"Will Parsons and Mark Allen provided really useful input to our Best Value Review of Procurement and helped us achieve a much better result with more substantial savings identified through improved procurement practices"
Best Value Officer
Southend-on-Sea Borough Council
Characteristics of EU Framework Agreements
An EU compliant framework agreement is an agreement that enables a buyer to award multiple contracts on a call-off basis from one or three or more suppliers, but not two, over the life of the agreement. It's a suitable approach when you know that you will need to purchase specific goods and services, but not exactly when or how much.
For example, let's suppose a buyer knows that they will need to purchase Quantity Surveying (QS) services in the future; they estimate that this will cost about £160,000 a year. This exceeds the EU threshold. Therefore the buyer must follow EU procurement procedures. The best way to do this is to use a framework agreement with say three suppliers of QS services. This allows the buyer to 'call-off' services from each of the three suppliers, without having to go through a lengthy EU compliant procurement exercise each time. It also enables buyers to ensure prices remain competitive for the duration of the agreement by instigating mini-competitions with all three suppliers.
Key characteristics of a framework agreement
- Awarded using an EU restricted procurement procedure
- Can last for a maximum of four years
- No obligation on the buyer to purchase anything during the term of the agreement
- No limit on the number of call-off purchases a buyer can make as long as they do not exceed the value of the agreement by a significant amount
- The number of suppliers party to the agreement is important; One supplier, from whom the buyer purchases using the terms of the agreement
- The number of suppliers party to the agreement is important; Three or more suppliers, The buyer purchases from the supplier that offers best value; or The buyer can hold a mini-competition amongst all suppliers party to the agreement capable of meeting the buyer's needs
- Duration of the agreement, limited number of suppliers and multiple purchases can enable parties to develop closer and potentially more productive relationships
- The total price for each purchase is agreed at the time the purchase is made
- Very flexible, each purchase can be unique, within the terms of the agreement
- Risks can be more transparent and are likely to be shared more equitably between buyer and supplier
The benefits of framework agreements include:
- Time saving, in terms of not having to manage a separate EU compliant procurement process for each purchase. Each EU procurement procedure can take anywhere between six and twelve months. Time saved can be used for other activities that add further value.
- A reduction of the risk of challenge, a reduction in the number of EU procurement exercises means less opportunity for challenges to procurement decisions
- Enabling continuous improvement, framework agreements allow the parties involved to develop closer and more productive relationships, for example continuous improvement by applying what is learnt from one purchase with a supplier to another with the same supplier
- Greater flexibility, within the terms of the agreement. Changes can be made if they do not significantly vary the specification. They can be made cost effectively and quickly, as and when needed.
- Maintaining competitive pricing, as the agreement can enable mini-competitions if there are three or more suppliers
- Potential risks are less likely to occur, because the impact, if a risk does occur, is more likely to be felt by both buyer and supplier. This is because a framework agreement can bind the buyer and supplier more closely, to the point that it is in the interests of both to actively manage and mitigate risks.
- Complacency, buyers still need to actively and thoroughly manage supplier performance and administer the framework agreement
- High expectations, suppliers tend to have unrealistic expectations of the amount of work they will receive when they become party to a framework agreement