Alastair Caithness
TD Admin
Tim Williams
Answering your Questions on Framework Agreements
Posted by Diane Callaghan on May 27, 2010
What is a framework agreement?
A framework agreement is an ‘umbrella agreement’ that sets out the terms (particularly relating to price, quality and quantity) under which individual contracts (call-offs) can be made throughout the period of the agreement (normally a maximum of 4 years).
Do framework agreements need to be advertised in OJEU?
If the procurement is being paid for out of the public purse and the value of all the potential call-offs is estimated to exceed the EU thresholds (and it is not excluded by part B of the regulations) then yes, the framework agreement should be advertised in the Official Journal of the European Union (OJEU). However, the individual call-offs do not then need to be re-advertised.
What is commonly procured using framework agreements?
Framework agreements are typically used where the authority knows they are likely to have a need for particular products or services, but are unsure of the extent or schedule. So framework agreements are commonly set up to cover things like office supplies, IT equipment, consultancy services, repair and maintenance services etc.
Who can use a framework agreement?
Many framework agreements can be utilised by more than one authority. If this is the case, the purchasing authorities need to be identified in the relevant OJEU notice. An example of frameworks available to a wide range of purchasing authorities are those formed by Buying Solutions (an Executive Agency of the Office of Government Commerce), a central purchasing body who create framework agreements for use across the whole of the UK public sector.
How can I get onto a framework agreement?
If the framework agreement has been advertised in OJEU, you can only be considered for inclusion on the framework agreement if you respond to the OJEU notice by the stated deadline. The procurement process for awarding the framework agreement will then follow all the usual EU procedures and rules and be awarded according to how well suppliers satisfy the selection criteria.
How are call-offs awarded under a framework agreement?
If the framework agreement is awarded to one provider, then the purchasing authority can simply call-off the requirement from the successful supplier as and when it is needed. Where the framework is awarded to several suppliers, there are two ways in which call-offs might be made:
1) Where the terms laid out in the framework agreement are detailed enough for the purchasing authority to be able to identify the best supplier for that particular requirement, then the authority can award the contract without re-opening competition.
2) If the terms laid out in the framework agreement are not specific enough for the purchasing authority to be able to identify which supplier could offer them best value for money for that particular requirement, a further mini-competition would be held between all the suppliers on the framework agreement who are capable of meeting the need.
What are the advantages of framework agreements?
The main advantage to a purchasing authority of using a framework agreement is that they do not have to go through the full OJEU process every time the requirements arise. Having to go through the tender procedure once rather than several times, will obviously reduce tendering costs. It also means there is less downtime between identifying the need and fulfilling it, which considering how lengthy the OJEU process can be, could be a considerable benefit. There are also further potential savings to the purchasing body because of economies of scale, which may prompt suppliers to offer more competitive prices.
The reduction to tendering costs will also apply to suppliers, as going through the tender procedure is costly and time-consuming for suppliers too. Obviously, the main advantage to suppliers of being on a framework agreement is the chance of being awarded valuable business opportunities.
What are the disadvantages of framework agreements?
A disadvantage of a framework agreement for a purchasing authority is that they are relatively unresponsive to change – there may be new suppliers and/or new solutions within the market that were not included when the framework agreement was initially set up. Furthermore, framework agreements tend to apply a ‘one size fits all’ approach, which might make it difficult for authorities to satisfy their own procurement objectives. However, most framework agreements do not place any obligation on the purchasers to actually buy anything. Therefore, if the requirement doesn’t fit into the framework agreement or they think they can achieve better value for money not using it, then they can go elsewhere.
This in turn is a disadvantage for suppliers under the framework agreement; most frameworks do not guarantee that suppliers will get any business from them. Therefore, you may spend a lot of time, effort, and resources getting included on a framework agreement and never get any business as a result. However, you are still in with a chance, whereas suppliers not included on the framework (whether they were unsuccessful or were not aware of it when it was tendered) are likely to find it more difficult to secure business for the requirements covered by the framework agreement. It is therefore a good idea for suppliers to investigate what framework agreements already exist and when they might be up for retender. And for those suppliers included on frameworks, don’t take the business for granted – continue to market your products or services to the purchasing authorities !
Patrick said
Hi – What happens in the following senario – framework is set up for a 4 year period with 6 contractors – however 2 contractors go into liquidation and 1 contractor has failed to perform as required – competition gas now been badly effected. Can new contractors be added to a framework during its lifetime??
Fanwell Saputu said
Hi Patrick,
Well it would be wise to consider the capabilities of the remaining contractors before adding any irregular cost to the supply chain since the works are on going and you having identified this problem at that stage the better for the whole tender, only should it be that the remaining contractors do not have necessary required competence then you can tender for new contractors, beware of the contractual collateral obligation too! Best wish. Regards Fanwell S
mstevensonsmith said
Tim
With regard to Archie’s point, the Contracting Authority have to consider a number of things prior to changing anything. For instance, they must consider whether the change may have been likely to make the tender more attractive to someone who deided not to bid. It is quite likely that some potential bidders may have felt they would have had little chance on a MEAT tender. Knowing it would have been Price Only may well have made them feel it was worthwhile bidding. In such a scenario the tender MUST be re-advertised and re-run.
Les Jeffs said
Dear sir
I write as Manager of an SME. We have developed a first rate reputation in Kent with case managers ( psychiatric nurses and social workers) who regularly referred to us and received a service for their mental health service user clients which was prompt,innovative and according to audit, highly effective.
Previously contracted for provision of supported accommodation services, this contract ceased on October 1st after consultation relating to reconfiguration of services in the light of financial pressures for Kent. We revised our practices in view of the new ceiling prices and cut out costs by about 25% to survive. We felt obligated to apply for the new contract for fear that our clientele would lost to us.
