About Framework Agreement Contracts

About Framework Agreement Contracts

Framework Agreement: “An agreement between an employer and one or more contractors, the purpose of which is to establish the terms governing orders to be awarded during a given period, in particular with regard to price and, where appropriate, the quantity envisaged” (SANS/ISO 10845-1:2015).

Why Framework Agreements?

1. To enable an Organ of State to fulfil its mandate of the delivery good quality infrastructure, on time and within budget.
2. To provide a convenient means for an Organ of State to obtain goods, services or works from contractors within a defined scope on an “as instructed” basis over a set term without necessarily committing to any quantum of work.
3. To enable an Organ of State to obtain goods, services or works ‘as and when required’ in an efficient and cost effective manner.
4. To reduce an Organ of State’s need to constantly re-advertise and approach the market for goods, services or works falling within the scope of the agreement over the term of the agreement and the number of relationships to be managed.
5. To provide an Organ of State with programming flexibility to manage expenditure relating to the delivery and maintenance of infrastructure over time, and enable collaborative relationships to develop in order to deliver better value and project outcomes, particularly those relating to contractor development, community participation and skills development.
6. To also provide an opportunity for contractors to improve their internal management systems, to develop their supply chains and improve their Broad Based Black Economic Empowerment status during the term of the contract through continuity of work over a longer term than is the case in non-framework contracts.
7. To enable lessons learned in one package or task order to be taken to the next, and enable a team to work together on an integrated approach over a period of time. This can be used to overcome public sector capacity constraints through the establishment of regional framework agreements.

When should Framework Agreements be used?

Framework agreements are appropriate where:

1. The budget availability and the detailed scope of work or the needs are uncertain.
2. The potential for additional funds to be made available exists.
3. The need involves repetitive work of a similar nature.
4. A quick response time is required long term relationships (3 to 5 year) are desirable to achieve efficiencies.
5. There is a general knowledge of what framework agreements are and how they should be implemented (or there is an ability to source additional capacity from outside the Organ of State).
6. There is adequate capacity within an Organ of State to conduct demand analysis, plan and implement Framework Agreements (including monitoring the implementation once they are established and make improvements).

Where are Framework Agreements not appropriate?

Framework agreements are not appropriate where one or more of the following circumstances exist:

1. Where an Organ of State generally lacks knowledge of what framework agreements are, how they are used and there is no ability to obtain additional capacity through insourcing, outsourcing or recruitment of skilled resources.
2. One of a kind or one-off projects
3. Projects where the nature and type of work is not known.
4. There are no policies or procedures within an institution in place to implement Framework Agreements. An external capacity should be sourced to avert this challenge.
5. No capacity to plan, implement nor monitor the implementation of framework agreement agreements.
6. Instability at leadership level of an Organ of State.
7. Where the legislation prohibits the use of framework agreements.

How to establish Framework Agreements?

Essential elements when establishing Framework Agreements (the list is not exhaustive):

1. A Policy and procedure manual and/or standard operating procedures on Framework Agreements approved and in place.
2. The delegations of authority to deal with Framework Agreements must be approved and in place.
3. A need for Framework Agreements must exist.
4. Framework Agreements should generally be used for repetitive work and professional services.
5. The presence of capability and capacity in place to effectively manage framework agreements.
Provisions of the Framework for Infrastructure Procurement and Delivery Management have been adhered to.
6. An open competitive tender process must take place to establish Framework Agreements contracts and be published in all relevant publication platforms.
Where tenders involve procurement of contractors, cidb provisions must be applied.
7. A clear, unambiguously evaluation criteria must be stated in the procurement document.
8. It should be made clear that an Organ of State does not bind itself to any quantity of work or service, scope of work or service or guarantee that one or all contractors in the framework agreement contract will be get the work.
9. An Organ of State should utilize well established Pricing strategies (i.e Bills of Quantities, Schedule of Quantities, Activity schedule or Lump Sum). These are found in cidb’s Construction procurement Strategy document. Any selected pricing strategy should be included in the procurement document and be utilized during the establishment of Framework Agreements.
10. Rates, Fees and/or Prices must be determined during the establishment of Framework Agreements. They must be fixed for a duration of contract unless it is impractical to do so. Where it is impractical to fix prices of framework contractors, a justification should be made.
11. Estimated quantities of each activity must be used and be stated in the procurement document for purposes of determining  a comparative tender schedule and tender amount. Once the evaluation process has been concluded, the quantities in the pricing schedule must revert back to zero.
12. Procurement documents must be prepared in line with cidb provisions and Treasury prescripts.
A form of contract to be used during the Framework Agreement contract implementation must be determined and stated in the procurement documents.
13. Number of framework agreement contractors to be admitted at any given time must be stated in the procurement documents and tender invitation.
14. Duration of Framework Agreement contracts.
15. Type of framework agreement (i.e. closed panel or open framework) to be used must be stated in the procurement document.
16. Generally, procurement documents for establishing framework agreements should contain the following parts:

