The scoreboard: Managing service agreements and performance

In service agreements, effective performance management is essential. Two key tools used to monitor and enforce service delivery are key performance indicators (KPIs) and service credits.

These mechanisms help ensure that both parties understand their obligations and have a structured framework for addressing underperformance. For commercial lawyers, the ability to draft and negotiate these provisions clearly and effectively is a core aspect of contract management.

The function of KPIs and service credits

KPIs are measurable targets set to evaluate how well a service provider is performing. Common KPIs include:

• Response times: e.g. answering support tickets within a set timeframe
• System availability: such as uptime guarantees in IT services – particularly important for sporting events like Wimbledon during key times such as ticket ballots and sale periods
• Service quality: including error rates or customer satisfaction levels. In the context of sporting events like Wimbledon, this could include security responses, cleaning and waste management or guest satisfaction in hospitality areas
• Regulatory compliance: ensuring adherence to legal and industry standards.

Service credits are financial deductions applied if KPIs are missed. They offer a form of compensation and incentivise compliance, while providing the customer with a structured remedy for shortfalls in performance.

Drafting KPIs and service credit provisions

From a legal perspective, the language used in setting KPIs and service credits must be clear, specific, and enforceable. Ambiguity in definitions can lead to disputes over whether targets have been met.

KPIs must also be achievable and proportionate to the services delivered. Setting unrealistic targets can result in repeated breaches and commercial friction. Service credit regimes should similarly be fair and not operate as punitive measures. Disproportionate or excessive penalties risk being challenged or ignored in practice.

Tiered service credits can offer a balanced solution where the severity or frequency of the breach dictates the level of credit applied. For example, a missed KPI once may result in a small deduction, but repeated failures could trigger escalating credits or even contractual termination rights.

Exclusions are another key aspect as not all failures should lead to service credits e.g. events outside the provider’s control (such as natural disasters or major third-party failures) are typically carved out. This ensures the mechanism remains fair and commercially sustainable.

Managing claims and enforcement

The commercial contract should outline how service credits are calculated and claimed. This often involves written notices and clear evidence of breach. There should also be provisions allowing the service provider to respond or dispute the claim. If unpaid, the contract may permit remedies such as withholding future payments or termination for material breach.

KPIs and service credits are essential components of many commercial contracts, acting as both performance motivators and risk management tools. For commercial lawyers, careful drafting is key: ensuring that terms are clear, achievable, and enforceable. When structured well, these provisions help parties avoid disputes, maintain service quality, and ultimately “keep score” fairly throughout the lifetime of the contract.