The new any Qualified Provider contract now specifically excludes accommodation ( although we are left maintaining clients in their ongoing tenancies at our extra expense) and invited applications which were to be collated and then listed for procurement purposes on the basis of lowest price. This has resulted in often lengthy lists with lowest price first and has meant in recent weeks that case managers are attempting to make sometimes urgent referrals direct to us but are stymied by having to use the centralised procurement team.
So, although handily placed in some client type lists, we know that referrals will inevitably be filtered through the purchasing system or via mini competition and lowest price first. Unfortunately for us and other local providers the price listing is dominated by large national providers new to the area who have plainly tendered at a price they know will dominate the listings. We believe that it is certain that all new work will be offered to these providers ( who have just opened offices in the County to qualify) and that, over time, our portfolio of work will diminish and not be replenished as it has been through long developed partnerships with local nursing or social work practitioners. The ultimate consequence, for a difference in price that may be a matter of 5 or 10 pence an hour, is that the large providers will come to dominate this new market to such an extent that the lower listed providers will eventually need to downsize to the point where they become non viable. Can the danger of a cartel be remedied?
Additionally, our work has always included much added value and such is the pressure on casework teams that we are handling often very challenging cases with poor, absent or ineffectual support and oversight from the responsible professionals ( clients rarely seen and reviews not done or updated). Yet, no reference is made in the Terms and Conditions to the partnership responsibilities of the County Social Work teams. This absence of proper discharge of their responsibilities sometimes exacerbates risks to our workers. It seems quite unreasonable to specify requirements contracted for us but not to do so for the commissioning entity. How can this be remedied in contractual terms?
And ,now the new Framework is in place, can we seek redress for being left with responsibility for large numbers if vulnerable clients placed in accommodation( either owned by us or by partners) for which now no premium is paid under the new contract but for whom we have ongoing responsibilities as landlord?
Tim Williams said
Dear Les,
I’m really sorry to hear the problems that you are experiencing. Regrettably this seems to be a case of poor procurement, where an overly large number of suppliers have been appointed to a framework and then ranked according to a criteria (price) that’s not really a suitable tool for selecting a provider in such cases.
This probably means that the mental health clients won’t receive the best level of care, which quite possibly will mean that the overall cost to the taxpayer increases as other interventions become necessary instead of dealing with any problems at an earlier stage.
ADMERIC said
Hello
I am facing a brand new situation. I am a project buyer and the company, that I work for, sell customized products. Since I don’t really know what exactly the company will sell, How am I gonna sign a frame Agreement with the supplier? I won’t have the quantity and the part numbers list…. If I get the supplier full price list, and negotiate a general discount for anything I buy, will be money loss…… any suggestion?
Doug said
We are about to enter into a contract framework for transport services and are concerned as previous writers that once a contract framework has been let (for whatever period) then this restricts further operators from being accepted onto the framework for that period. We are struggling to understand how this can keep the overall flexibility, competition and cost effectiveness that we currently have if this really is the case.
We do see the benefits that a framework arrangement can but feel that there must be a legal way of getting new operators onto a contract framework during any let period. It is owrth noting that many of teh opeartors would be willing for this to happen.
Also could you provide guidance on what would happen if an existing operator on a framework changed to a new company or mereged with a different operator.
Many thanks
Tim Williams said
Dear Doug,
Many thanks for your comment. There is no way of getting new operators onto a framework agreement during the lifetime of that agreement. The agreement is intended to fix the purchaser(s) and the suppliers at the time it is awarded. Although there is nothing to prevent a new operator from sub-contracting to one of the operators that is party to the agreement.
If flexibility is an important consideration then you need to balance including a larger number of operators on the framework, against the overhead of administering a larger supply pool and the lower income that each operator will derive.
It’s important to remember that just because you have a framework agreement, it doesn’t follow that you are necessarily tied into using that agreement for every contract. There is nothing to prevent you running a separate tender exercise, if it’s worth the additional cost and inconvenience.
Like many procurement law issues, the situation regarding a merger or a takeover is not completely clear. If the changes are ‘materially different’ then it is considered to be a new contract and so it must be re-tendered. In the case of a framework it might not be necessary to re-tender, but the affected supplier should probably not be considered as a party to the agreement any longer.
Ian Young said
Taxi tender framework agreement
I have been working with fife council for the last 5 Years doing school contracts and been in the framework system for to tender for jobs same again this year,but this year i did not fill out one page with 3 paragraphs (abc) i got excluded from being in the tendering process,this was a mistake on my behalf but they will not move on there discision.this is £5000 per month jobs will have to go
Can anyone help
Ian Young said
Has anyone got any answers, can i appeal
lallyrs said
Ian, it may be worth pointing out to Fife that they have a duty to inform you of any obvious errors or omissions, simply excluding you because you made an easily corrected and obvious mistake isn’t on. Write to them and suggest that they are being unfair, that it may cause the loss of local jobs copying in your local councillors and that you may challenge the procurement and see what result that has.
Ian Young said
Thanks for your comments but they are not interested my concern is that every year tender has been for one year this years tenders, is for 3 years,which is why i am anoyed
lallyrs said
I understand your annoyance Ian. I work for a large public sector organisation in Procurement and we take threats of “challenge” very seriously as the law is now very much on the side of the supplier/bidders. If you have not specifically told them that you are considering challenging the process I would do so. The threat of an injunction alone should send shiver up their legal department’s spine. Best of luck in any case.
Ian Young said
Thanks very much you have made me feel better now .
Andrew said
The procurement dept (or other dept) cant open the document until after the deadline, so wouldnt be able to inform you of the mistake in order for you to get it back in on time. Discretion is used where justifyable, such as large value contracts to the authority, not the bidder. The taxi market is highly saturated and your competition is very high, so unfortunatly for yourself, this should be a lesson learnt for next time.
Jon said
Im sorry,but working in a government sector myself and to avoid “challenge” there has to be a set of rules that applies to everybody….i would have omitted it also.You should have read the instructions clearly and filled in the document correctly. By not reading and complying with the rules you have not followed the correct procedure,ultimately its your fault and not the councils.Remember the Public sector has to be transparent and fair, its not up to the council to tell you were you have gone wrong (well…..only in a de-brief) because they would have to do it for everyone.