     Cover page (containing name of an Organ of State, logo, tender number, project name, name of tenderer, CSD number, CSR Number (cidb), closing date and time}

    Table of Contents page

    Tender Notice and invitation page (cidb grade and class of works, where applicable, brief scope of a project, location where project will take place, project duration, form of contract to be used in the framework agreement, pricing strategy adopted, places and platforms where tender documents will be available, tender document non refundable tariff (if applicable), compulsory briefing details (if applicable), closing dates and location of tender box,  evaluation criteria, preferential procurement policy framework points (80/20 or 90/10), tender validity period, any other tender conditions applicable, complaints of tender abuse number.

    Tender data (based on SANS 10845 provisions or the latest cidb’s Standard for uniformity in Construction and Engineering Procurement), detailed tender conditions and terms of references, including consequences for not adhering to them. Where SANS provisions are used, alignment to National Treasury and cidb prescripts should be made.

    Standard Bidding Documents (SBD / MBD forms, including their partially completed annexures e.g. Annexure C, D, E accompanying SBD 6.2/ MBD 6.2 forms), Compulsory Enterprise Questionnaire, Sample of Construction Sector Codes (CSC000) Sworn Affidavits (for both EMEs and QSEs), Annexures/Schedules for measuring Functionality requirements, Resolution to Sign sample, Certificate for Joint Ventures, etc.

    The functionality criterion used during the setting up of Framework Agreements contracts must compose of a minimum of three (3) sub criterion. The total score for functionality must be 100 points / percentage. The functionality criteria must be measured separate from the price and preference.

    Form of Offer and Acceptance (to be discarded after establishment of a Framework Agreement contracts)

    contract information.

    pricing instructions and

    Detailed Pricing schedule (Bills of Quantities, Price List, Lump sum, etc).

    Scope of Work or service.

    Broad Specification of what the works or service entails

    Relevant site information

Types of Framework Agreements

An Organ of State can establish a framework agreement contract using any of these types of Framework Agreements. The list is not exhaustive:

1. Framework Agreement with fixed terms, with one supplier. An Organ of State would enter into a Framework Agreement with one supplier for a period of up to three years. The call-off contract based on the Framework Agreement is concluded directly by the Organ of State using the conditions set forth in the Framework agreement, without any change.

2. Framework Agreement without fixed terms, with one supplier. An Organ of State would enter into a Framework Agreement with one supplier for a period of up to three years. The call-off contract is concluded on the basis of a written request to the supplier, asking the supplier to send in a new offer. A written request may contain, besides the original terms, precisely defined conditions and other minor amendments to the terms of the Framework Agreement. After receiving the new offer, the Organ of State and supplier will enter into a contract. The essential terms of the Framework Agreement may not change in the written request stage.

3. Framework Agreement with all conditions set, with more suppliers. An Organ of State enters into a Framework Agreement with three or more suppliers for a period of up to three years. If the Organ of State does not get three or more tenders that meet the selection criteria, it may enter into a Framework Agreement with a smaller number of suitable suppliers, if allowed by law. In the case that the best supplier is unable to deliver, the contract will be concluded with the next best available supplier. Organs of State shall, within a reasonable period – for instance within seven days of the conclusion of the contract, send a decision to all suppliers in the Framework Agreement about the conclusion of call-off contracts.

4. Framework Agreement without all conditions set, with more suppliers. The Organ of State enters into a Framework Agreement with at least three suppliers for a period of up to three years. If there are not three or more tenders that meet the selection criteria, the Organ of State may enter into a Framework Agreement with a smaller number of suitable suppliers, if allowed by law. A written request may contain, besides the original terms, precisely defined conditions and other minor amendments to the terms of the Framework Agreement. After receiving the new offer, the Organ of State and supplier will enter into a contract. The essential terms of the Framework Agreement may not change in the written request stage.

5. Additional information on Framework Agreements could also be found on CIDB, the Organization for Economic Co-operation and Development and World Bank documents.