With constantly changing Procurement landscape, efforts are continuously made to moderate the growing complexities involved in the process. Many new approaches are been adopted across the value chain to reduce the long and lengthy processes that form the basis for the delay of key executive projects.
One such concept is of “Framework Arrangements” this umbrella concept has been garnering lot of attention as a solution for lengthy procurement processes. However, with its modern day approach businesses across the value chain are looking forward to implement this in their next bidding strategy.
Framework Agreements in Tendering Process
What is this Framework Arrangement all about?
Frameworks have become a popular mechanism that minimizes the efforts that goes into making frequent purchases by buyers. In other words, “A framework arrangements enables the organization to establish agreement with the terms and conditions under which the contracting authority can award individual contracts for one or more than one service to one or more than one supplier over the lifetime of the framework. (normally 4 years)”
Lets take an example, a school is to be built over the period of 4 years. The buying organization establishes a framework arrangements with 2 contractors, contractor A and contractor B. On the agreed terms and conditions the framework is set up. The buying authority may call-off requirements for the small units needed to be constructed over the period of 4 years. The contractors involved will be providing range of services from provision of paper, furniture’s, electronic items and more on until the school is completely built.
Framework arrangements are largely used by the authority that undertakes projects with no set schedule of completion. Once the company secures a place in the agreement then they will never lose it and may have access to large and potential contracts that’s the major benefit framework offers. A framework covers the provision of a generic group of goods, works or services or both. For instance, goods like office furniture, services like design consultancy and works like construction of classrooms.
There are broadly 2 types of Framework Arrangements the former one is framework contracts and the latter one is framework agreements.
Framework Contracts:
A framework contract has a consideration of a monetary sum paid up front by the buying organization to the supplier. This payment is made in order to create a contract on the terms and conditions offered by the supplier to the buying organization so it is important to first ensure that the terms and conditions are correctly drafted so that the supplier is tied in to what has been agreed.
Framework Agreement:
A framework agreement is the same arrangement without the up-front consideration – instead, each time a buyer uses the agreement a separate contract is formed by the consideration paid for the order in question. Some organisations call framework agreements ‘trading agreements’ – others might call them ‘standing offers’. ‘Blanket orders’ etc.
The public contractors are largely benefited from the inception of framework arrangements as it gives the freedom from re-advertising of the tenders and re-application for the contract awards by the suppliers. More importantly framework in the tendering allows you to have a long-term business relationship with the buyer along with the continuous source of revenue.
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