Just think…..if they give allowances to you they have to be given allowances to evreybody! they could then “challenge” your inclusion. Laayrs suggests “conflict”…the council ommited you to avoid conflict! they have done no wrong whatsoever and would laugh at your challenge….you have even admitted whos fault it is.
Your also assuming that if you had filled it in correctly you would have won the contract………they have no obligation to award it just because they have done in the past.
The Public sector has to be strict and fair…..its tax payers
money they are using.
Archie Thorburn said
I would tend to agree with Jon.
Ian Young said
This was just the framework, i did not get to tender for anything.
lallyrs said
Jon, omitting bidders because they have made an obvious error is simply a case of cutting your own noise off! There appears to be a trend within public sector procurement to focus more on running a compliant process than achieving value for money. Excluding a bidder particularly to a framework simply reduces the level of competition. Engaging with bidders, particularly SME’s only produces a more dynamic market and a better competition. There is no suggestion that the organisation point out all errors or comment on the quality of a submission up-front, but is it fair to SME’s that may not be familiar with this process to exclude them for a genuine omission! Any authority that does not take seriously an informal challenge has not got an eye on value for money!
Ian Young said
I am not happy with there response they are saying the same thing over and over again,we know they have kept to the rules but this was a genuine mistake,I have only got there word for it that it was not filled in anyway.If it was a one year tender I would just wait and apply next year and make sure it did not happen again but it was for 3 years.I will be out of business by that time,no one can go out there in this climate and find £5000.00 worth of work a month.Tenders are all out and I cannot get any of them but through out the years things will change in transport,can they include my company to tender ? That’s all I am asking now.
Simon said
A number of Councils came together a number of years ago to set up a framework agreement with a range of suppliers:
- Since then a number of other Councils have chosen to use this Framework Agreement without advertising the fact. Under what circumstances is this possible, given that the parties to the original agreement must remain the same?
- The Councils operating the original Framework are believed to want to operate a 12 month extension? In what circumstances can this be done?
- One Council, not part of the original purchasing group, is proposing to use the framework from some months hence and operate it for four years, ending 2 years after the original framework was set up. Surely the life of the framework is limited to four years, and if it is possible to tag on, only the timeframe imposed on the original framework could apply? They are also planning to run a mini-competition, using only the suppliers to the original contract, to provide what they believe will be lower prices over the term of their Framework. Is this not tantamount to carrying out a tender exercise without advertising it or offering it to all potential suppliers?
I would be grateful for your comments.
Ian said
Hi, could a private company advertise a framework on OJEU and make it available to non private organisations funded with public money such as charities, third sector, voluntary org’s, churches etc.?
Ben Gordon said
Hi there,
I am currently undertaking some research onto framework agreements for construction in schools in the UK.
My main queries are as follows:
If a number of architects, say 6, are appointed to a framework agreement with an Education Authority, can that authority chose it’s preferred architect for any construction works to the school without a competition between all appointed parties?
If the framework agreement for an Education Authority has been advertised on the OJEU for a certain amount of money and a school wants to procure a new building whose value far exceeds that in the original OJEU notice, can that building be procured under the original framework without the need for anew OJEU notice?
Many thanks for your help!
Ben
Tim Williams said
Hi Ben,
The answer to both parts of your question is No!
In a framework agreement there are two ways in which a call off contract can be awarded. Firstly, if the terms of the agreement are specific enough, the requirement can be evaluated using the existing award criteria and contract awarded on the basis of the original bids provided.
The second method is to run a mini-competition between all of the qualified suppliers. The original bids and award criteria must still be respected, but in an architectural contract for example, the specific individuals nominated and their charge out rates are likely to vary from project to project.
So the authority cannot choose its preferred architect, as though they were listed in a catalogue, they have to consider all the participants against the award criteria, which may be supplemented by additional information in a mini-competition.
The answer to the second part of your question is that frameworks have a finite value and once call off contracts have been awarded against the framework that exhaust that value, then a new stand alone contract, or a new framework should be put in place.
I suspect that in many cases the finite value part of the equation is not monitored effectively, particularly if the framework is being used by a group of authorities. The other ‘abuse’ that may be prevalent is that the authority picks a very high value for the framework, which is not based on any analysis of spending plans and realistically is unlikely to be reached, e.g. many of the OGC Buying Solutions frameworks.
Stu said
Dear Tim,
We are currently in a situation where we provide a specialist residential education service. This service has education included as they are residential schools. The framework we did not get on was for residential services (those without edusation- childrens homes) but residential services who offer education as well were eligible for the framework if they also offered a core service, whereas were are not. This now means that our competitors who offer core services and education services will have all referrals whether education is required or not, through the successful providers first.
This feels quite unfair as we offer a quality education service but as we do not offer what amounts to a completely service different service provision in a core service we will now lose referrals.
Do we have any recoourse?
Our sister comapny who do offer a core service have been successful- can we use their place on the framework to integrate ourselves?
Many thanks,
Stu
Lallyrs said
Is it possible to have a ‘framework contract’ within a framework, i.e. if a buyer cannot define the volume of goods/services they will need can they place a contract? Indeed is there such a thing as a ‘framework contract’?
Tim Williams said
A framework agreement is defined in the Public Contracts Regulations 2006 as follows:
“framework agreement” means an agreement or other arrangement between one or more contracting authorities and one or more economic operators which establishes the terms (in particular the terms as to price and, where appropriate, quantity) under which the economic operator will enter into one or more contracts with a contracting authority in the period during which the framework agreement applies;
The main purpose of such an agreement is for situations where the buyer is unable to define the volume of goods/services they will need, or the timing of deliveries. The terms of the agreement are framed to allow call-off contracts to be placed as and when the provision of the goods/services are needed.
There is no need for an additional framework agreement to do this.
