What is a Framework Agreement?

A framework agreement is a two-stage procurement method:

• Participant qualification
• Iterative bidding

The first stage, qualification, is necessary for the client to form a pool of verified suppliers. The client announces the technical and quality requirements for the procurement item. Suppliers must confirm that their goods meet these requirements by providing valid licenses, certificates of compliance, and other documents. Requirements may also apply to the companies themselves, such as proof of market experience or experience in fulfilling similar contracts.

With the participants who pass the qualification stage, a long-term framework agreement is signed. Once qualified, a participant gains the right to participate in all announced reverse auctions within the respective “framework.”

It is important to note that bidding only occurs for product items defined during the first stage of the procedure. New products cannot be added to an already signed framework agreement.

The second stage, iterative bidding, consists of a series of reverse auctions in which only the participants qualified under the “framework” can take part. Auctions are held periodically, with intervals determined by the client based on their needs. These intervals could be monthly, weekly, or otherwise.

Framework Agreement for Commercial Clients

For commercial clients, the tool allows to adjust the volume (quantity) of goods in each subsequent procurement under the respective “framework.” For example, if a company regularly procures fuel, it might have required 100 tons last month but only needs 50 tons this month. The client announces procurement for exactly the required volume.

A framework agreement can be signed for an extended period (there are no system-imposed restrictions on its duration). The client can conduct iterative procurements with pre-selected suppliers over several years.

Two formats of the framework agreement are available:

• Public: The announcement, bidding process, and results are fully open and transparent.
• Closed: Procurement information is accessible only to a limited circle of participants.

Clients can choose the format that suits them best.

Applications of Framework Agreements

This procedure is particularly suitable for organizing regular procurement of goods whose prices fluctuate significantly in the market, such as electricity, natural gas, and fuel.

Through a framework, clients can also procure other goods, such as office supplies, spare parts for machinery, etc. Agricultural businesses can benefit from using framework agreements to procure fertilizers and plant protection products cost-effectively.