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Last edited 22 Feb 2021
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 is pre-determined) has been 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.
NB Glossary of procurement terminology, A guide for suppliers, Published by the London Borough of Richmond upon Thames in April 2012, defines a call-off contract as: ‘A contract made following a formal tendering process with one or more contractors, suppliers or service providers for a defined range of works, goods or services covering terms and conditions (including price) which users ‘call off’ to meet their requirements.’
STAR Procurement (a shared procurement service for Rochdale, Stockport, Tameside and Trafford Councils), Glossary of Terms, published in May 2019, defines a call-off contract as: ‘A contract awarded to a supplier or number of suppliers appointed to a Framework Agreement, to deliver the particular supplies, services or works required.’
The Chartered Institute of Procurement & Supply (CIPS) Glossary of procurement terms, defines a blanket order as: ‘An order that is placed with the supplier which allows the buyer to call off quantities as they need them over an agreed time period. This works in accordance with a manufacturing organisation’s production schedule.’
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