Phil said
Hello,
I have a legal scenario which I hope you could give your professional opinion / insight into. This will help me with my studies surrounding this field.
Given the following scenario, where does the land lie in terms of legality of the agreement?
A suppier has a Framework Agreement setup with a company, which was setup by a senior employee of the company. Following the agreement is completed with this supplier, the senior employee leaves the company to become the suppliers senior employee.
I understand that this is not a very detailed scenario but any comments are appreciated.
Thanks in advance.
Tim Williams said
Hi Phil,
I’m afraid we’re not really qualified to give you an answer on this query as on the facts presented above I think it is an employment law matter, rather than procurement law.
There is nothing in the Public Contracts Regulations relating to such an issue. It would clearly be of some concern to the organisation to ensure that the tenders for the framework agreement had been evaluated fairly. If there were any irregularities in the evaluation then the other suppliers who tendered might be able to seek damages.
As it is a framework agreement rather than a contract, it is likely that there is no binding obligation to purchase from the company. If the organisation has concerns that the agreement does not provide best value, they could carry out another tender process to establish a new framework agreement and just leave the other one dormant.
Robert Smyth said
Hi gents
Would a multi-provider framework agreement with a combination of call off methods i.e. direct award for contracts up to say £50k and the re-opening of mini-competition over that £50k threshold be in breach of the regulations/directives?
Tim Williams said
Hi Robert,
Yes it would be in breach of the regulations. The framework agreement allows you to simplify the arrangements for multiple contracts for similar goods or services, by awarding the master agreement (the framework) and then awarding call-off’s based on the terms and conditions in that agreement.
The value of all contracts for similar goods and services awarded during the financial year must be aggregated and it is the aggregate value that determines whether the contract is over the OJEU threshold. That is, the value of the individual contracts has no relevance, so even a £10,000 contract should be awarded through a framework, or advertised separately in the OJEU, if the aggregate value of all similar contracts takes it over the relevant threshold.
There’s nothing to stop you running a separate tender exercise for a £50k contract, but you couldn’t just directly award the contract, it would have to go through the OJEU process.
Michael said
Tim
I wonder if you could help. I understand that a framework can not be used if the effect is to restrict, prevent or distort competition.
A framework we are examining makes use of a Most Favoured Customer clause which prevents any suppliers on the framework from offering better pricing to any other party. In our view this has the effect of reducing and distorting competition because, in effect, it sets a price floor below which these suppliers may not operate, even if they wish to.
Additionally, we believe that the presence of the clause creates a monopolistic position for the framework operator who are a private company acting as agent for a government department. They earn significant fees from each transaction and have created a position wit their framework where it has become impossible for any other procuring organisation to compete. This alone, we believe, is a distortion of the market, restricting competition.
I would welcome your thoughts on whether the presence of the MVC clause restricts, prevents or distorts competition in contravention of the EU regulations.
Thank you
Michael
Alan said
When making a Direct Award under a multi-supplier framework covered by the Utilities Contracts (Scotland) Regulations do the other suppliers need to be notified of the process and the award?
Tim Williams said
Alan,
Thanks for your questions, the situation is the same under the UK regulations and the Scottish regulations so I’ll answer them both here.
Firstly, regarding the process, if it’s a multi-supplier framework the process will depend on the type of award procedure that was used to put the framework agreement in place. If it was an Open or a Restricted procedure then the utility can choose a supplier based on the original bids, or conduct a mini-competition. The option of using the negotiated procedure is also always available, which may provide more flexibility.
If the utility is selecting a supplier based on the original bids then there is no requirement to notify all the framework suppliers that they are doing so, although in terms of transparency and future competitiveness there may be advantages in doing so. In the situation where you are conducting a mini-competition or using the negotiated procedure it is clearly sensible to notify all of the framework suppliers that you are doing so in order to obtain a competitive response.
Moving on to the award stage, a utility is not required to publish a contract award notice in the Official Journal (OJEU) where it awards a contract under a framework agreement. Although again it might be considered good practice and improve competition for the future if at least the other framework suppliers are notified.
Neil Routledge said
Do you have to state value or volume on the OJEU advert fo a framework, what is the min. requirement?
Tim Williams said
Neil,
If you don’t complete the value field in the contract notice it will still get published, i.e. the Publications Office will not block publication if this value is omitted.
Although I am not aware of any cases in the UK, I am aware that there have been informal infringement proceedings initiated against contracting authorities, in other EEA countries, who have not included this information in a contract notice.
Although it doesn’t always seem so a framework agreement is meant to be based on the anticipated requirements of the organisation or organisations that are party to the agreement.
John Brooks said
Hi…I am working with an African country using UK contract law. I would like an opinion on if a framework agreement is enforcable at law by the purchaser. Example – framework agreement set up…no committment by purchaser to buy…call off made…holder of framework agreement rejects…can a bid security be used to compensate purchaser…or court enforces? …I think not…but would welcome expert opinion. Thx John
Tim Williams said
John,
Thanks for your question.
It all depends on the contractual terms that are attached to the framework. Most frameworks in the UK are completed on a ‘no obligation’ basis, i.e. they set-out the terms and conditions on which a call-off may be concluded but there is no obligation on the purchaser to make call -offs, or on the supplier(s) to fulfill them.
But there is no reason why the contract cannot place obligations on one or both parties and put in place financial or other penalties if one of the parties doesn’t fulfill their obligations.
John Brooks said
Tim, thanks. However, advice I have had is that FAs without ‘consideration’ are not enforceable unless structured as ‘deeds’. Thoughts?
Tim Williams said
John,
I’m afraid you are getting outside the boundaries of my expertise. I suspect that you are correct, i.e. that it would be difficult for a purchaser to enforce an agreement on a supplier.
erasto bemeye said
I m MBA finalist at CU, my organization awards framework agreement for commmon use items to suppliers once a year, after a length of tender evaluation processes of more than 8,000 tender docuuments. My question is what mechanism can be adopted to minimize tender evauation process from say 4 months to a possible shorter period.
