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E.9 FRAMEWORKS

E.9.1 Contents

Introduction
Benefits of Frameworks
 Types of Framework Arrangement or Agreement
Negotiations on prices in Framework arrangements or agreements
Undertaking a Procurement Exercise to Purchase a New Framework
  -  Selecting the Scope (Extent) of an Arrangement or Agreement
  -  Selecting the Term of an Arrangement or Agreement
  -  Supplier Selection
  -  Specifications
  -  Terms and Conditions of Contract
  -  Tender Evaluation
 Managing a Framework Arrangement or Agreement
 Completion Report
 Termination of an Arrangement or Agreement

E.9.2 Introduction

The procurement of Framework Arrangements and Agreements is discussed in this Section of the Procurement Manual. Part F of the Manual discusses how to purchase (“call-off”) from an existing Framework Arrangement or Agreement. For ease of reference some of the information in Section F - Use of Existing Contracts and Frameworks Arrangements is repeated herein. 

Framework Definition: Frameworks are agreements to provide goods, works or services on specified terms.

There are two types of Framework:

  • Framework Arrangements: Contain no contractual commitment on either side for the provision of any particular quantity. Framework Arrangements involve no commitment to purchase, although they commonly specify the terms and conditions of the eventual contract that would apply if and when goods, works or services are purchased.
  • Framework Agreements: Incorporate a contractual commitment to purchase a particular volume or value of goods or services.

Framework Arrangements and Agreements have a number of applications, including the following:

  1. to negotiate and promote best value for money centrally within the Department or nationally for common goods and services which can be purchased as and when required by individual management units;
  2. to give individual management units access to providers of specialist services as may be required from time to time, thus relieving users of the need to conduct individual tendering exercises - such arrangements may offer a panel of providers from which the end user can select or may give one provider preferred supplier status;
  3. to set the terms for works or services, e.g. maintenance, where the volume cannot be reliably set in advance.

DTI management units are strongly advised to take advantage of the range of established DTI Framework Arrangements and Agreements. Use of these Framework Arrangements and Agreements will, of course, have the benefits as described in Section E.9.3 - Benefits of Frameworks below. 

Orders for goods, works or services covered by Framework Arrangements or Framework Agreements are commonly referred to as "call-offs". Consequently, the arrangements themselves are variously referred to as "call-off arrangements", "call-off agreements" and "call-off contracts". This last description is, of course, a misnomer if applied to Framework Arrangements as no contractual commitment to purchase exists.

E.9.3 Benefits of Frameworks

Frameworks offer a number of advantages:

  • they offer the value for money advantages of centralised procurement without the commonly associated level of bureaucracy
  • a single tendering exercise over the life of the arrangement reduces administrative effort and cost for the Department
  • the initial tendering process will have identified competitive suppliers, who should then offer more competitive prices on the basis of the expected value of business
  • quality assurance and legal requirements such as the Health and Safety at Work Act, etc., will have been dealt with at the outset
  • call-offs are covered by DTI Standard Terms and Conditions combined with special terms and conditions appropriate to the items being procured and will, in general, provide better protection than individual small purchases under the supplier's standard conditions
  • the agreed range of items or services should be at short notice thus reducing or avoiding stock holding for goods and reducing down-time on equipment maintenance and repairs
  • the supplier benefits in terms of planning stock levels and continuity of supply
  • a mutually beneficial longer-term working relationship can be established with suppliers
E.9.4 Types of Framework Arrangement or Agreement

There are three main types of Framework Arrangement or Agreement:

  1. Fixed term - commonly used for the supply of goods and services. They normally provide estimates of the volumes or total value of items to be supplied. The main considerations are the selection of an appropriate term for the arrangement or agreement to run and the selection of the items to be covered. For guidance on the selection of items to be covered see Section E.9.6.1 - Selecting the Scope of an Arrangement or Agreement. For guidance on the selection of the term see Section E.9.6.2 - Selecting the Term of an Arrangement or Agreement.
  2. Fixed quantity - provides the supplier with greater assurance that the estimated quantities will actually be called off. These can be developed into ‘standing orders' with a fixed quantity and frequency of delivery. For example, such arrangements can be used when buying low-cost consumables for which demand does not vary, and for certain types of service contracts, e.g. window cleaning, office equipment maintenance.
  3. So-called "insurance" type - which typically fix the annual cost of a service irrespective of the number of times the service is required. This is particularly applicable to equipment maintenance contracts, where a long-term fixed price maintenance agreement can be seen as a significant benefit when selecting a supplier of capital equipment.

