Benchmarking Clause template clause
Updated: 26 March 2026
Please note: these example clauses are intended as a starting point, not as legal advice. Always adapt the text to your specific situation and have important contracts reviewed by a legal professional.
Clause text
Article [X] - Benchmarking
1. The Client shall be entitled to have a benchmark review conducted [annually / once every two years / at any time after the first [number] months] to assess the market conformity of the fees, prices, and service levels applied by the Supplier ("the Benchmark Review").
2. The Benchmark Review shall be conducted by an independent third party approved by both Parties. If the Parties fail to agree on the reviewer within [number, e.g. 14] days, [designated body, e.g. the Chamber of Commerce] shall appoint a reviewer.
3. The Supplier shall provide the reviewer with all cooperation reasonably necessary, including the provision of relevant cost and pricing information, subject to the confidentiality provisions of this Agreement.
4. If the Benchmark Review reveals that the Supplier's fees deviate by more than [percentage, e.g. 10]% from the market average for comparable services, quality, and scope, the Parties shall enter into consultations within [number, e.g. 30] days regarding adjustment of the fees. If the Parties fail to reach agreement within [number] days, the Client shall be entitled to terminate the Agreement with due observance of a notice period of [number] months.
5. The costs of the Benchmark Review shall be borne by the Client, unless the review reveals that the fees exceed the market average by more than [percentage, e.g. 15]%, in which case the Supplier shall bear the costs.
What does this clause mean?
A benchmarking clause gives you the right to periodically test whether the fees you pay are still in line with the market. In long-term contracts, there is a risk of paying rates well above current market prices for years, simply because no one makes the comparison.
The clause functions as a market correction mechanism. An independent party compares your rates with those of comparable service providers. If the deviation exceeds an agreed threshold, the supplier must come to the table to adjust prices. According to CIPS, 80% of invoices do not match the contractual terms. A benchmarking clause not only helps with price correction but also forces a periodic moment at which you assess the entire contractual relationship.
Paragraph 5 contains an incentive: if fees are well above market level, the supplier pays for the review. This prevents suppliers from treating the benchmark as a non-binding discussion topic.
When should you use this clause?
Include a benchmarking clause in multi-year contracts with substantial financial commitments, particularly in IT outsourcing, facilities management, cleaning services, security, and other services where the market moves quickly.
The clause is most valuable for contracts longer than three years. According to Bain & Company, external procurement represents 43% of total business costs. Even a small percentage saving on that expenditure delivers significant results. Combine the benchmarking clause with a price indexation clause: the indexation absorbs inflation, while the benchmark tests whether the overall picture remains market-conform.
Customize these elements
- 1Align the benchmark frequency with the contract term: annually for contracts of three years or less, every two years for longer terms
- 2Clearly define the comparison parameters: not just price, but also quality, scope, complexity, and service levels
- 3Limit the termination right to situations where the supplier is unwilling to adjust fees, not at every deviation
- 4Consider a mutual benchmarking clause if the supplier should also have the right to adjust fees upward when market conditions change
Sources
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