula for measurement, such as "number of tenders with environmental criteria divided by total tenders."

The OECD has identified four core areas for procurement performance measurement: efficiency of the procurement process, openness and transparency, professionalism of the workforce, and contract monitoring. At the national level, many EU/EEA countries have developed their own KPI frameworks aligned with these principles.

Common procurement KPIs

• Contract compliance: Degree to which suppliers deliver according to agreed terms and requirements specifications
• Cost savings: Documented reductions compared to previous contract periods or market benchmarks
• Sustainability: Share of procedures incorporating climate and environmental considerations
• Cycle time: Average duration from need identification to contract conclusion
• Supplier performance: Delivery accuracy, defect rates, and service responsiveness

Tools like Cobrief can help suppliers understand which KPIs contracting authorities typically measure, enabling better-targeted bids.

In the UK, the Procurement Act 2023 introduced mandatory KPIs for public contracts exceeding £5 million, requiring contracting authorities to set at least three KPIs and publish annual performance assessments. While EU Directive 2014/24/EU does not mandate specific KPIs, it introduced contract performance conditions and allows exclusion of suppliers with significant prior performance deficiencies. KPIs are increasingly recognised as essential for moving procurement from an administrative function to a strategic one.