Introducing Social Value KPIs

The Procurement Act 2023 introduced mandatory published Key Performance Indicators (KPIs) – written into contracts and tracked over time – into UK procurement law for the first time. 

Days before the Act came into force in February 2025, PPN 002 and the new Social Value Model were released. Accompanying guidance made it clear that KPIs could be set in relation to social value deliverables and performance. Their importance was reiterated in August 2026 in PPN 026.

While the original Social Value Model included provisions for Social Value KPIs, the change of legal status for these indicators brought in by the Procurement Act represents an important tightening-up of the rules for contracting authorities and suppliers alike. 

In this blog, we’ll look at:

• What Social Value KPIs are and the goals they’re intended to promote
• How they will be tracked and used

KPIs under the Procurement Act 2023

Section 52 of the Act defines a KPI as:

“A factor or measure against which a supplier’s performance of a contract can be assessed during the life-cycle of the contract”

It stipulates that for most contracts worth £5 million or more (there are exceptions), contracting authorities must:

• Set and publish at least three KPIs for the contract, before entering into it
• Make public the relative weighting being given to these KPIs (which may change over time)
• Assess and publish the findings of that assessment of suppliers’ performance against those KPIs at least once per year – rating it against the following scale, already in widespread use via the Commercial Playbooks

Failure to deliver satisfactorily against contracted KPIs can be used as a basis for early termination of a contract. 

The guidance to the Social Value Model elaborates on this:

“We encourage in-scope organisations to include at least one SV KPI (in addition to any others) when first entering into a contract.”

The following provisos to that encouragement are given:

• Social Value KPIs for a contract should be considered alongside Model Award Criteria (MACs) at the contract design stage
• Preliminary Market Engagement should be used to discover whether a Social Value KPI is appropriate – for example, whether it is proportionate, whether the market is mature enough, etc
• “Reporting thresholds” (ie definitions of what “Good” and the other ratings mean) should be agreed and made clear
• Where a KPI is thought to not be appropriate, social value targets can nevertheless be included as Performance Indicators (PIs) – minus the statutory underpinning and requirements the Act provides for KPIs

Most importantly:

“Where SV KPIs or PIs are used they should always comprise a combination of a deliverable and a numeric element, by which the performance of that deliverable is to be measured.”

Wherever the deliverable relates to a Standard Reporting Metric (SRM) included in the Social Value Model, that SRM should be used as the basis for drafting the KPI. 

We have a good idea of what Social Value KPIs are likely to look like from data already published around contract KPIs by government departments from before the Act took effect. 

For example, here are some apprenticeship-related KPIs for Capita’s contracts with the Cabinet Office and their latest ratings:

How Will Social Value KPIs Be Used?

The Act aims to drive up standards of transparency and performance in public procurement by introducing requirements to track and report on KPI performance. 

Although there are no automatic sanctions for suppliers failing to hit their targets, the Act provides for authorities to issue Contract Performance Notices. These set out:

• The nature of the underperformance
• Steps taken by the supplier to mitigate it
• Reasons why these have been deemed insufficient

Once a CPN has been published, a contracting authority may have grounds to pursue:

• Full or partial contract termination
• Debarment or exclusion of the supplier from future procurements

The question of reputation also comes into play: suppliers with successive good reports will have more credibility and evidence to quote in future processes; while those who are “named and shamed” for failures will be handled with caution. 

When the system works well:

• Suppliers and authorities will collaborate through Preliminary Market Engagement to agree appropriate Social Value KPIs
• Those who are unsure of their ability to deliver on those clear requirements will exclude themselves from bidding, with the risk their record being made public as a deterrent 
• It will become easier for authorities to exit contracts that are not being delivered on
• A virtuous cycle of improving value for money and social value delivery will be brought about through greater transparency

But there are challenges on the road ahead.

Last year, the Tussell Trust pointed out:

“As of August 6th 2024, over 8,000 live £5m+ contracts would be subject to the new rules, with between 10 and 30 new eligible contracts being awarded every single day.”

Contracting authorities will have considerable work on their hands developing and tracking so many KPIs – putting already stretched resources under more strain. The “virtuous cycle” effect depends entirely on the quality, timeliness, and accuracy of data collected. 

The detailed rules around notices also open up new routes for legal challenges to contract awards on the basis of an authority’s management.

In a recent blog, legal firm Freshfields warns:

Finally, there is a grey area for underperforming suppliers who are called out in KPI report but who nevertheless don’t meet the criteria (discretionary or mandatory) for exclusion or debarment.

Over the coming months and years, we’ll see more and more contracts issued with Social Value KPIs included, as well as performance reports. Once the new processes have settled in and a substantive body of best practice has built up, we’ll return to this topic and make sure you’re up to date!