Tim Williams said
Erasto,
I’m not entirely clear how the tender process in your organisation operates, but from what you say it seems very cumbersome.
The first step I would take would be to increase the length of the contracts beyond one year, as it seems unwieldy to spend 4 months awarding a contract that is only going to last 12 months.
Are you saying that there are 8,000 suppliers submitting tenders? If so, my next step would be to drastically reduce this number by having a pre-qualification process to shortlist the suppliers most likely to eventually win a contract, so that you don’t waste their time or your organisation’s time in evaluating bids that have no real hope.
Neil Routledge said
I wonder if you could answer the following questions around framework agreements?
Firstly, do we have to specifically have to name individual Trusts and organisations or can we just put a generic group i.e. any public sector organisation. Is there anything preventing us including private organisations in the tender?
In addition with regard to mini competitions are we covered to have the right to re negotiate price if the volume of business is increased if the number of trusts on the framework increase?
Many thanks
Tim Williams said
Neil,
Thanks very much for your questions.
The official UK guidance is contained in a Procurement Policy Note published in September 2010, which is available on the archived Office of Government Commerce pages (http://bit.ly/pkxjc2).
The guidance talks about making sure that “immediate
identification of the contracting authorities concerned” is possible. It then goes on to discuss identifying authorities by class, but in my opinion this is where things start to get on to thin ice. A framework can only last for four years and is meant to be based on contracts that its constituent members intend to award, while allowing flexibility in terms of timing or quantity. It should therefore not be too difficult to identify the constituent members on this basis.
Where it starts to get difficult is where an organisation is trying to set-up a framework that can potentially be used by a very large number of organisations, e.g. OGC Buying Solutions, or as we must now call it the Government Procurement Service. These are almost always established without any consultation with the potential constituents and so any estimate of contract volume, etc., is highly suspect. There’s also no real transparency, responsibility or accountability in these arrangements and on the whole my view is that they don’t work particularly well.
I would recommend that in establishing any framework it pays to keep its scope fairly modest, in terms of participants, while retaining some flexibility. The limited research that has been carried out in this area shows that you don’t need a huge volume of business in order to achieve the best discounts, i.e. the discount level increases fairly rapidly and then plateau’s.
On your second point about adding new trusts to the framework, this is absolutely not allowed. The parties to the framework must all be clearly identified at the outset, once it is established all participants both supplier and buyer are either in or they are out. No-one can join at a later stage. The terms of the original agreement must also be respected throughout its term, i.e. if the price is fixed, or there are fixed discounts from list price, etc., these cannot be re-negotiated in the mini-competition.
Steven said
We are due to start a tender process with a public sector body in the coming months. The tender is a framework for 4 years. I have been advised by the authorities procurment team that whilst it doesnt say so in the documents they will have the facility to continue ordering on the framework for an additonal 2 years beyond the end of the term. Are they right, or must this additonal time option be stated within the contract documents?
Archie said
Doesnt sound right to me. If its not in the document I would suggest it cannot apply.
I believe that frameworks could not extend beyond 4 years.
Ask them to issue a covering letter to all applicants
Tim Williams said
Steven,
A contracting authority can use a framework agreement to place a call off contract only within the 4 year lifetime of the framework. The contract that is called off can be delivered beyond the term of the framework, but no new call-offs can be issued.
For example, under a financial consultancy services framework, a call off contract to develop a new staff pension scheme could be entered into 3yrs and 11 months into the term of the framework. The pension scheme contract might run for 12 or 18 months, or longer i.e. 17 months beyond the end of the parent framework agreement.
But, no new consultancy projects could be contracted under the framework after the end of the 4 year period. So perhaps a couple of months after the pension services contract was placed it became obvious that there was a need to look at life insurance provision as a staff benefit, then it would not be possible to use the same framework to appoint consultants to develop a scheme.
Ann Lockwood said
The non medical non clinical framework states what the supplier fee is for each agency supplying temporary staff. The agency introduces candidates to our department and states what the charge would be for that person but doesn’t disclose what the workers are paid. Can the agency effectively increase their fee by seperately negotiating how much they will pay the worker or are they bound to pay the worker in line with the agreement even if the worker would be happy to take less money?
Tim Williams said
Hi Ann,
I would say that this is mainly a contractual issue, rather than a procurement related one, although there may be some crossover. I assume that the framework was tendered on the basis of the fee’s quoted by each agency and it was clearly intended that the remuneration paid to the worker was to be separate? If this was the case then presumably the resulting contract reflects that approach, i.e. that the agency is only entitled to their fee and not part of the workers remuneration.
I’m surprised that the agencies aren’t required to disclose to you what they are paying the workers as this would appear to be a significant obstacle in properly managing the contract. Can I suggest that you ask the agencies what they are paying and if they refuse it would perhaps indicate that they are negotiating with individual workers to boost their remuneration.
teery jackson said
Hi Tim can you advise me if by entering into a 3 year framework agreement with 2 other successful bidders, who on are an equal footing with us, and by replacing the 2 orginal contractors, that contract now requires a quote for every job, with the posible of several hundred individual jobs per year, of values from say £25 to a thousand pounds per job therefore fragmenting the original contract, and therefore because in theory, but not I believe not in practise we may not get any jobs, therefore would we be still liable for Tupe.from the previous contractors. Is there any recent decsions by the EAT on this matter.
regards
terry
Tim Williams said
Hi Terry,
A quote may, or may not be required for every job it depends on how the framework has been set-up. Regulation 19, paragraph 7 of the Public Contracts Regulations states:
Where the contracting authority concludes a framework agreement with more than one economic operator, a specific contract may be awarded—
(a) by application of the terms laid down in the framework agreement without re-opening competition; or
(b) where not all the terms of the proposed contract are laid down in the framework agreement, by re-opening competition between the economic operators which are parties to that framework agreement and which are capable of performing the proposed contract in accordance with paragraphs (8) and (9).
