Framework Agreement Definition Cips

A framework agreement, also known as a framework contract, is a type of contract used by organizations to establish terms and conditions for future procurement activities. The Chartered Institute of Procurement and Supply (CIPS), the leading global professional body for procurement and supply chain management, defines a framework agreement as „a long-term agreement with suppliers that sets out the terms and conditions under which specific goods or services will be purchased throughout the agreement period.”

Framework agreements are commonly used by public sector organizations, such as government agencies and local councils, as well as by large businesses and corporations. They provide a structured approach to procurement, allowing organizations to establish relationships with suppliers and negotiate favorable terms and prices. Framework agreements can cover a wide range of goods, services, and works, and are often used for high-value items such as construction projects and IT services.

The main advantage of a framework agreement is that it streamlines the procurement process, saving time and reducing costs. By establishing a pre-approved list of suppliers, organizations can avoid the need to carry out lengthy tendering processes each time they need to purchase goods or services. This can be especially beneficial in situations where there is a high level of uncertainty or where requirements are likely to change over time.

Another key benefit of framework agreements is that they can help to improve supplier relationships. By establishing long-term contracts with suppliers, organizations can build trust and develop closer working relationships. This can lead to improved service levels, better communication, and more effective collaboration.

However, it`s important to note that framework agreements are not without their challenges. One of the main issues is the potential for limited competition. By establishing a pre-approved list of suppliers, organizations may limit the number of companies that are able to compete for their business. This can result in higher prices and reduced innovation.

To address this issue, it`s important to regularly review and update framework agreements to ensure that they remain relevant and competitive. Organizations should also be careful to avoid anti-competitive behavior and comply with relevant procurement regulations.

Overall, framework agreements can provide a valuable tool for organizations looking to streamline their procurement processes and establish closer relationships with suppliers. By understanding the definition of a framework agreement from CIPS and following best practices, organizations can maximize the benefits and minimize the potential challenges of these long-term contracts.