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Last edited 14 Feb 2018
A call-off contract, also known as a blanket order, is a purchase order which enables bulk orders over a period of time. This is a form of framework agreement that is often used in construction where projects can last for months or even years.
The benefit of using a call-off contract is that it allows the supply of materials to be secured over multiple delivery dates, meaning that a customer does not have to hold excess stock (e.g. all the bricks required to build a housing development) on site; instead they can ‘call off’ stock as and when it is required.
This also reduces the amount of administration required to process multiple purchase orders. Instead, sales orders and invoice items are raised as they are needed until the point at which the contract is fulfilled, the end of the order period is reached, or the maximum order value (which has is pre-determined) is reached.
Another significant benefit is that call-off contracts are often negotiated with pre-determined pricing, which can offer discounts for bulk ordering. This is beneficial for suppliers who are guaranteed ongoing business over a period of time and can help them manage cash flows and orders.
Careful management of call-off contracts is essential, with appropriate controls in place. The customer should have confidence that the agreed pricing is maintained and the schedules for call-off are met; while the supplier should have firm control over their commitments, and make sure they do not over- or under-supply.
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