Public procurement teams are under pressure to find savings without cutting services, stretching staff even further, or compromising the programs people rely on. One of the clearest opportunities is already inside the vendor portfolio.

When vendors under-perform, the cost rarely shows up as one clean line item. It shows up in missed deadlines, service issues, rework, frustrated end users, staff follow-up, corrective action, and lost contract value. That makes vendor under-performance one of the most valuable, available, and easily remediated cost centers in public procurement. Agencies already have the contracts, the vendors, and the authority to monitor performance. Using a tool like Canary provides the final puzzle piece, end-user feedback.

So how much savings can be accessed by addressing these costs? To answer this question, we built our Cost of Under-Performance Calculator. It gives procurement leaders a fast way to estimate the annual financial impact of under-performing vendors across their portfolio.

The calculator starts with two inputs:

• Total annual vendor spend
• Total number of vendors

From there, it estimates three figures:

• Performance loss
• Staffing cost
• Total estimated annual cost

The goal is not to produce a perfect audit. The goal is to give procurement teams a credible starting point for understanding how much value may be leaking after the contract is awarded. The calculator uses several data-backed underlying assumptions to do this, but you can adjust these as you see fit.

Assumption 1: How many vendors are under-performing?

The calculator defaults to 15% of vendors under-performing, based on Procurated performance data. Procurated has over 110,000 points of vendor performance data. By tying that back to customer spend data, we can reasonably assume this figure.

That default should be treated as a planning assumption. Some agencies may see a lower rate because they have strong contract monitoring, active end-user feedback, and clear escalation processes. Others may see a higher rate because performance issues are scattered across departments, buried in emails, or only documented when the relationship has already become a problem.

Even a modest percentage can create a large financial impact. In a portfolio of 1,000 vendors, a 15% under-performance rate means 150 vendor relationships may be creating avoidable cost, risk, or staff burden. The immediate answer is not always to replace those vendors. Often, the bigger opportunity is to identify issues earlier, document them more consistently, and give the agency a better path to intervene before more value is lost.

Assumption 2: How much value is lost when vendors under-perform?

The calculator defaults to a 15% performance loss on affected vendor spend. Users can adjust that figure, but the calculator limits the range to 10% to 20%.

That range is based on McKinsey’s contracting performance research, which found that poor supplier performance can result in higher total costs of 10% to 20% in a contracted category. McKinsey also notes that many contracts lack the basic elements needed to enable stronger vendor performance and cost savings.

For public procurement, the takeaway is simple. The award is not the finish line for savings. A competitive solicitation and a well-negotiated contract can still lose value after award if the vendor is late, unresponsive, missing service levels, or creating work for agency staff.

Assumption 3: How much staff time does under-performance create?

The calculator assumes 40 hours of manual staff work per under-performing vendor.

That estimate reflects the work usually required to move a vendor issue from informal frustration to documented action: written notice, documentation, corrective action planning, tracking, follow-up, internal review, and closeout. It also aligns directionally with third-party vendor management benchmarks.

The exact number will vary. Some issues are resolved with a short conversation. Others require months of follow-up. But the broader point holds: poor vendor performance does not just reduce contract value. It also consumes staff time that could be spent on higher-value procurement work.

Assumption 4: What is the cost of procurement staff time?

The calculator uses a default hourly wage of $35 for procurement staff.

That is a conservative planning figure based on Bureau of Labor Statistics data. BLS reports that the May 2024 median annual wage for buyers and purchasing agents was $75,650, which equals roughly $36 per hour using a 2,080-hour work year. BLS also reports a much higher median annual wage for purchasing managers, so the true internal cost may be higher when a vendor issue requires review from senior procurement staff or leadership.

The calculator keeps the staffing estimate simple by focusing on procurement staff time. In practice, vendor under-performance often pulls in end users, finance, legal, department leadership, and program staff as well.

Why this cost center is so addressable

Vendor under-performance is valuable to address because it sits directly on top of existing spend.

It is available because the signals already exist inside the agency. End users know which vendors are difficult. Contract managers and Procurement teams know which vendors create renewal risk, service issues, and internal noise.

It is remediable because agencies have multiple touchpoints to act: contract monitoring, performance documentation, corrective action, vendor reviews, renewal decisions, and future sourcing strategy.

The gap is visibility. Too often, performance issues are known locally but not captured centrally. They are discussed in emails, hallway conversations, department meetings, and renewal debates, but they never become a usable performance record. That’s where tools like Canary come in. Canary turns disparate performance feedback into actionable structured data and automated alerts and insights.

Try the calculator

The Cost of Under-Performance Calculator helps procurement teams estimate the hidden financial impact of vendor under-performance in minutes. Enter your total vendor spend, enter your vendor count, review the assumptions, and adjust the model to reflect your agency’s experience.

For many public procurement teams, the next major savings opportunity may not require a new sourcing event or a painful budget cut. It may come from making sure the contracts already in place are delivering the value taxpayers were promised.