Defining Your Policy for Supplier Performance Management

In the public sector, it can be difficult to easily understand your Contract's performance due to the sheer number of procurements and contracts you may already manage. This can be especially challenging when you don't have a supplier performance plan in place.

Supplier performance management (SPM) is a roadmap that provides clarity and direction when evaluating the health of the Contract. It ensures that your department is not left scrambling to assess supplier success or identify areas for improvement once a contract has begun or been completed.

Building an SPM is a collaborative effort that involves working closely with trusted employees and stakeholders, and potentially even your Suppliers. The goal of the program is always to ensure open communication with your suppliers and to foster stronger relationships within your supplier community.

Why Have an SPM?

Let us first discuss why an SPM is crucial for public-sector agencies. SPMs (Supplier Performance Management) provide a structured process that allows buyers, client departments, and suppliers to understand how they will be evaluated. SPM offers a variety of template types for assessment to fit your procurement needs such as Goods-with-a-warranty, Construction-over-1-million, etc.

During the procurement process, you can provide clarity on the SPM policy and how it will be conducted with the awarded supplier(s). A general meeting with the supplier can take place post-award to determine what template will be used and to outline the areas that will be assessed. A final important aspect of this procedure is having a fully developed appeal process that allows suppliers to provide their feedback through an open and transparent conversation.

A comprehensive and effective SPM policy can result in:

  • Risk Mitigation: Regular performance assessments help identify potential risks early, allowing for timely interventions, and reducing the likelihood of project delays or failures.
  • Improved Supplier Relationships: An SPM fosters open communication and collaboration between the agency and suppliers. This relationship-building can lead to better cooperation and more favorable terms in future contracts.
  • Transparency and Compliance: A structured program ensures that procurement processes are transparent and comply with regulatory requirements. This transparency builds public trust and ensures fair competition among suppliers.
  • Enhanced Accountability: An SPM holds suppliers accountable for their performance, ensuring they meet contractual obligations and quality standards. This accountability leads to more reliable and consistent service delivery.
  • Cost Efficiency: Agencies can identify inefficiencies and areas for cost savings by monitoring and evaluating supplier performance. This proactive approach helps negotiate better terms and avoid unnecessary expenses.

We've discussed the positive impact SPM can have on your organization, but the policy you create and the elements you include will determine its true efficacy.

Defining Performance Standards

How successful your SPM is, depends on the time and thought your team puts into establishing its policy and the key factors it should uphold. While every SPM template will need to be tailored to the specific requirements of the client department, asking this question is a good place to start:

What defines excellent, satisfactory, or poor performance when working with a supplier? This could include metrics such as:

  • Timelines: A supplier's timeliness is one of the most crucial factors to review in an SPM. Timely delivery from suppliers can make or break a project's deadlines, maintain smooth production and operations, keep costs low, and demonstrate how committed a supplier is to meeting your policy's expectations.
  • Reliable communication: Even if a supplier meets its deadlines and provides quality service, a lack of reliable communication can create major strain. It can leave your team members guessing about a project's status and potentially lead to considerable misunderstandings and timeline-killing delays.
  • Health and Safety
  • Invoicing/ reporting
  • Quality

An effective SPM will also specify clear guidelines on how to handle unsatisfactory performances performance. This may involve banning or suspending suppliers or other functions that would stop them from submitting to new opportunities or continuing a contract. The policy will also assign responsibilities for managing and communicating the evaluation expectations to all parties involved, specifying when these evaluations will occur.

Once your organization has established its internal supplier performance policy, it's essential to be transparent with your suppliers about the criteria for contract success. This openness will help solidify your relationships with suppliers and ensure your expectations are clear.

We Can Help

As always, bids&tenders is here to assist. Contact us today to learn more about our digital procurement platform solution and how it can help you maximize your supplier relationships and optimize your procurement processes. You can also refer to this helpful How-to-Guide, to get started on setting up your supplier performance management program.