Chapter Two

Public Procurement and

Framework Agreements
Objectives
• After completing this chapter the students are able to:
• Understand the concept of framework agreement
• Differentiate framework agreements from other
contracts
• Associate framework agreement contracts with that
of other contracts
• Understand the benefits of framework contracts
• Discuss on the challenges of framework agreement
contracts
 Introduction
• The Framework agreement is often known as an
umbrella agreement.
• It is an agreement which is reached between two
parties to cover a long-term collaborative
arrangement.
• These are used typically where an employer has a
long-term program of work in mind and is looking
to set up a process to govern the individual
construction or supply packages.
• It allows an employer to instruct another party to
carry out works or provide services, by reference
to pre-agreed terms, over a (usually) pre-agreed
period of time.
The concept of a framework agreement is that:
– It is, essentially, an arrangement which establishes the
contractual terms.
– It will be applied by subsequent orders made for the
goods, services or works.
– It will be covered by the framework over the period of
time during which it is enforced.
• The law has clarified the position in terms of the
availability of framework agreements
• The law has introduced restrictions
• It also controls over their use and ambiguities
about the legal rules.
• Framework agreements, sometimes called
– Indefinite Quantity Contracts,
– Two-phase procurement instruments,
– The first competitive round generates sometimes one
but more often multiple awards to contractors.
– This framework agreement also managed by the
individual procuring entity
• The second round of competition, between one or
more of the contractors, from the qualified pool,
yields a specific contract with one of them to supply
the particular goods or services required.
• Second brief round of competition is used to choose
one of the contractors to handle each specific visit.
• The first round will generally include most of the
features of the request for proposals method of
procurement.
• The second round will generally resemble request for
quotations from the qualified group of contractors.
• Variations on this approach are possible, depending
on the number of contractors awarded a framework
agreement.
 2.2. The meaning and definition of framework
agreement
• There is some confusion as to the precise
coverage of the rules on framework agreements.
• This confusion results primarily from lack of
clarity as to the use of the terms “framework
agreements” and “framework contracts”
• It is also because of whether or not framework
contracts are a type of public contract.
• The suggestion that a “framework contract” is
the same as any other public contract
• It seems to confuse the establishment of terms
for the delivery of works, services or supplies
with an obligation to provide, receive and pay
for those works, services or supplies.
• The term “binding” framework is used in the
very rare.
• The contracting authority must use the
framework agreement for any purchases it
wishes to make of the works, services or
supplies which form its subject-matter.
• The large number of non-binding “buying club”
framework agreements provides contracting
authorities with a wide choice of potential
suppliers.
• This means that contracting authorities are in a
position to “shop around” for the supplier that
offers the best deal.
• Framework agreements are sometimes
criticized as anti-competitive.
• It is because the first round of competition,
which yields no specific contract, resembles a
pre-qualification and not a full and open round
of competitive proposals.
• The second round involves price competition but
it is only limited to the pre-qualified suppliers
and contractors.
• Sometimes, in fact, procuring entities will only
involve one or two or three contractors in the
second round on the premise that full
competition has already taken place in the first
round.
• On the other hand, there are significant gains in
cost and efficiency
• Much of the preliminary work of the
procurement process is accomplished during the
first round, at little cost to the government.
• The second round, focused on specific tasks or
orders, is likely to generate substantially
competitive prices.
• Record keeping in this method of procurement is
particularly important, but a little bit complicated
because of the two rounds of competitive action.
A framework can be set up by:
• An individual contracting authority;
• A contracting authority acting on behalf of a
number of contracting authorities;
• Central purchasing body acting on behalf of
itself or a number of contracting authorities.
Can frameworks be applied for all procurements?
• Frameworks may not be suitable for all types of
purchasing
• contracting authorities need to be certain that a
framework will provide an economic and efficient
means of purchasing.
• The most appropriate use of frameworks is where
a contracting authority has a repeated requirement
for works, services or supplies,
• but it is used when the exact quantities are
unknown.
• Contracting authorities must be in a position to
manage a framework agreement,
• The needs of both the contracting authority or
the provider(s) must be met
• The operation of the framework agreement must
be closely monitored.
• Care must also be taken to ensure that
– framework agreements are not set up to distort
competition
– They are not improperly used.
What procedure is used for procuring a framework
agreement?
• Any one of the four main competitive procedures
may be used for procuring a frame-work
agreement
• Although it is most common to use the open or
restricted procedures.
• It is only when contracts are awarded under the
framework agreement that different;
• Framework agreement-specific provisions should
be apply.
• It should be noted that a framework agreement
is not a list of selected economic operators that
are qualified to provide the works, services or
supplies covered by the agreement.
• To be appointed to the frame-work agreement,
– economic operators will have to have both qualified
and submitted tenders,
– who are evaluated by the contracting authorities, and
– it is those tenders that will provide the basis for
future awards under the framework agreement
 Framework Agreements in the Context of
Consulting Services (Indefinite Delivery
Contracts, Price Agreements or Standing Offers)
• Indefinite delivery contracts refer to contracts in
which an individual consulting firm or an
association of firms is hired for a specified time
period (usually three to five years) to undertake
tasks as and when the need arises.
• The specific workload is unknown at the outset;
• Indefinite delivery contracts are usually agreed
upon because it is anticipated that the services
will have two particular characteristics:
– Clients will need access to immediately available or
– on-call services for urgent assignments, and
– a lengthy competitive bidding process is impossible
because of external circumstances.
• These services could include experts for urgent
remedial actions in emergency situations caused
by natural calamities, wars, epidemic or
outbreaks.
 – Each individual consultancy will be quite small,
– making an expensive competitive selection process
inefficient, although, when added together, the
amount of advice is substantial.
• These combined factors make it worthwhile to
appoint suitable consultants who can be on
standby and are called upon when needed.
• However, locking in one set of advisers over a
considerable period of time raises a number of
issues related to the selection of the consultants;
• Therefore, the quality and price of the services
proposed must be addressed.
• Since it is not known how often or for what
specific tasks the consultants will be called upon,
they may not be able to submit a plan of work or
a fixed total price.
• At the same time the long contract period and
the unknown activation dates mean that
consultants may always credibly claim that the
requested expert is not available.
• Administering an indefinite delivery contract
requires considerable time and energy from
Client’s staff, which must negotiate and
administer each delivery order.
 Setting up a framework agreement - Early
considerations
• A framework agreement can be set up by
– one or more contracting authorities for their own use
or
– A central purchasing body for the use of other
contracting authorities.
• In either case, an agent may be employed to carry
out the processes of advertisement, selection and
award.
• In that event, liability for legal compliance remains
with the contracting authority or authorities.
• Where a group of contracting authorities has
collectively decided to set up a framework
agreement,
• The allocation of liability is the most important
matter for them to address as between
themselves.
2.6.1. Setting up framework agreements: the
starting premise

