Green Scorecard, Deteriorating Service: IT Managed Services at Year Three
MetroWater Utilities has a 5-year, $60M IT infrastructure managed-services contract with a strategic supplier, now in year 3. The supplier's monthly scorecard shows 99.2% availability, 94% first-contact resolution, and all 12 KPIs green. Yet business-unit leaders complain about slow onboarding of new sites (average 47 days vs. a 20-day target) and a 30% rise in severity-1 incidents over six months, mostly from a subcontractor. The contract has no subcontractor approval clause and no continuous-improvement obligation. The supplier relationship manager spends 70% of her time on invoice disputes and ticket escalations. The contract's service credits are capped at 5% of monthly fees. The CIO wants to know whether to renegotiate, invoke remedies, or plan for recompete at year 5.
1. Critique the performance measurement system and explain why the scorecard is green while performance is deteriorating.
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The scorecard measures activity, not outcomes. Availability of 99.2% can be true for installed sites while new-site onboarding takes 47 days. First-contact resolution can be gamed by closing tickets early. Twelve green KPIs alongside a 30% rise in severity-1 incidents is a contradiction that should trigger a data-quality review, not reassurance.
Missing measures. There is no onboarding cycle time, no severity-1 rate or recurrence, no subcontractor performance, no customer satisfaction, no root-cause closure, and no leading indicator. Averages hide the tail. Equal weighting across 12 KPIs dilutes the one or two that matter. Service credits capped at 5% weaken the link between performance and consequence.
Redesign. Use a balanced set: outcome (business-unit satisfaction, onboarding time), process (change-cycle time, root-cause closure), leading (subcontractor qualification, backlog), compliance, and relationship. Add thresholds and trends, not just monthly snapshots. A scorecard that cannot explain a deterioration is a reporting artifact, not a management tool.
2. What governance and contract changes would you recommend for the remaining two years?
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Renegotiate now. Waiting until year 5 gives away leverage. The supplier wants renewal, and a credible recompete threat is the strongest lever. Use the remaining two years to correct the contract.
Governance. Create tiered governance: a strategic board (CIO and supplier VP), an operational service review, and joint improvement teams. Give the relationship manager decision rights and move invoice disputes to a shared-services fix - rate-card clarity, catalog, and auto-approval - so her time shifts to value.
Contract changes. Add subcontractor approval and flow-down of SLAs; a continuous-improvement obligation with a savings target and gain-share; severity-weighted service credits with a higher cap; a benchmarking clause; and exit/transition assistance with data and knowledge transfer. Tie a portion of fees to outcome measures, not just availability. The current contract directs attention to disputes, not performance; the fix is incentive design, not more meetings.
3. How would you use continuous-improvement methodologies to address onboarding and severity-1 incidents?
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Use DMAIC on onboarding. Define the 20-day target, measure the 47-day baseline, map the process, and find the delays - site surveys, subcontractor scheduling, approvals. Pilot changes, then control with standard work and a dashboard. A 50% reduction in 90 days is a credible target if the delays are concentrated.
Attack severity-1 incidents with Pareto and FMEA. If most incidents trace to one subcontractor, the first countermeasure is a qualification requirement and a control plan, not a general request to improve. Use 5 Whys on the top three causes and track recurrence, not just volume.
Select by impact and feasibility. Run onboarding and severity-1 together, but do not launch ten initiatives. Establish a continuous-improvement council with the supplier and business units, and hardwire benefit realization into the contract. Continuous improvement needs a baseline, a method, an owner, and a consequence; otherwise it is a slogan.