Vendor performance management procedure


The Vendor performance management procedure describes the manner in which the University manages its relationships with key vendors to ensure delivery of contracted outcomes whilst maintaining a mutually beneficial and sustainable relationship. The procedure is in line with the strategic direction set by the Group procurement policy and the values of the University.


The procedure and appointment of a Vendor Relationship Manager applies to all University expenses, services and capital acquisition contracts greater than $450,000 in total contract value excluding GST or those engagement deemed high risk contracts (regardless of source of funds) including those undertaken by Foundations, Centres, Controlled Entities (as defined by the University’s Controlled entities policy), and any other entity, which has entered into an agreement with the University, requiring compliance with the University’s policy and associated procedures. This procedure is a guideline for out of scope vendor engagements.


No exclusions with the Group Procurement Policy Framework

Procedure steps and actions


Figure 1 – Vendor performance management

Figure 1

The Vendor performance management procedure is part of a group of procurement and finance policies and procedures that work together to ensure the optimum ongoing outcome for the University. This procedure outlines the operational framework within which the University manages the deliverables and inherent risk resulting from commercial engagements with vendors, thus ensuring that the outcomes negotiated through the Strategic sourcing procedure are achieved.

The procedure operates within a framework described in Figure 1. This framework provides the necessary quality assurance and control as part of the cycle of procuring goods & services to ensure vendors support the Business Unit in delivering their objectives.

The framework supports procurement governance through compliance monitoring and performance management, within the cycle of strategic, commercial and operational management of vendors.

At the core of the framework are a series of structured and mandatory governance forums, tailored to a particular engagement or vendor, that enables the Business Unit and the vendor to manage operational deliverables within a professional environment supported by objective data.

Figure 2 – Vendor performance management

Figure 2

The core steps are summarised in Figure 2. These steps are the foundation of a robust Vendor Performance Management Process and include:

  • Engagement Activation: Mobilisation of the service (including complex goods).
  • Operational Management Governance: Structured vendor engagement forums.
  • Proactive Performance Management: Transparent performance management and risk mitigation.
  • Vendor life cycle management: Links back into the Vendor to Procure strategic procedure.


The Business Owner is accountable for the delivery of outcomes from vendor engagements. In executing this accountability the Business Owner must work within the Vendor Management framework by:

  • Adhering to the structure and intent of the Vendor Governance Framework;
  • Managing operational outcome delivery through the Vendor Governance Framework;
  • Utilising the Vendor Governance Framework to identify and manage risk with the vendor, and
  • Driving a Continuous Improvement culture within the Vendor Governance Framework.

Strategic Sourcing & Procurement supports the Business Owner to transition the commercial engagement into the performance management framework and will ensure that all functions within the University and the Vendor organisation abide by this procedure and its governance framework during the contract term.

Strategic Sourcing and Procurement must:

  • Implement and maintain a high quality vendor governance framework;
  • Manage the risk assessment during vendor selection to determine this procedures applicability;
  • Ensure that the Business Owner successfully activates an engagement;
  • Report to the Procurement Governance Committee on procedure compliance
  • Report non-compliance to the Audit and Risk Committee on a quarterly basis;
  • Lead dispute resolution processes and execute any exit strategies which result from that process;
  • Apply commercial penalties or rewards once agreed through the governance process.

Expand all sectionsCollapse all sections

Engagement Activation

Engagement Activation - from contract to operational ownership



Engagement activation 1

Business Unit Owner

<1 month post contract signing

The Engagement Activation stage is used to formally transition the commercial and contractual engagement to operational status. A successful Engagement Activation will achieve the following outcomes:

  • All stakeholders are aligned on objectives and required outcomes from the engagement.
  • Clarity of ownership and accountabilities exist at all level of both organisations.
  • The relevant vendor governance forums and attendees are implemented.
  • A Balanced Scorecard monitoring tool is implemented, on which the engagement will be measured.

The relevant governance framework is defined and contracted in the Strategic Sourcing phase and typically follows one of the generic governance models shown in Table 1.

Image – Table 1

Table 1

The Balanced Scorecard is integrated in the Vendor Governance Framework by:

  • Defining how each KPI will be measured and supporting data collected.
  • Instilling a structured process of KPI variance reporting and analysis.
  • Identifying, agreeing and communicating required corrective action.
  • Enforcing any commercial rewards, escalation and performance management processes, and penalties.

Operational Management Governance

Vendor Operational Management Governance



IMAGE – Engagement activation 2

Business Unit Owner

Forum schedule

The Business Owner and operational team must use the structured vendor governance forums as a key tool to manage their operational delivery through vendors.

Business Unit Owners must ensure that:

  • Governance forums established in the Engagement Activation process are held on a timely basis.
  • The appropriate level of seniority is represented at each governance forum;
  • Tabled issues and actions are founded on robust analysis;
  • Outcomes of governance forums are formally documented with clarity as to cause, actionable outcomes and ownership;
  • Repetitive issues that may adversely impact the University’s financial, environmental or reputational position are escalated to senior management in a timely manner and
  • That driving continuous improvement built on robust measurement and analysis is an established part of the governance forums.

