For a performance management framework to be effective and fair, the consequences and actions resulting from Key Performance Indicator (KPI) scores must be established collaboratively and transparently. They must be mutually agreed upon by both the purchaser and the supplier during contract negotiations. This fosters a collaborative relationship and ensures both parties understand their obligations and the repercussions of non-performance. Furthermore, all agreed terms, including KPIs and the associated remedies or actions, must be formally documented in the contract or a Service Level Agreement (SLA). This documentation provides legal clarity, prevents future disputes, and creates an unambiguous basis for managing the contract.

B. Deliberately omitted: Omitting consequences would render the KPIs meaningless and unenforceable, as there would be no formal mechanism to address underperformance.

D. Unilaterally imposed by the purchaser: Imposing terms without agreement is adversarial and damages the supplier relationship, potentially leading to poor performance and legal disputes.

E. Terminated: Termination is a severe and final consequence, not a mandatory characteristic of all actions. Many other remedies, like service credits or improvement plans, typically precede termination.

1. CIPS. (2018). Commercial Contracting L4M3 Course Book. Profex Publishing Limited.

Page 156

Section 6.2: Discusses Service Level Agreements (SLAs)

stating

"An SLA is a negotiated agreement between customer and supplier... It will set out the service to be delivered

the performance standard required... and the remedies available to the customer if the supplier fails to meet the standard." This supports the need for terms to be mutually agreed (negotiated) and documented (set out).

Page 160

Section 6.3: Explains that remedies for breach of contract (such as failing to meet KPIs) must be specified within the contract itself. This reinforces the principle of documentation.

2. Lysons

K.

& Farrington

B. (2020). Procurement and Supply Chain Management (10th ed.). Pearson.

Chapter 21

'Managing contracts and supplier relationships'

p. 534: Emphasizes that performance measures (KPIs) and any associated rewards or penalties should be "agreed with the supplier and incorporated in the contract." This directly supports both mutual agreement and documentation. The text highlights that this collaborative approach is essential for effective supplier relationship management.