WGS can advise on and provide framework agreements for corporations.
Below is an overview of how framework agreements work.
What are framework agreements?
There are two types of contracts which are commonly referred to as framework agreements. For the purposes of this overview these are termed “simple framework agreements” and “complex framework agreements”.
In both types the framework agreement is essentially facilative. It gives a mechanism for one party to place orders with another on standard terms.
In a simple framework agreement, the framework agreement and the purchase order together constitutes a single contract albeit one in which the scope of the contract regularly changes as orders are placed and fulfilled. In a complex framework agreement the framework agreement is a separate facilative agreement which sets the terms on which future contracts will be made between the signatories.
Public Procurement Rules
There are frequently public procurement rules which impact on framework agreements and these will need to be considered before the Framework agreement is drafted.
Why use a framework agreement
There are three main reasons for using a framework agreement as follows:
- Facilitating similar transactions.
- Agreeing a process and a set of standard terms makes it easier and faster for the parties to reach agreement where they are likely to enter into a series of similar transactions in the future.
- Achieving consistency and economies of scale. Where different areas of business enter into similar transactions with a supplier the use of a complex framework agreement brings a degree of consistency to the terms on which transactions are made.
- Avoiding repeated procurement if a company is contemplating a series of similar transactions a single framework agreement covering all the potential transactions is an attractive and alternative to multiple procurements.