So, in plain English this means that if the terms of the framework agreement are specific enough the contracting authority should be able to evaluate which of the three contractors provides the best value for money for this particular contract, depending on the range and type of goods and services required and award the contract as appropriate. If they are not specific enough and in my opinion this is probably the case most of the time, then all three contractors should be invited to submit a quote for the specific contract. It’s important to note that legally you aren’t able to change any of the terms laid down in the framework agreement, just apply them to the specific of the call-off contract, although I suspect that in many cases it doesn’t actually happen like this.
I’m a long way from being an expert on TUPE, and the case-law doesn’t appear to provide very clear guidance as to what to expect. The decisions of the employment appeal tribunal in Kimberley Group Housing case and Clearsprings Management Ltd case gave an indication of how the courts might tackle these issues, but I would be reluctant to assume that TUPE either did or didn’t apply as the specific circumstances of each case appear to have significant influence.
Both cases arose following the establishment of a contract by the Home Office to provide accommodation for asylum seekers.
In the Kimberley case, the tribunal felt a sensible approach would be to look at the proportion of work done by each contractor before deciding where their employees transferred. The contractor that took on the bulk of the work would get all the employees.
In the Clearsprings case, the tribunal decided if activities carried out by the original contractor were so fragmented that under the new contract it was impossible to identify which incoming contractor employees should transfer to, then the employees could not be transferred.
As the framework agreement itself provides no guarantee of work being awarded to you, it would seem that the principle of the Clearsprings case would apply, i.e. the work is fragmented and it’s not possible to identify in advance where the work will be performed, so the employees should not be transferred under TUPE. But I would either take specific legal advice on this from your solicitor and/or price for the possibility that you may have to take on the employees.
tom said
Hi, I was wondering if you could help me answer this question? There is an existing framework agreement running it started Jan 2010 and it runs on a 2 year provision with the possibility of an extended year. If a council then joins this agreement Sept 2011 do they have an end date of Sept 13/14 or Jan 12/13?
I hope you can assist?
kind regards,
Tom
Tim Williams said
Hi Tom,
The framework agreement runs from January 2010 to December 2012, but it included a provision in the original agreement to extend it by a further year to December 2013. This means that, on the assumption that the agreement is extended, any contracting authority, e.g. a council, that is a ‘party’ to the agreement can place a call-off contract under the terms of the agreement up until December 2013.
The important issue here is whether the council that is joining in September 2011 is actually a party to the agreement. A framework agreement is supposed to be closed from its formation until its termination, i.e. the contracting authorities and the suppliers who are party to the agreement are identified at the outset and no new authorities or suppliers can join. It is this aspect where frameworks have been considerably abused, as many have been set up using terms such as ‘the UK public sector’ to define the authorities who are party to the agreement. The European Commission has expressed concern to the UK Government on a number of occasions over this practice. In September 2010, the Office of Government Commerce (OGC), which has now been absorbed into the Efficiency & Reform Group of the Cabinet Office, issued a Procurement Policy Note (PPN) ‘Need to ensure that bodies permitted to use frameworks are adequately identified and clarification is issued if necessary.’ PPN’s are issued to all public contracting authorities and all authorities are supposed to comply with their requirements, but frequently the information doesn’t reach the staff on the front line who are putting these contracts in place.
This PPN states that it is permissible to identify the contracting authorities permitted to use a framework by specifying a recognisable “class” of contracting authority may be used – e.g. “Central Government Departments” or “all county and district councils in Norfolk and Suffolk”. In my opinion this is still far too loose, in the vast majority of cases the authorities so identified have not participated in the drawing up of the agreement, or given any indication of their likely spend for the goods and services to be provided under the agreement. It is now quite often the case that an authority may be identified in several different frameworks for the same type of goods and services and can simply choose which framework to use. Where is the transparency in that?
So to go back to your original question. If you are concerned about whether a specific council is entitled to use the framework agreement, have a look at the original contract notice published in the Official Journal (OJEU) and see how the ‘parties’ were identified. We can help find the relevant notice for you if you don’t have easy access to it (give us a phone on, 0800 270 0249, or email us at info@tendersdirect.co.uk . It may be quite easy and straightforward to challenge that the council is entitled to use the framework at all.
Archie said
Better before than after!!!
michael said
i have published a call off document from a framework agreement, but there are errors in it.
some suppliers have already downloaded it but i need to recall it, am i within my rights to recall the document and re-issue it
thanks
Tim Williams said
Michael,
Yes there should be absolutely no problem in recalling the document and re-issuing it without the errors. The important issue is to ensure that you treat all the suppliers equally.
Tim
Craig said
We have the situation where a major company in our industry agreed a 10 year framework agreement with a large county council, some years ago. They are now touting this agreement around numerous other local authorities and inviting them to purchase from this framework agreement, therefore denying existing suppliers such as ourselves to even provide a quote. None of these councils have any geographical or any other kind of relationship with the County Council. We have already lost several hundreds of thousands in turnover, with the potential of even more in teh coming months. Can this be challenged?
Michael said
Hi there
Can you tell me if it is legal for one supplier to be included in a single framework agreement twice (ie. once as a prime contractor, and secondly as a significant sub-contractor to another company)?
Thanks
Tim Williams said
Hi Michael,
On the face of it there’s nothing in the Regulations that prevents a supplier being included once as a prime contractor and also as a sub-contractor to another prime contractor. Some public sector organisations specify that this type of structure is not allowed in their tender documents and in some cases you can see that it might adversely affect proper competition.
In short, there’s no legal reason to prevent such an arrangement.
Hazel said
With regards to your statement above ‘A disadvantage of a framework agreement for a purchasing authority is that they are relatively unresponsive to change – there may be new suppliers and/or new solutions within the market that were not included when the framework agreement was initially set up’ I have noticed on a US government website that they are able to set up a framework agreement where annually they publish an advertisment asking for names of qualified suppliers to be added to the roster and also they can add ‘responsible’ suppliers at any time the supplier makes a written request [subject to qualification requirements] It then goes on to detail the process to be undetaken when contracts are awarded.