E.9.5. Negotiations on Prices in Framework Arrangements or Agreements

  1. The EC has produced an interpretation that the award of individual contracts (under the umbrella of Framework Arrangement) can only be made on the basis of the terms and conditions (including the pricing mechanism) established in the Framework itself. No negotiation of price or the pricing mechanism already established in Framework Arrangements can take place at call-off - including S-CAT (See Section F.3 - The S-Cat IT & Business Services Catalogue) , G-CAT (See Section F.4 - The G-Cat Scheme) and other Framework Arrangements available for Government Departments and Agencies to use (See Section F.5 - Other Sources of Framework Arrangements and Agreements).

  2.  Where, in either Framework Arrangements or Contracts, there are multiple suppliers and a mini-competition is mounted between them, it follows that the competition must not involve negotiation on the prices and pricing mechanism already established in the Framework Arrangement or Framework Contract. The award criteria for these mini-competitions should be a combination of (i) quality/methodology and (ii) resources/costs. During the mini-competition suppliers will have the opportunity to state the type of resources they would deploy and the daily rate or fixed price that they would charge to undertake the proposed task. The quoted price must relate to the rates in the relevant Framework but may take into account any price mechanism (e.g. discounts) established within it. OGC have confirmed that negotiation on price outside these parameters is not permitted, even if offered by suppliers.

E.9.6. Undertaking a Procurement Exercise to Purchase a new Framework Arrangement or Agreement

E.9.6.1 Selecting the Scope (Extent) of an Arrangement or Agreement

In selecting the scope for an Arrangement or Agreement look for price, delivery or administrative cost advantages. The selection is a trade-off between the savings achieved, on the one hand, by obtaining a lower price for a large number of items placed with one supplier and the administrative convenience (and savings) of dealing with this single supplier, and on the other hand the likelihood that the selected supplier may not always be the lowest-priced for every item within the Agreement.

Where the intention is to cover a range of commodities for which the expenditure pattern is well known, do not assume that use of a single supplier is inevitable. Identify the items and forecast demands individually within the tender documents and request individual prices, but ask in addition what the impact on prices would be if a number of the items were taken from the same supplier. (If precise information on forecast throughput is difficult to obtain, seek advice from major users.)

Tender analysis should identify the total cost from each prospective supplier (based on the quoted item price and forecast demand) and rank prospective suppliers against each item. Apply an appropriate range of ‘what-if' scenarios (such as the total cost if the cheapest quote is selected for each item and the cheapest combination using more than one supplier) to then determine the best bid or sub-division of bids overall.

Pay careful attention to the bids of those suppliers offering the best prices for the highest value (price x volume) items. The objective is to find an overall commercially sensible solution rather than just the lowest price per item. Also bear in mind that the initially tendered prices are likely to drop if you offer a supplier a significant share of the business.

There are no hard and fast rules for getting the best deal, but consider the following points:

  • a single supplier is often the best answer (Framework Arrangements are difficult to administer if an item range is divided between suppliers) so, before splitting an Arrangement or Agreement between suppliers, ensure that overall value cannot be obtained from a single supplier
  • geographical factors (e.g. delivery performance across a range of sites) can mean splitting an arrangement between sites or regions may be beneficial
  • do not overlook other commercial factors such as delivery costs (preferably should be zero), minimum order quantities, payment terms, etc.

