Using Should Cost Models, KPIs and Risk Allocation in Framework Call-Offs

Purpose: How to carry three core Sourcing Playbook disciplines through a framework call-off so the commercial model remains coherent and buyer-owned.

How to carry three core Sourcing Playbook disciplines through a framework call-off so the commercial model remains coherent and buyer-owned. This matters because public procurement decisions are rarely isolated events. A choice made during planning can affect competition, affordability, service quality, supplier behaviour and the ability to manage the contract later. The strongest approach is therefore to use the source guidance as part of an end-to-end commercial process, with clear ownership and evidence rather than as a document that is completed after the key decisions have already been taken.

Quick summary

• Framework pricing data can support analysis, but the calling-off authority owns the Should Cost Model for its specific requirement.
• The model can support affordability, procurement design and scrutiny of supplier proposals.
• The framework should permit buyers to set appropriate contract-specific KPIs and service levels.
• The buyer is responsible for agreeing and monitoring those KPIs during contract delivery.
• The provider can identify common framework risks, but the buyer must identify and allocate risks specific to its contract.

What the guidance means in practice

The source material gives several anchors for that process. Framework pricing data can support analysis, but the calling-off authority owns the Should Cost Model for its specific requirement. The model can support affordability, procurement design and scrutiny of supplier proposals. The framework should permit buyers to set appropriate contract-specific KPIs and service levels. These are not interchangeable statements: some describe statutory or policy requirements and others describe recommended commercial practice. Teams should identify which category each requirement falls into, apply it to the organisation and procurement in scope, and keep a record of the judgement. Where guidance from 2021 or 2023 predates the Procurement Act 2023, its commercial principles can remain useful, but current legislation, regulations and current statutory guidance take precedence on legal process.

The practical value becomes clearer when the remaining guidance is read alongside the project lifecycle. The buyer is responsible for agreeing and monitoring those KPIs during contract delivery. The provider can identify common framework risks, but the buyer must identify and allocate risks specific to its contract. The buyer should confirm that the available pricing and payment mechanisms complement the chosen risk allocation and incentives. In day-to-day terms, this means the buyer should be able to answer three questions at any approval point: what outcome are we trying to achieve, what evidence supports the proposed commercial approach, and what will need to be managed after the decision is made? If those answers are weak, more analysis is normally more useful than adding another layer of narrative to an approval paper.

A practical process to follow

A proportionate process can be built into existing governance. The steps below are deliberately practical. They are not a substitute for the detailed source guidance, legal advice or local standing orders, but they provide a useful structure for a procurement or commercial team.

1. Step 1. Define service volumes, scope, assumptions and the whole-life period for the call-off cost model. Record any assumption that could change the conclusion and when it will be reviewed.
2. Step 2. Use framework pricing evidence as an input rather than treating ceiling or catalogue rates as the expected contract price. Keep the analysis proportionate to the value, risk, novelty and criticality of the requirement.
3. Step 3. Set measurable KPIs that follow from the specification and intended outcomes. Capture the source evidence and name the person accountable for the next decision.
4. Step 4. Create a contract-specific risk register before fixing the payment mechanism. Record any assumption that could change the conclusion and when it will be reviewed.
5. Step 5. Test that the framework permits the required liability, performance and commercial incentive structure. Keep the analysis proportionate to the value, risk, novelty and criticality of the requirement.
6. Step 6. Carry the cost model, KPI definitions and risk register into mobilisation and live management. Capture the source evidence and name the person accountable for the next decision.

What good looks like

Good practice is visible in the decision trail, not only in the final document. A reviewer should be able to follow the line from the service need, through market and cost evidence, to the route, evaluation, contract terms and management arrangements. Where several functions contribute, the file should show who owns each decision and where challenge occurred. The same principle applies to handover: useful assumptions, models, KPI definitions, risks, supplier information and approval conditions should move into mobilisation and contract management instead of being left in the sourcing archive. This continuity is particularly important for long-running public services, where staff can change but the organisation remains accountable for the outcome.

Recommendations for procurement teams

The following recommendations are suitable for teams that want to embed the topic into normal ways of working rather than create a parallel compliance process:

• Keep the cost model under version control.
• Make KPI data sources and calculation methods explicit.
• Allocate each material risk to the party best able to manage it rather than simply to the supplier.
• Use early engagement or framework competition mechanisms where they lawfully provide better evidence.
• Revisit assumptions when material contract changes occur.
• Ensure the resulting call-off remains within the framework terms.

Common pitfalls to avoid

The most common problems are usually process failures rather than a lack of templates. Watch particularly for the following:

• Treating maximum framework rates as a reliable estimate of total cost.
• Using generic framework KPIs that do not measure the local contract.
• Transferring risk that a supplier cannot realistically control.
• Designing specification, pricing, KPIs and risk in separate workstreams.

Easy-to-read takeaway

For using should cost models, kpis and risk allocation in framework call-offs, the core discipline is to start early, connect the analysis to a real decision and preserve enough evidence for the next stage of the lifecycle. The source material should help teams make better decisions, not merely produce more paperwork. Before acting on a live procurement, confirm the current version of the Procurement Act 2023, regulations, Procurement Policy Notes and any organisation-specific approvals or delegations. This is especially important for thresholds, notice duties, exemptions and policy requirements that can change over time.

Source basis

Primary source used: Using the Playbook in Conjunction with Framework Agreements, June 2023. Related articles in this collection also draw on the other supplied Cabinet Office, HM Treasury and Procurement Act materials where the topics overlap.

This article is general procurement support content. It should be read alongside current legislation, statutory guidance and your organisation’s own governance and legal advice.