What Does a Framework Agreement Mean for SMEs?

Framework agreements are commonly employed across all sectors of public sector procurement; they are particularly common for large construction tenders, as well as health and social care, mechanical and electrical services and IT/data management opportunities. If your organisation is looking to win work from the public sector, it is highly beneficial to understand precisely what a framework agreement entails, in addition to potential advantages or drawbacks inherent to the structure of the agreement, prior to starting the bidding process.

Defining a framework agreement

A framework agreement is an arrangement where the purchasing authority selects multiple suppliers to deliver works or services at a fixed rate as and when required. Ultimately, what differentiates a framework from traditional contracts is the use of multiple suppliers or providers to fulfil the tendered works or services. Following award of a framework place, agreements are usually organised into a ‘call-off’ structure, where the buyer’s representatives have a list of pre-approved suppliers to call and purchase packages of works.

Tenders for framework agreements are frequently ‘lotted’, or divided into different categories, such as geographic area, services provided or overall value of works/services, allowing bidder organisations to choose which lots they are best positioned to deliver against. The minimum number of places available on a framework is two, reduced from three, following amendments from the Public Contract Regulations 2015. Frameworks often last for a period of three to five years, with extensions occasionally available at the buyer’s discretion and performance on the contract.

Why buyers use frameworks

As with all other procurement processes, buyers use frameworks to establish each tender organisation’s capability to carry out agreed works, based on past experience in addition to proposed approaches specific to the opportunity.

Other benefits of a framework agreement for public sector buyers include:

• Providing effective resourcing across a large geographic area or number of workstreams: it may be challenging to find a supplier who can fulfil all requirements of the contract
• Establishing pre-agreed terms, conditions and prices for delivering works or services with a large number of suppliers, rather than an individual contract for each organisation
• Reducing risk in delivery: by engaging with several suppliers under the same agreement, any risks to delivering works or services can be effectively mitigated
• Longer cycles for procurement: lengthier agreements result in a steady supply of pre-approved suppliers, while also reducing time, effort and money spent on the procurement process.

Framework agreements can also be used to integrate additional workforce into the buyer’s existing resource, or complete works in support of a principal contractor. For instance, a local council may have directly employed operatives or a larger contractor complete scheduled maintenance for their housing stock, but may require a framework agreement for other services to residents, such as reactive repairs, void works or EICR certification.

Benefits of a framework agreement

Many new businesses or those tendering for the first time opt to submit a bid for framework agreements – this allows them to gain relevant experience prior to tendering for single provider contracts, in addition to reducing their own risk as they are not the sole provider.

However, frameworks are not solely restricted to new, emerging or developing businesses – they can be a valuable source of revenue for larger and established businesses across all sectors. For example, Network Rail’s CP6 capital delivery frameworks, totalling £4.4 billion in value, has several firms in the Construction Index’s top 100 as suppliers. Similarly, suppliers providing data management and IT solutions to CCS frameworks include some of the largest technology consultants and providers in Europe.

Benefits to joining a framework agreement include the following:

• Higher chances of success: as more than one supplier will be awarded a place on the framework and subsequent call-off arrangement, your organisation is naturally more likely to submit a successful bid. Moreover, frameworks can also appoint multiple suppliers per lot, enhancing your chances of success even further.
• Market entrance for new/emerging businesses: if you are a new business or do not have previous experience servicing a contract of a similar size and scope, it may be easier to break into public sector procurement using frameworks. For example, a new health and social care provider will naturally find it easier to enter a framework agreement instead of being awarded a single provider contract, where a lack of organisational experience may hinder a competitive bid.
• Develop relationships with buyers: frameworks offer a chance for you to understand the purchasing authority’s working practices, preferences and procedures (such as their customer care policy), which will prove useful when bidding for future opportunities.

Framework agreements often offer more scalable workstreams for SMEs, meaning they are better placed to manage workloads from the buyer.

Potential drawbacks

Although framework agreements offer numerous benefits, there are also potential disadvantages. The most apparent and immediate con of a framework agreement is that there is no guaranteed work or revenue attached to the contract. The majority of frameworks are unlikely to be a contractual agreement in and of themselves, but simply pre-agreed terms and conditions which would apply to any ordered works/services over the agreement lifecycle.

Similarly, you may not receive as much work as anticipated if the buyer determines the framework will operate a ranked supplier list. In these instances, even if you are awarded a place on the framework, a lower ranking may result in fewer call-offs and a smaller workload. In addition to a loss of potential revenue, resourcing committed to servicing the framework may also come to a standstill, leading to reduced organisational productivity.

Lastly, peaks and troughs in demand are common occurrences on frameworks, impacting the amount of work you receive. Occasionally, this is by design – for example, if the buyer (such as a local authority) has planned works to peak at a certain time in the financial year. However, low call-offs can be impacted by an overall lack of demand, such as decreased call-outs for responsive works/repairs or additional works being covered by the buyer’s principal contractor.

Tender writing support for securing a place on a framework

With over 14 years’ experience and 7,000 SQ and ITT submissions supported on behalf of our clients, Executive Compass offer a suite of bid and tender management services, including an initial scoping exercise to determine if a framework agreement is right for you, informing your organisation’s ‘bid/no bid’ decision. To find out more, our sales and marketing team are contactable at 0800 612 5563, or via email info@executivecompass.co.uk.