Each performance measure should be tied to a corresponding enforcement provision. Enforcement provisions incentivize the Supplier to consistently meet the performance measures set out in the contract.
Strong enforcement provisions:
Appropriately incentivize the Supplier to hit performance measure targets regularly using monetary or contractual provisions;
Reduce the risk of service level or project failure by holding the Supplier materially accountable for failure to meet performance measures;
Include remedies in the case of non-performance
Contractual remedies provide a tangible way to ensure the Supplier is informed and addressed appropriately for missing key performance measures. This can be in the form of monetary penalties, or exercising contractual options such as termination or seeking neglected services from another Supplier.
When crafting enforcement provisions, some of the most important questions to ask are:
How are you making sure the expected deliverables are being met?
How are you holding the Supplier accountable for poor or nonperformance of the contract requirements?
In what ways is the Supplier properly incentivized to consistently meet performance targets?
Common examples of enforcement provisions include liquidated damages, credits applied to monthly invoices, termination for breach of contract, and milestone payment withholds, to be paid after the last milestone in completed, reflected on the final invoice.