Table 2 identifies the high level expectations for typical governance forums.

Governance Forum

Required Attendees

High level terms of reference

Senior Executive Review

Vendor Exec RMIT ED/HOS or above

  • Agree, monitor and direct the vendor relationship at a strategic level.
  • High-level business review and alignment.
  • High risk issue escalation.
  • Cross-business continuous improvement and commercial opportunity discussion.

Quarterly Operations Review

Functional Operations Owners

  • Critical KPI analysis and contractual impact.
  • Monitor adherence to long-term objectives of the contracted arrangements.
  • Monitor and support delivery on key initiatives.
  • Ensure suitability and effectiveness of system, processes and people.
  • Drive focus on operational continuous improvement.

Monthly Operational Reviews

Operations leaders

  • Ensure adherence to operational commitments.
  • Short-term issue resolution that ensures continuing delivery of targeted service levels.
  • Forecasting mid to longer-term requirements.
  • Monitoring, analysing and actioning outcomes of balanced scorecard reporting.
  • Risk registration & mitigation activity tracking.

Annual contract review

Account Manager/CM (Commodity)

  • Formal assessment of performance against contracted KPI’s.
  • Decision-making and activation of decisions in line with contract.
  • Summation of performance over most recent term of the contract.
  • Recommending next steps and amendments to SS&P and Business Unit heads.

Table 2

The following documentation must be captured through the vendor governance process.

  • A formal risk register.
  • Transition and implementations plans that are required post contract signing.
  • Service variation requests.
  • Balanced scorecards per schedule.
  • Minutes of all meetings conforming to guidelines.

Filing copies of balanced scorecards and minutes will be stored in a centralised repository as established and maintained by SS&P to facilitate contract management where required.

Proactive Performance Management

Proactive Performance Management



IMAGE – Engagement activation 3

Business Unit Owner

Ongoing operations

Contract Managers in Business Units utilise the governance framework to undertake high quality and mutually respectful reviews of Vendor performance. Effective Vendor performance reviews are founded on:

  • Unbiased accurate reporting of Vendor and University performance;
  • Accurate and timely collection of performance metrics defined in the Balanced Scorecard;
  • Timely analysis of the reported metrics;
  • Timely identification of options to resolve underperformance, and
  • Transparent reporting and escalation of issues.

Contract Managers and vendors must take deliberate and measured action and intervention to achieve high quality performance outcomes from vendor engagements. Knowledge of challenges and issues with recommendations on remedy is an expected outcome from the operation governance forums. The Business unit have detailed operation knowledge to best govern at a detailed level and must therefore ensure that:

  • Service delivery risk is proactively managed with vendor leadership through these forums.
  • Reported data, analytics and escalations are considered in the governance process.
  • The effective application of penalty and reward mechanisms as built into contractual agreements.
  • That contracted escalation processes are used to formally advise vendors of compliance issues.
  • The utilisation of a balanced scorecard to address both soft KPI issues such as people issues e.g. poor account manager or poorly performing consultant.
  • They track and manage contracted commercials including but not limited to:
    • Price movement
    • Scope variation
    • Savings delivery
    • Budget and actual forecasting

Management of risk – Formal Escalation Process

In the event of material risk to the University due to vendor performance or the formal governance framework not resulting in a timely acceptable resolution of an issue the Business Unit owner must follow the structured escalation process within the contract or in the absence of a contracted escalation process, contact SS&P for advice.

Mandatory Reporting

In addition existing governance structures will be utilised to maintain visibility of strategic individual supplier arrangements and overall vendor management performance, these are:

  • SS&P reporting to the monthly Management Reports;
  • SS&P reporting on a quarterly basis to the Procurement Governance Committee and
  • In the event of Non Compliance to the Audit & Risk Committee.

Vendor Lifecycle Management

Vendor Lifecycle Management



IMAGE – Engagement activation 4

SS&P Category Manager


Strategic vendor relationships typically span many years. The University requires these relationships to be proactively managed through their lifecycles to ensure that only valuable vendor relationships are maintained or extended.

Each vendors will be assessed annually to determine which of the following vendor lifecycle management category is appropriate based on their performance:

1. Grow – Vendor has out performed expectations both commercially and through demonstration of lateral capability that warrants consideration of additional business.

2. Fix – requiring performance management based on KPIs not meeting SLA but with the Business Unit and SS&P agreeing that the vendor has presented an improvement plan that is feasible.

3. Exit – Vendor has consistently underperformed and this is impacting the business. An exit plan must be developed to exit the vendor with risk to business continuity.

The following criteria must be considered when assessing the positioning of the vendor in this matrix.

  • Operational performance
  • Commercial performance
  • Innovation and Technology advancement
  • Continuous improvement.

All strategic vendors will be assessed annually. Vendors categorised as tactical and commodity relationships may be assessed annually but at least once every 3 years. Outcomes of all life cycle reviews must be documented in the annual category plans.

[Next: Supporting documents and information ]