For Arrangements covering a wide range of items (commonly based on a trade catalogue) individual prices are often not negotiated. The form of tender in these cases is a set discount off the list price. To evaluate such tenders, the list prices have to be considered along with the discount offered. It will often be impractical to consider all the items in such an analysis. In those cases take a ‘shopping basket' approach, selecting a typical mix of items from the range representative of the forecast volumes. In addition, undertake a sensitivity analysis to determine the effect of variations in the volumes of the highest expenditure value (price x volume) items.

When re-tendering bear in mind that circumstances can change with time. Just because one approach proved cost-effective previously does not mean that it is still the best. Remember that the objective is to obtain best value for money overall. Quality and satisfactory service need to be taken into account.

E.9.6.2 Selecting the Term of an Arrangement or Agreement

In setting the term for an Arrangement or Agreement to run, there is a trade-off between the savings achieved through a lower price for a longer-term agreement, and the volatility of the market, which may make the selected supplier less competitive over a long period.

One-year Arrangements or Agreements are common for goods, but may need to be even shorter if item prices are highly volatile. Longer-term Arrangements or Agreements offer price stability but need to be justified by securing a price reduction.

Services benefit from the commitment involved in longer-term Arrangements or Agreements, which also minimise disruption and expense arising from the "learning curve" of a new provider.

E.9.6.3 Supplier Selection

For some Framework proposals large numbers of suppliers are prepared to bid. Take into account the range of suppliers already used for the product or service. Consider accumulating any demands that are currently uncoordinated to provide an opportunity to move up the supply chain.

Refer to Chapter E.4 - Sourcing and Supplier Appraisal for general advice on identifying and appraising suppliers. Remember that:

  1. an element of supplier pre-selection can reduce time spent on tender preparation - a telephone discussion with a supplier outlining the type of products, likely volumes, number and location of sites for delivery and any special requirements, can help to identify whether a supplier is sufficiently interested in or capable of getting the business;
  2. for some types of items, product samples will have to be obtained for approval by users before considering the supplier for tendering; and
  3. pre-qualification references may be required.

E.9.6.4 Specifications

For Arrangements and Agreements covering standard products a simple specification is usually sufficient.  Ensure that the specification includes information such as the number and location of sites for delivery, delivery frequencies, quantities, etc.

Arrangements and Agreements for services commonly require more complex specifications which cover the work to be carried out, locations and frequencies, quality standards and work excluded. It is often important to invite prospective suppliers to view the locations and facilities where the service is required and to allow them to develop their own ways of meeting the specification, which can then be critically examined and amended.

E.9.6.5 Terms and Conditions of Contract

While Framework Arrangements do not themselves create a contractual obligation, call-offs under those arrangements do. It is therefore important for the Arrangements to set out the terms and conditions of the contractual relationships that will arise from call-offs.

DTI's Standard Terms and Conditions of Contract for Supplies or for Services, as set out in Forms PF31 and PF32 respectively, will apply. For Framework Arrangements or Agreements for works refer to Section D.2.16 - General Conditions for Works Contracts.

Special terms and conditions should be included whenever appropriate to cover such items as assurance of price stability and service levels.

It is government policy that normally prices should not be varied over the first two years of a contract. This policy also applies to Framework Arrangements and Agreements. Arrangements or Agreements for longer periods may provide for an annual review or have a price adjustment clause built in. Price adjustment clauses can also be used to provide for future prices (particularly for services) to benefit from efficiency savings.

Pricing methods that vary from those set out in the DTI's Standard Terms and Conditions must be covered by special conditions under a variation of price clause.

E.9.6.6 Tender Evaluation

For general guidance on tender evaluation refer to Chapter E.12 - Tender Evaluation

Tender evaluation for Framework Arrangements and Agreements can be complex. There can be several permutations by which suppliers are given products and the effect volumes of business have on item prices for each supplier. It may not be practicable to investigate all the options and in most cases some form of simplification must be considered. The following general guidelines should cover most situations:

