KPIOperations & Supply Chain

Contract Compliance Rate

Percentage of purchases made through contracted suppliers vs. off-contract buying

What is Contract Compliance Rate?

Contract compliance rate is the percentage of spend that goes through contracted suppliers. It shows how well an organisation follows the agreements it has negotiated.

Spending outside contracts, known as maverick spend, usually costs more and weakens supplier terms.

How this KPI is measured

Function
Operations & Supply Chain
Sub-function
Procurement
Industry
All Industries
Type
Lagging
Impact
Risk
Unit
%
Measurement frequency
Quarterly
Formula
(Spend through contracted suppliers / Total addressable spend) × 100

How to calculate it

Divide spend through contracted suppliers by total addressable spend, and multiply by 100.

For example, if 8,000,000 of 10,000,000 addressable spend went through contracted suppliers, compliance is 80%.

Define addressable spend as spend that could reasonably go through contracts, and exclude items that cannot.

Where it is used

  • Capturing negotiated savings

    Make sure contracts are used.

  • Reducing maverick spend

    Find leakage.

  • Managing suppliers

    Strengthen relationships.

How to improve it

Tips and common mistakes

  • Non-compliance often happens because contracts are hard to use.
  • Define addressable spend carefully.
  • Review by department.

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