Framework Agreements

Since posting our blog item "ethical procurement in the construction industry" we have received a number of questions and comments concerning "framework agreements" and in particular who these agreements benefit and whether or not they assist with cost effective procurement.

The perceived benefit for the building owner is that the procurement process has only to be carried out once for works being carried out over a term period of three to four years. However the process of entering into a framework agreement is lengthy and bureaucratic. High value contracts have to be advertised in the Official Journal of the European Union and this often results in a large number of interested companies applying for tender documents. A pre-qualification process is used to reduce the number of interested parties down to a short list of six to ten acceptable tendering companies. The cost of completing the pre-qualification documents and the marking criteria is usually such as to eliminate small and medium size firms who would almost certainly provide the best value for money solution. However at the pre-qualification stage price is not taken into consideration. The result is that the short list of firms included in the final stage of tendering are nearly always larger organizations with larger overheads and therefore higher prices than many of those eliminated at the pre-qualification stage. If the framework agreement results in a term contract with a single company both client and contractor are bound in for the period of the agreement. If the marketplace becomes more competitive during the period of the agreement the client does not benefit and if it becomes less competitive the successful company does not benefit from higher prices. Even if just three or four companies were selected from the short list to enter into a framework agreement on a the basis of restricted tendering on a project by project basis, the costs to the client would be higher than using smaller firms as the smaller firms would have been eliminated at the pre-qualification stage.

The problem would be solved by clients, especially those spending tax payers' money, not adding together all potential expenditure for a three or four year period and then, because of the ludicrous EU rules, having to procure the services by the framework system. In the light of the severe financial problem being experienced by EU Member Governments perhaps the EU bureaucrats will spend less time and money on bureaucracy and leave individual countries to manage their own affairs more economically.

It is usually the laziness and ineptness of those spending tax payers' money that want to find the least time consuming way of procuring the services of consultants and contractors rather than inviting tenders on a project by project basis. There are many competent and well qualified small and medium size firms of consultants and contractors that are far more competitive than the ones used on framework agreements. From our direct knowledge their schedule rates are frequently less than half of those of the larger firms.

The Guild would be pleased to provide detailed information to the newly elected Government of many examples of Government Departments and other organizations spending tax payers' money paying far too much for construction work and related professional services - assuming that the Government are genuine in their stated objectives to reduce costs and manage the economy efficiently!

The EU Public Sector Procurement Directive covering public procurement of services, supplies and works defines a framework agreement as "an agreement with suppliers, the purpose of which is to establish the terms governing contracts to be awarded during a given period, in particular with regard to price and quantity". A framework agreement can be a "term contract" or a "call-off" arrangement. In the construction industry framework agreements are used by most government departments, local authorities and some major public companies. Architects, structural engineers, mechanical services engineers and CDM Co-ordinators services are often procured by framework agreements as is maintenance building work.

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