What is it framework Agreement

A framework agreement is a document confirming the agreement of two or more parties to cooperate for some specified period. A framework agreement can be entered into by one or more customers with one or more suppliers. Based on the results of public or commercial procurement, one customer agrees with one or more suppliers of goods, works, or services.

This transaction format is convenient because it allows to save money and time on the selection of suppliers for a certain number of identical purchases. It also helps all parties to establish long-term business relationships.

What Does the Framework Agreement Define?

The framework agreement defines the conditions, the form of the contract, the terms of cooperation, the price framework or a fixed price, the number of goods, the scope of services or work, the place of delivery, etc. By signing the agreement, all parties agree to its terms.

Framework Agreement in Public Procurement

In the system of state electronic tenders, procurement under a framework agreement is a separate type of trades. Now they are more often used by all-Ukrainian organizations with high needs, such as Ukroboronprom, Ukrposhta, etc. This type of procurement occurs in two stages:

1. 1. Selection of at least three suppliers with whom a framework agreement will be concluded.
   2. Bidding among the signatories of the agreement to determine the final winner.

In more detail, the first stage is as follows:

1. 1. The announcement by the customer of online bidding under the framework agreement.
   2. Submission of price proposals by all interested suppliers.
   3. Prequalification – the stage at which all suppliers who have submitted an offer are evaluated according to non-price criteria. As a result, the customer must select at least three suppliers.
   4. The first stage of the auction involves a minimum of three bidders selected at the prequalification stage. The customer specifies the maximum number of potential suppliers in the tender documentation in advance. At this stage, all participants voluntarily reduce their initial offers.
   5. The signing of a framework agreement with fixing the price of each participant at the last round of trading in the Prozorro system.

When it becomes necessary to conduct a purchase, the customer announces the second stage of the purchase under the framework agreement. The winners of the first stage participate in it. During the electronic auction, they can again reduce their bids. As a result, the winner is determined, with whom the customer concludes a supply contract. Such a procedure is carried out every time the organizer needs to purchase goods, works, or services specified by the agreement, and any of the signatories of the framework agreement can become the winner.

Framework Agreement in Commercial Procurement

Commercial purchases on the SmartTender electronic trading platform are not regulated by law, therefore they can be carried out in a format convenient for the organizer. In general, the procurement algorithm under a framework agreement in commercial tenders is similar to public procurement.