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Supplying Principles and Practices > USPS Supplying Practices Process Step 2: Evaluate Sources > Define Contract Management Metrics
Define Contract Management Metrics
Contract management is the process of ensuring that the intent,
requirements, and terms and conditions of a contract are met from inception
to end of life. Successful contract management requires the establishment of
meaningful and effective metrics.
In instances when metrics have not been established in the request for
proposals (RFP), the Contracting Officer will work with the Client to define
contract management metrics.
Measuring performance requires the creation and use of performance metrics
that allow the quality of a service to be measured. Elements of contract
performance that can be assessed include:
• Completeness
• Cost
• Availability
• Capacity
• Reliability
• Flexibility
• Timeliness
• Responsiveness
• Security
• Standards
• Usability
• Accuracy
• Risk
• Safety
• Auditability/clear documentation
• Satisfaction
There may be a need to modify, add, or remove performance metrics during
the lifetime of the contract. It may be too expensive or time-consuming to
measure a given element; time and resource implications must be
considered. If a metric requires specialized Client knowledge, it is imperative
to devote the time of an individual or team to the task.
The performance metrics selected must offer clear and demonstrable
evidence of the success of each of the following aspects, even in areas
where a metric is hard to quantify:
• Quality - conformance to contract requirements and standards
of good workmanship
• Timeliness of performance - adherence to contract schedules,
including the administrative aspects of performance
• Client-Supplier relationship - being reasonable and cooperative;
commitment to customer satisfaction; integrity and ethics
• Cost control - forecasting and containing costs on changes and
cost-reimbursement contracts
There should be at least one metric in each category above. The intention is
to form the most comprehensive view possible of the performance of the
Supplier, the Postal Service, and any subcontractors involved. All
Purchase/SCM Team members with contract management responsibilities
are required to ensure that a formal feedback process is in place with
suppliers that covers these key criteria.
Managing risk is an important aspect of managing service delivery and must
be reflected in the design of performance metrics. The fulfillment of the
contract may be endangered by several kinds of risk, some within the
Supplier's control and some beyond it. Identifying and controlling (by avoiding
or minimizing) risks is a vital part of managing a contract. Business continuity
plans and contingency plans provide backup strategies and actions to
recreate/restore/relocate a business or project and are used to help prepare
the Client for possible situations where the Supplier is unable to deliver
contractual requirements. Guidance on risk management activities at the
project level are discussed in the Manage Risks topic of the Decide on Make
vs. Buy task of Process Step 1: Identify Needs. Performance metrics should
reflect risk management objectives.
Client requirements are the primary focus of contract management and must
underpin the selected performance metrics. Performance metrics must also
align with:
• Client strategies
• Postal Service strategies
• Most recent business justification
• Demand management strategy
• Logistics support plan
• Project plan
• Value chain map and analysis (performance metrics should
support a focus on value-added activities away from
non-value-added activities)
• Life-cycle support plan
• Investment recovery plan
• Performance-based contracting agreement
• Industry benchmarks
Metrics should be S.M.A.R.T.:
• Specific - clear and focused to avoid misinterpretation. Should
include metric assumptions and definitions and be easily
interpreted.
• Measurable - can be quantified and compared with other data. It
should allow for meaningful statistical analysis. Avoid "yes/no"
measures except in limited cases, such as start-up or
systems-in-place situations.
• Attainable - achievable, reasonable, and credible under
conditions expected.
• Realistic - fits into the organization's constraints and is
cost-effective.
• Time Bound - states the time period in which each metric will be
accomplished.
Before the defined metrics can be applied to a supplier's performance, the
Client must identify a baseline or level against which to measure service and
improvements for each of the metrics. This activity must be completed before
the contract commences. A benchmark analysis or a performance
comparison across different suppliers, in the case of multi-source contracts is
another useful way to gauge improvements. Some industry benchmarks can
also give rise to useful performance metrics.
Develop Commodity Strategy topic, General Practices
Define and Understand Client Needs, Goals, and Strategies topic,
Conceptualize Need task, Process Step 1: Identify Needs
Prepare Preliminary Business Justification for the Need topic, Conceptualize
Need task, Process Step 1: Identify Needs
Develop Demand Management Strategy topic, Conceptualize Need task,
Process Step 1: Identify Needs
Conduct Market Research and Benchmarking Analysis topic, Decide on
Make vs. Buy task, Process Step 1: Identify Needs
Manage Risks topic, Decide on Make vs. Buy task, Process Step 1: Identify
Needs
Develop Logistics Support Strategy topic, Decide on Make vs. Buy task,
Process Step 1: Identify Needs
Update Business Justification topic, Decide on Make vs. Buy task, Process
Step 1: Identify Needs
Develop Purchase Plan and Best Value Parameters topic, Prepare Project
task, Process Step 2: Evaluate Sources
Perform Value Chain Mapping and Analysis topic, Prepare Project task,
Process Step 2: Evaluate Sources
Develop Life-Cycle Support Plan topic, Develop Sourcing Strategy task,
Process Step 2: Evaluate Sources
Develop Preliminary Investment Recovery Plan topic, Develop Sourcing
Strategy task, Process Step 2: Evaluate Sources
Consider Performance-Based Contracting Arrangements topic, Develop
Sourcing Strategy task, Process Step 2: Evaluate Sources
Define and Initiate Contract Management Activities topic, Plan for Contract
Management task, Process Step 3: Select Suppliers
Evaluate Contract Effectiveness topic, Manage Delivery and Contract
Performance task, Process Step 5: Measure and Manage Supply
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