My question is.. Is it legal for a UK public sector organisation to set up this kind of framework agreement which allows new suppliers to be added after the intial set up?
Regards
Hazel
Tim Williams said
Hazel,
There are a couple of ways in which we can answer your question.
Firstly, new suppliers cannot be added to an existing framework agreement, it is essentially designed as a closed system where there are specifically nominated contracting authorities who can make purchases using the framework and there are a specified number of suppliers who can be awarded contracts under the term of that framework. This often gets blurred particularly on the contracting authority side, when purchasing consortia establish frameworks for a wide range of organisations, such as those established by OGC Buying Solutions. In principle though, all authorities that can use the framework should be clearly identifiable and new authorities cannot join at a later stage.
There is nothing to stop a new framework being formed every 12 months, the difference being that all the suppliers would have to re-bid every year in order to gain admission to the framework which is different to the situation you described in your comment.
There is a procedure called a Dynamic Purchasing System (DPS) which is designed for use with commodity items, i.e. products or services that it’s fairly easy to specify as off the shelf. It’s a purely electronic procedure and allows a framework to be set-up that new suppliers can join during the lifetime of the DPS. This hasn’t been a huge success in Europe as in designing the rules of operation the European Commission made it fairly cumbersome to use, so that in almost any situation it would actually be easier just to set up a framework.
Stuart H said
Hi Tim,
I am currently studying Framework agreements and the question has come up in revision topics ‘European laws are irrelevant to us in the UK – Discuss’
Please can you advise me please.
Thanks,
Stuart
Tim Williams said
Stuart,
Sorry I’m probably a bit late in replying to your question.
I’m no expert on European legislation as we specialise just in procurement legislation. But, my view is that it’s fairly obvious that the majority of our legislation is now derived in Brussels and the UK simply implements it, more or less as designed by the European Commission into UK law.
Procurement law in particular is driven by European Directives, European Regulations and the decisions reached by the European Court of Justice. European law takes precedence over UK law in that if there are any infringements of the directive and UK law has been inadequate in correctly transposing the requirements of that Directive then the Commission are quite likely to take action to force UK legislators to amend the UK legislation as well as resolving any individual issues that have arisen.
James said
Hi tim,
Im currently doing my dissertation on framework agreements aswell, and would love to have some your your thoughts on some issues.
Why do you think Framework Agreements are predominantly used by larger contractors ??
And how do you feel the governments recent propsals to make Frameworks more open to small and medium size business’s will effect this ??
Tim Williams said
Hi James,
It’s not that the larger contractors are using frameworks, as it’s the contracting authority that decides whether to use a framework.
It tends to be that the more well known frameworks are the large ones set up by OGC buying solutions, or by groups of authorities acting together. This in turn means that the value and/or geographical range of the requirement is much larger, which obviously plays to the strengths of a larger company with a strong balance sheet and a national presence.
I’m not sure that the type of frameworks that I’m describing above will become more accessible to SME’s. But perhaps UK public sector organisations will more often question whether all of the goods and services they are purchasing are best sourced in this way, or whether it makes sense to have a more diverse, innovative, local source of supply.
Alex said
Hi,
I am currently doing a dissertation around the use of framework agreements in the highway maintenance sector and how effective they are in line with the HA’s Best Value principles.
I am struggling to find any references that point out when the use of framework agreements really took off, and whether there is was a specific reason for their popularity? Recession?
Could you shed any light on the matter?
Thanks,
Alex
Tim Williams said
Alex,
The G-Cat framework for IT equipment, established by the Central Computer & Telecommunications Agency (CCTA) in 1996, was certainly amongst the first public sector frameworks.
Although the CCTA and its successor body OGCbuying.solutions strongly asserted that G-Cat complied with the European directives, the European Commission was not convinced and in 2000 issued “pre-infringement” notices requesting further information on the operation of G-Cat and S-Cat, the IT services framework. Although the case did not lead to formal infringement proceedings, it reflects the lack of legal certainty as to whether frameworks were permitted in the public sector and how they should be operated.
The Public Contracts Regulations 2006, based on the 2004 European Directive clarified the legal basis and also regulate the conduct of framework agreements in the public sector. So in answer to your question I would say that their use has been increasing from 2006 onwards, although perhaps not always in full compliance with the legislation.
My view is that properly used, frameworks are an excellent method of procurement and avoid unnecessary repetitive tendering exercises. Unfortunately far too many contracting authorities use a framework as a lazy shortcut to avoid their own tender exercise when that would probably be a more appropriate route.
Tim Williams said
This has been by far the most popular post on our blog since Diane wrote it 6 months ago and it still keeps topping the popularity rankings every week.
A question for those of you reading it now though. Does it answer all of your questions, or are there any areas you’d like us to expand on?
Gwin said
It is useful, thank you.
I work for an IT company and I’m trying to source a list of frameworks that are currently running, specific to IT supplies and services to the Public Sector. Do you know if there is a list in existance which encompasses the majority of Public Sector frameworks, such as OGC Buying Solutions Commoditised IT Hardware and Software, CPC frameworks, HE regional consortia frameworks like NWUPC (North West Universities Purchasing Consortium) Audio Visual framework etc, or do I have to either wait for them to appear on the OJEU, go to the individual sites to find them? My problem with the latter is that I’m relatively new to the industry so unsure where to find details of organisations that run frameworks.
Many thanks for your time.
Tim Williams said
Hi Gwin,
I’m afraid that we don’t know of any list of framework agreements that are currently running. At the moment the only solution I can suggest is as you say yourself to visit each of the authorities that establish frameworks and keep an eye out on those published in the Official Journal (OJEU). If it is something that other people would value we will consider setting up such a list on Tenders Direct.
