A Framework Agreement is a general term for an overarching (or umbrella) agreement with supplier(s). The Framework Agreement sets out the terms and conditions under which specific purchases (call-offs) can be made throughout the period of the agreement. The terms normally include price, quality, quantities and timescales as well as details as to how the Framework Agreement call offs can be made.
A Framework Agreement can be put in place between one or several buying organisations and one or several suppliers. Only the buying organisation(s) listed in the Framework Agreement can use it to put in place their own firm contracts. Once the Framework Agreement has been put in place no further suppliers can be added to the Framework Agreement.
Framework Agreements can help suppliers to participate in national and large collaborative contracts where the framework is often divided into specialist or geographical lots.
A lot is where a procurement process separates a procurement exercise into smaller categories e.g. type of product or service, geographical location.
The value of the framework is the estimated value of all contracts (call offs) envisaged to be awarded under the agreement during its duration. The total value of call offs made by buying organisations cannot exceed the total Framework Agreement value.
The duration of the call-off contract may extend past when the date when the Framework Agreement ends as long as this is in accordance with the Framework Agreement terms and conditions. The end date of any call of contract must be stated in the Framework Agreement procurement documents.
A Framework Agreement itself is not a contract and therefore it is not a guarantee of work to the framework suppliers. However the procurement exercise (call off) that puts in place a Framework Agreement is subject to procurement legislation.
An example of a Framework Agreement is:
- a Centre of Expertise puts in place a Framework Agreement for Office Furniture for 3 years to be used by all local authorities (Scottish Councils);
- the Framework Agreement is for a total value of £10 million;
- the Framework Agreement includes the product lists for desks, chairs and cupboards with respective specifications and pricing. As well as other agreed terms e.g. lead time, delivery times;
- the Framework Agreement is awarded to two suppliers: Supplier X for desks, supplier Y for chairs and cupboards.
- A local authority has a requirement for desks for 2 years. They choose the items they want from the Framework Agreement and then contact Supplier X via the method listed in the Framework Agreement and “call off” the desks at the pre-agreed pricing they require.
- The total call off value comes to £100,000;
- The value available for future call offs from the Framework Agreement reduces by £100,000.
The Contract Notice published in Public Contracts Scotland, which advertises the new requirement, will confirm whether the Contract Notice is for a Framework Agreement, who is running it and the procurement processs who can use it.
The Framework Agreement does not bind any public body to purchase goods or services from it – the public body can decide to use the framework agreement or not. If the public body does not consider that the framework agreement provides value for money it can choose to award a contract outside of the framework agreement.
Types of Framework Agreement
Framework Agreements (and their resulting call offs) can be set up in several ways, dependent on the requirement and the market, as shown in in the diagram below:
Framework Agreements can take one of two forms:
- a single supplier framework
- a multi-supplier framework
Single Supplier Framework Agreement
For a Single Supplier Framework Agreement all goods and services covered by the Framework Agreement have been awarded to one supplier. Any call offs are made from this one supplier at the agreed Framework Agreement prices and terms. Once the Framework Agreement has been put in place no further suppliers can be added.
Multi Supplier Framework Agreement
In this case the Framework Agreement has been awarded to several suppliers this can either be for the whole Framework Agreement or, if the Framework Agreement is broken down into lots, then there could be differing suppliers for each lot. Once the Framework Agreement has been put in place no further suppliers can be added to it.
Call offs from the Framework Agreement can be made in several ways:
The Framework Agreement has awarded the supply of differing goods and services to differing suppliers. This can be done by awarding separate lots. Much like the single supplier process, once the buying organisation has identified which goods and/or services they require they will then approach the nominated supplier(s) directly to purchase at the Framework Agreement terms (including prices).
The Framework Agreement ranks the awarded suppliers i.e. 1, 2, 3, etc. for supplying specific goods and services. When the buying organisation wants to call off they will approach ranked supplier 1 (for the goods/services required) first to procure their requirements at the Framework Agreement terms (including prices). Only if the supplier ranked number 1 cannot supply when required, the buying organisation will then approach supplier ranked 2, and so on.
This is where not all the terms or a procurement exercise are set out in the Framework Agreement e.g. it may not have agreed prices. In this case the public body must run a mini competition (a new procurement exercise) between the suppliers that are capable of performing the proposed call-off contract.
As the name suggests a mini competition is a smaller “mini” procurement exercise as many of the terms will have already been agreed in the Framework Agreement. However buying organisations can add new terms to this mini-competition as long as it covers areas that the Framework Agreement allows for and these terms do not conflict with the original Framework Agreement terms.
Under a mini-competition the Framework Agreement suppliers will bid for the new requirement. The call-off contract must be placed with the bidder who has submitted the best bid in accordance with the mini-competition award criteria.
It is important that suppliers understand that being part of a multi-supplier framework is not a guarantee of business - you may still have to compete and be successful in mini-competitions.
Per the diagram below, it is more likely for a Framework Agreement to be put in place by a Centre of Expertise: to use nationally or by sector. Call offs and mini competitions are then made by the individual buying organisations. However this is not always the case i.e. one buying organisation can put in place their own Framework Agreement or several buying organisations can collaborate and put in place their own Framework Agreement.