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.
More Operations & Supply Chain kpi library
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