Last edited 11 Jul 2016

Framework contract

Clients that are continuously commissioning construction work might want to reduce procurement timescales, learning curves and other risks by using framework agreements. This allows the client to invite tenders from suppliers of goods and services to be carried out over a period of time on a call-off basis as and when required.

The framework contract documents should define the scope and possible locations for the works or services likely to be required during the defined time period. They should describe the contract conditions that will be used for pre-construction services (such as design) and/or the contract conditions that will be used to execute the works.

Depending on the size and complexity of the anticipated projects, the supplier might provide a pricing mechanism or risk adjustment mechanism for different types of contract that might be used, for example a minor works contract, a cost reimbursable contract, a design and build contract and so on. A suitable options would then be selected by the client depending on the nature of the projects that emerged.

Framework tender documents are likely to include:

  • The starting and completion dates of the agreement.
  • Requirements and obligations regarding insurance, bonds and warranties.
  • A description of the contract conditions to be used and assumptions regarding preliminaries.
  • A description of how the project will be managed in its various stages and the basis of remuneration.
  • A description of the tender selection procedure and assessment procedure to be employed by the client.
  • A description of inflation, interest and retention percentages to be applied.
  • A description of incentive mechanisms to be applied.
  • A description of dispute resolution procedures.
  • Rates for travel and subsistence expenses.
  • A request for schedules of rates and time charges to be submitted and a breakdown of resources and overheads to be applied to design, or manufacture and installation (including any proposed subcontractor or sub-consultant details).
  • Any other criteria required from tenderers in order that the client can properly assess their suitability.

One or more suppliers are then selected and appointed. When specific projects arise the client is then able to simply select a suitable framework supplier and instruct them to start work.

Where there is more than one suitable supplier available, the client may introduce a secondary selection process to assess which supplier is likely to offer best value for a specific project. The advantage to the client of this process is that they are able instigate a selection procedure for individual projects without having to undertake a time-consuming pre-qualification process (which might be subject to OJEU procurement rules on public projects). This should also reduced tender costs.

The advantage to the supplier is that the likelihood of them being awarded a project when they are already on a framework contract should be higher than it would be under an open procurement process. Some suppliers however complain that having already been appointed on a framework agreement, they may then have to bid for individual projects anyway, and after a great deal of time and effort may not be awarded any projects.

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