Ask the Experts: Vendor Oversight

Posted in Metrics

Q: One of our vendor oversight metrics measures whether our CRO has billed us for the amount that we expect by quarter. We are finding that this sometimes green even though we know there are problems with costs not matching the work that should have been completed. Or it might be red but when we drill down, actually the costs are in line with what has been completed. Can you recommend a metric that might work better for oversight of costs with the CRO? (Metric Insights, Mar. 2021) 

A: Organizations typically measure whether costs are as expected. However, even when the costs are as expected, there may be problems because not all the activities that were expected to be completed to date happened. For example, the costs might be as expected for the date, but the site activation and patient enrollment activities are far behind. What you really want to know is whether costs are as expected compared with the work that has been completed. In this example, costs are higher than expected for the work completed because not enough sites have been activated and patients enrolled. There is a metric that calculates this – the Schedule Performance Index which we have incorporated into our Vendor Oversight Finance metrics. As contracts are typically based on a price per unit, this measurement is actually what the Sponsor and CRO should review from a cost accounting perspective. The Schedule Performance Index takes the cost of all the work that will be charged to the sponsor (the units completed to date) and divides by the cost of the units expected. This approach focuses on the actual costs that will be charged to the sponsor – complexities due to invoicing and payment schedules are not included. If the Schedule Performance Index is 1, then everything is on track. If above 1, then more work has been completed than expected – you are ahead of schedule according to the costs. And if less than 1, less work has been completed than expected and you are behind schedule according to costs. The Schedule Performance Index allows you to link the time and cost dimensions of the work, and with other metrics such as % milestones complete will help you and the sponsor manage costs.

Ask the Experts: Answers to your Metric Questions

With more organizations focusing on metrics, we have received an increase of questions ranging from how to use metrics, why some metrics are better than others, which type of metrics is best to use, as well as questions about specific metrics. This column provides a forum for us to share these questions and answers with you. Submit your question ›

Linda Sullivan

Senior Advisor, Metrics & Performance Management

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Keith Dorricott

Metrics Subject Matter Expert

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