Vendor Performance Audit

# Vendor Performance Audit **Framework: Vendor Performance Scorecard (VPS)** **Output: Scored vendor review, improvement plan or offboarding recommendation** Most vendor relationships drift because nobody's measuring them. This quarterly audit system gives you a structured way to evaluate every significant vendor, surface problems before they escalate, and make data-driven decisions about renewing, renegotiating, or replacing. --- ## When to Run This Audit - **Quarterly** for all Priority vendors (ACV > $10K or operationally critical) - **Semi-annually** for Standard vendors - **Triggered** any time a major incident occurs (SLA breach, security issue, delivery failure) - **Pre-renewal** (minimum 60 days before contract end) --- ## Phase 1: KPI Scorecard Rate each dimension 1-5. Be honest — this is for your decision-making, not the vendor's feelings. ### Dimension 1: Delivery & SLA Performance (Weight: 30%) | Score | Criteria | |-------|---------| | 5 | Consistently exceeds SLA. Proactive communication on any hiccup. Zero surprise failures. | | 4 | Meets SLA >95% of the time. Issues are rare and resolved quickly. | | 3 | Meets SLA most of the time. Occasional misses with reasonable resolution. | | 2 | Frequent SLA misses. Resolution is slow or requires escalation. | | 1 | Regular delivery failures. SLA is aspirational, not operational. | **Evidence required:** Pull ticket data, delivery logs, or incident records. Don't score from memory. ### Dimension 2: Quality of Output (Weight: 25%) | Score | Criteria | |-------|---------| | 5 | Output exceeds expectations. Error rate near zero. Rework is essentially unheard of. | | 4 | Output meets quality bar consistently. Minor issues handled proactively. | | 3 | Generally acceptable quality. Some rework required. | | 2 | Quality is inconsistent. Rework is common. Internal team spends time fixing vendor output. | | 1 | Output frequently doesn't meet standards. Significant internal overhead to compensate. | ### Dimension 3: Responsiveness & Communication (Weight: 20%) | Score | Criteria | |-------|---------| | 5 | Always reachable. Proactively surfaces issues. Communication is clear and timely. | | 4 | Responsive within agreed SLA. Communicates proactively most of the time. | | 3 | Generally responsive but reactive. Sometimes requires chasing. | | 2 | Slow to respond. You often initiate all communication. Escalations required. | | 1 | Unreliable contact. Incidents discovered by you, not surfaced by them. | ### Dimension 4: Value vs. Cost (Weight: 15%) | Score | Criteria | |-------|---------| | 5 | Clear ROI. Cost is at or below market for quality delivered. Strong value demonstrated. | | 4 | Good value. Cost is reasonable given output and relationship quality. | | 3 | Market rate. Neither a bargain nor obviously overpriced. | | 2 | Starting to feel overpriced relative to value delivered or market alternatives. | | 1 | Overpriced for what we get. Alternatives would deliver more for less. | ### Dimension 5: Strategic Alignment & Roadmap (Weight: 10%) | Score | Criteria | |-------|---------| | 5 | Deeply aligned. They understand our business and proactively help us get where we're going. | | 4 | Good alignment. They know our goals and adjust accordingly. | | 3 | Transactional but functional. Delivers what's scoped, no more. | | 2 | Misaligned in places. Their direction and ours are diverging. | | 1 | No alignment. Product/service is moving away from our needs. | --- ## Phase 2: Composite Score & Tier Classification **Weighted score calculation:** ``` VPS = (D1 × 0.30) + (D2 × 0.25) + (D3 × 0.20) + (D4 × 0.15) + (D5 × 0.10) ``` Max score = 5.0 | VPS Range | Tier | Recommended Action | |-----------|------|-------------------| | 4.0 – 5.0 | 🟢 Green — Trusted Partner | Renew, consider expanding scope or strategic partnership | | 3.0 – 3.9 | 🟡 Yellow — Watch | Renew with conditions; issue improvement plan for lowest-scoring dimension | | 2.0 – 2.9 | 🟠 Orange — At Risk | Renegotiate terms or begin sourcing alternatives; 60-day improvement window | | 1.0 – 1.9 | 🔴 Red — Replace | Begin active replacement process; do not renew | --- ## Phase 3: Issue Log Review Before finalizing the score, review your incident/ticket log for this vendor over the review period: - How many incidents were opened? How many are still open? - What was the average resolution time? Compare to SLA. - Were any incidents flagged as critical/high-impact? - Did any incidents result in downstream business impact (revenue loss, client complaints, compliance exposure)? **Incident severity modifier:** - 1+ critical incident with unresolved root cause → drop tier by one level - 3+ medium incidents unresolved → flag for improvement plan regardless of VPS score --- ## Phase 4: Improvement Plan Template (Yellow & Orange Tiers) If VPS < 4.0, issue a formal improvement plan: **Improvement Plan — [Vendor Name] — [Quarter]** - Review Period: [start] – [end] - VPS Score: [X.X] / 5.0 - Tier: Yellow / Orange - Review Date: [90 days from today] **Key Issues Identified:** 1. [Specific issue with evidence] 2. [Specific issue with evidence] **Required Improvements:** 1. [Specific, measurable change required] — Target: [metric] by [date] 2. [Specific, measurable change required] — Target: [metric] by [date] **Consequences if not met:** - Yellow: Move to Orange tier; begin parallel sourcing - Orange: Contract not renewed; active replacement begins **Acknowledgment:** Share this plan with the vendor. Get written acknowledgment. --- ## Phase 5: Offboarding Trigger Criteria Initiate replacement when ANY of the following are true: - VPS score < 2.0 - Two consecutive quarters in Orange tier - Critical incident with material business impact and no credible root cause fix - Vendor signals they are discontinuing the product/service - Market alternative offers >30% better value at equivalent quality - Compliance or security failure When trigger is met: immediately move to replacement sourcing and set a hard cutover date. --- ## Audit Schedule Template | Vendor | Category | ACV | Tier | Last Audit | Next Audit | Owner | |--------|----------|-----|------|------------|------------|-------| | [Name] | Software | $X | Green | [date] | [date] | [name] | Run this as a quarterly review in your ops calendar.