    1. enter tender responses on a spreadsheet to assist data manipulation and what-if analysis (such spreadsheets can be additional to Form PF 50 or can replace Form PF50 as the record of tender opening if properly certified - see Section E.11.9 - Opening of Tenders)
    2. consider the total cost difference between using the cheapest supplier and using more than one supplier - if not greatly different, consider negotiating with one or two suppliers for additional discount based on giving one of them the entire business;
    3. if one tenderer is generally more competitive for one type of product within the contract, and another supplier for another type, consider proceeding on type basis rather than dealing at item level - it is much easier to manage an Arrangement or Agreement if there is a logical link between the items supplied;
    4. compare tender prices with general market prices - if there is little difference between ‘spot' and tender prices do not proceed with a Framework approach unless the other benefits such as reduced administration costs are substantial;
    5. ensure the arrangement is commercially sensible - dealing with many different suppliers may apparently achieve a lowest-cost solution, but the hidden costs of having to maintain communication (write more contracts, process more invoices) with so many suppliers can be significant; and
    6. avoid accepting unrealistically high minimum order quantities or minimum order values put forward by suppliers offering low prices.
E.9.7 Managing a Framework Arrangement or Agreement

Framework Arrangements and Agreements should be monitored routinely. A formal review system, whose coverage is appropriate to the nature of the Arrangement or Agreement, should be put in place for each Agreement or Arrangement. It should normally include information from which the liaison officer can:

  • compare expenditure with forecast, both overall and by individual item
  • assess the extent to which the supplier has met agreed performance standards (e.g. on delivery or customer satisfaction)
  • determine the extent and nature of any user problems
  • assess the extent to which items available on Arrangement are purchased from other suppliers

The information collected by the routine monitoring system should be assessed at regular intervals to identify any trends in supply patterns or changes in supplier performance that need to be addressed in liaison or negotiation meetings or taken into account at review or renewal.

Routine monitoring is not the most effective way of dealing with pressing problems. A parallel reporting (complaints) system for users is usually needed to ensure timely action on urgent issues to ensure they are effectively addressed.

While many Arrangements or Agreements run their course with no need for change, others, for the benefit of one side or the other, may need to seek change on some aspect of the Arrangement

If a supplier requests a price increase that is not allowed for in the Arrangement, proper justification must be provided. Even if the reason is that demand is lower than forecast, the supplier should be asked to show the incremental cost to them of such a change. If the issue is a change in cost base they should be asked to provide a detailed cost breakdown for representative items within the range. It can be useful to make an informal approach to suppliers who were unsuccessful in the original tender to obtain an updated price that will indicate the strength of your negotiating position.

Increases in price sought by the supplier as a result of poor demand are not normally permitted unless allowed for in the Agreement. The wording of the Arrangement or Agreement should be specific on this point.

If DTI seeks a price change, e.g. as a result of significantly higher demand than expected or a perceived change in cost base, then the supplier should be asked to justify his prices and again the prices in the market should be tested on an informal basis.

If it is necessary to address quality or delivery problems formally with a supplier, it should be made clear to them that a failure to improve may lead to the Arrangement or Agreement being terminated (see also Section E.9.9. - Termination of an Arrangement or Agreement ).

E.9.8 Completion Report

It is good practice at the conclusion of an Arrangement or Agreement to prepare a completion report. This does not always need to be a comprehensive review. A summary of key points, covering the following, can be useful:

  • usage vs. forecast
  • level and nature of user complaints
  • supplier performance
  • start and finish prices of key items
  • summary of negotiation history
  • expenditure outside Arrangement (reasons for and recommendations for dealing with this expenditure)
  • benefits (financial and non-financial)
  • cost of set-up and management
  • recommendations for any new Arrangement or Agreement, e.g. change scope, quality.
E.9.9 Termination of an Arrangement or Agreement

If an Arrangement or Agreement is to be terminated ensure that the supplier is given the requisite notice. Particular care should be taken with Framework Agreements (as with any other contractual Agreement) to ensure that the Department’s contractual obligations are properly met.

It is also important to ensure that alternative procurement Arrangements are put in place for the goods, works or services covered by the Arrangement or Agreement. The timescales for putting such Arrangements in place need to be carefully taken into account when negotiating the termination of an existing Arrangement or Agreement.

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