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The Procurement Process

15.5 Seeking Improvements

15.1 Preparation 15.2 Managing Service Delivery 15.3 Managing the Relationship 15.4 Contract Administration 15.5 Seeking Improvements 15.6 Managing Changes 15.7 Ongoing Assessment
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What you need to do

The aim of incentives is to motivate the provider to improve by offering increased profit, or some other desirable benefit, as a reward for improved performance or added value.

Points to consider

Types of provider incentive, (see Achieving Excellence Guide No.5 for construction projects) include guaranteed levels of capacity, revenue sharing, commercial opportunities and so on.

Incentives to improve are normally built into the contract terms.

It is important that incentives are balanced. They should not emphasise one aspect of performance at the expense of other, perhaps less visible, aspects.

Financial incentives should offer rewards to both parties that fairly reflect any investment they have to make to achieve the saving in the first place

Seek to bring down costs, not margins, to allow the supplier a reasonable return to cover items such as training and development.

See also guidance on added value, break-out improvements and techniques for measuring improvements in the Contract management guidelines.

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