Tim
Annie said
Hi Guys, I am currently writing a dissertation on Frameworks and my hypothesis is “The recession of 2008 – 2010 will reduce the use of Framework Agreements in the public sector in the UK”.
Could you give me your opinions on; if Frameworks only prosper in good economic times? and are public sector clients going to follow some of the private companies by ditching their frameworks and reverting to lowest bid wins?
Many Thanks
Tim Williams said
Hi Annie,
Thanks for your questions.
I’m not at all sure that I agree with the premise of your dissertation, i.e. I think the recession may well increase the use of frameworks.
Once they have been set up frameworks provide an easier way of purchasing as there is no need to go out to tender for the repetitive call-off requirements. As cuts in the public sector take effect and the number of staff reduces I would actually expect to see an increase in the use of frameworks.
There are also many frameworks that are established and then not used to their full extent, because the purchasers at the front line don’t know that the framework exists, or because they have a preference for an alternative. It seems to me increasingly likely that the use of specific frameworks will be mandated.
I think your second point about moving to lowest price bids, is also wide of the mark. Firstly there’s no conflict between using frameworks and going for the lowest price. It’s perfectly possible to award a framework on lowest price criteria. Importantly though the lowest price does not necessarily, or even often, provide the best value, at least not unless the criteria have been set very well. Essentially an evaluation on the basis of most economically advantageous tender, is awarded, or perhaps should be awarded, to the lowest price bid that meets the specification.
These are interesting questions you have raised, so I’d be interested to hear if anyone has any different views?
suzan said
hi, as a beginner i just want to clear some concepts in framework agreements i.e.
1. is it used in times of urgency?
2. can we maintain integrity and on the other hand obtain best value for money?
3. do we have to tender in framework agreements or is it just like single source procurement where one chooses a supplier without any tender?
it will be really appreciated,
thank you!
Simon said
What’s the average negotiated Overhead and Profit mark up for a 1- 3 year framework agreement within the public sector?
Tim Williams said
Simon,
I’m afraid there’s no simple answer to your question. It’s exactly the same as in the wider business world, it will depend on the market sector, the level of specialisation, the level of demand and supply, the element of risk, etc.
For example, construction contracts normally have a low profit margin in the low single figures, but the overall value is high and so there’s an adequate return in monetary revenue to satisfy the shareholders. Conversely a consultancy service contract will have a much higher margin, perhaps 50, 60, 70% or more.
I don’t think you can approach bidding to the public sector on the basis of ‘I’m going to apply my standard 30% profit margin,’ to this contract. You need to evaluate the likely competition and determine who your competitors are likely to be and what price they are likely to bid at. Although public bodies do sometimes ask what level of profit margin you are applying, it is unlikely to be the deciding factor, they are much more interested in the overall cost to themselves.
Regards
Tim Williams
Anthony Pozniak said
Hi Simon,
I agree with Tim’s comments and from my experience I would like to add the following: you don’t specify which industry sector you are in but for commodity products with many suppliers nationwide profit almost becomes secondary and a company has to evaluate the worth of being included on a framework agreement. For example there may be a value in kudos where a company receives favourable and ongoing press coverage, you may get decent testimonials which may help with other bids or maybe inclusion allows a business to expand and take advantage of economies of scale when purchasing components with which to make the finished product. Many bids for this type of product are “supported” bids which means that a company will dip into a marketing fund to help finance the bid.
Conversely if the product or service is so specialised that there are few contenders this offers more opportunities for profit and the emphasis on differentiating yourself from the competitors is based on a “best fit” and value proposition.
Best wishes
archie thorburn said
if the award criteria of a framework agreement is advertised as a most economically advantageous tender, can the award criteria then be changed in the contract document to a lowest price award ?
Tim Williams said
Hi Archie,
At first sight I thought the answer to this one was quite straightforward, i.e. once the award criteria have been published then they can’t be changed. However, thinking about it in a bit more detail, it probably is possible to change them between publishing an Official Journal notice and issuing the invitation to tender documents to the candidates, provided the change is made clear to everyone.
It’s clearly not ideal to make such a change and as with any change that departs from the normal procedures the contracting authority is exposing themselves to a potential challenge. The authority could probably protect themselves against any challenge by publishing an additional information notice in the OJEU.
Unsatisfactory although it is, I actually can’t see any reason why a contracting authority cannot change the award criteria at any point up until the deadline for the submission of tenders, provided that they make everyone aware of the changes and that they are not distorting the competition by doing so.
Once the framework agreement has been concluded though, the award criteria can not be changed for any of the call off’s awarded under the terms of that agreement. So even if a mini-competition is being held the same award criteria must be used, although they can potentially be supplemented with additional criteria.
Archie said
Hi Tim,
Thanks for that.You seem quite well informed in what is to me a minefield.
The “change” from MEAT as advertised was given in the contract document as:”Instructed via this term contract based on which contractors are available and who has the lowest price for the works instructed, at the discretion of the Manager of Property Conservation.See seperately how works are instructed. Open to only the contractors appointed under the term contract”.To my knowledge no additional information notification was made.Unfortunately we,(20 on contract) along with many other contractors priced the works on the consideration of MEAT, not lowest price, only to be told that we are unlikely to be considered for call offs because of our not being in the lowest price bracket.There is a 36% variation between lowest and highest.You may see other subjectives from this.I would value your response.
I look forward to hearing from you
Regards,
Archie
Tim Williams said
Archie,
From what you say, it sounds as though the contracting authority is changing the terms of the framework contract after it has been concluded, i.e. it is only at the call-off stage that they have introduced the change from MEAT (Most Economically Advantageous Tender) to lowest price.
If this framework (or term contract) is covered by the Public Contracts Regulations (PCR) then it seems that they are breaching those regulations. I can give you some pointers on how to raise a complaint, if this is the case. Even if it’s not covered by the PCR, it may well be actionable as a breach of contract.
If you would like to email me at Tenders Direct I’d be happy to offer some further advice.