• As a matter of law, a framework agreement

can be set up by:
– One or more contracting authorities for
their own use; or
– A central purchasing body for the use of
other contracting authorities
• In either case, an agent may be employed to
carry out the processes of advertisement,
selection and award.
• In that event, liability for legal compliance
remains with the contracting authority or
authorities
 2.6.2. Duration of framework agreements

• A framework agreement may not endure for more than

three to four years “except in exceptional
circumstances,
• In particular, circumstances relating to the subject of
the framework agreement.”
• For example in Ethiopia a maximum contract period for
the framework agreement is three years.
• This three-year rule exists to ensure that public
procurement markets are opened up periodically to
competition.
• Where any kind of justification for a longer
period than four years has to be justified in the
contract notice
 2.7. Award of a framework agreement

Agreement with one economic operator:

• The framework agreement is with one economic
operator then the contracts are awarded within
the limits of the terms laid down in the
framework agreement.
• The contracting authority may request the
economic operator to supplement its tender if
necessary
• but there must be no substantial amendments to
the terms laid down in the framework
agreement.
Agreement with more than one economic
operator:
• Where the agreement is with more than one
economic operator, the contracting authority has
a choice.
• There are two ways of awarding a contract:
– Awarding the contract directly to a particular
economic operator; or
– Inviting all suitably qualified economic operators on
the framework to participate (a „mini-competition‟).
• Contracting authorities should make it clear
when setting up the multi-provider frame-work
– how contracts will be awarded, and
– How the framework agreement should include
provisions covering the manner of awarding the
contract.
• In both cases, the parties may under no
circumstances make
– substantial amendments to the terms laid down in the
framework agreement and
– the award must not be made improperly or in such a
way as to prevent, restrict or distort competition.
Award to an economic operator without further
competition:
– Where the contracting authority wishes to award a
contract directly to one of the economic operators in
the framework
– then it must do so on the terms laid down in the
framework agreement.
Award following a mini-competition:
• The contracting authority may use the second
option of a mini-competition, where not all
terms are laid down in the framework
agreement.
• This process allows the terms referred to in
the specification to be introduced or existing
terms to be more precisely formulated.
• All qualified economic operators in the
framework must be invited to participate in a
competition on this basis so as to ensure
– equal treatment,
– non-discrimination and
– transparency.
• The Directive sets out the requirements for the
conduct of the mini-competition.
 Who can call off contracts under a
framework agreement?
• Contracting authority must be an original party
to the framework agreement.
• As a minimum "original party" means that the
contracting authority must have been either:
– named in the contract notice;
– named in a document referenced in the contract
notice; or
– be an identifiable member of a class of contracting
authority named in the contract notice or a
document referenced in the notice.
• Calling off under a framework gives rise to two
principal issues:
– which framework supplier should get this particular
call off, and
– on what terms?
 2.8. The advantages and the disadvantage of
framework agreement

• When you are procuring over a period of time,

a framework can deliver many benefits, such
as:
– The first benefit is contractual certainty.
– Reduced transaction costs;
– Continuous improvement within long-term
relationships;
– Better value and greater community wealth;
– Solutions that delight customers.
 Discussion
• In what aspect procuring entities are using
framework agreement in their procurement
practice?
• What can be the major challenges to use
framework agreement in the public
procurement system?
• What other benefits can Framework agreement
bring in the public procurement system, if we
applied it in an individual procuring entity?
 The End
Thank you