You want to identify the spend of purchase orders that do NOT have a contract reference, although an existing contract could have been used. What key performance indicator (KPI) provides this…

Question

Options

• AContract leakage
• BOff-contract spend
• CUnused contracts
• DPurchase order value

• A
  83% (35)
• B
  10% (4)
• C
  2% (1)
• D
  5% (2)

Explanation

Contract leakage measures exactly this scenario - purchases made without referencing an available contract, even though a valid contract existed that should have been used. This represents "leaked" spend that bypassed the negotiated agreements, costing the organization the benefit of contracted pricing and terms.

• B (Off-contract spend) is close but broader - it covers all spending outside contracts, including cases where no contract exists at all, not specifically where one could have been used.
• C (Unused contracts) measures the value of contracts that were never utilized, focusing on the contract side rather than the purchase order side.
• D (Purchase order value) is simply the total monetary value of POs - a basic metric with no reference to contract compliance at all.

Memory tip: Think of "leakage" as money dripping out of your contracted agreements - spend that slipped through the cracks when a contract was available but not applied to the PO.

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