Framework Agreements: How to avoid frustration and get more orders

After a strenuous and prolonged tender process, you’ve finally made it onto your target customer’s Framework Agreement. Hoorah!

Time to get out the champagne and sit back as the orders come flooding in, right?

Not exactly…

Framework Agreements – if you’re not already aware – are simply a formal acknowledgement that a buyer might make an order or form a contract with you. Although it’s worth reading the specific clauses of your agreement(s) in detail, Framework Agreements are, for the most part, non-committal in terms of volume. In other words: the buyer is not obliged to buy a single widget from you. Not a bean. Nada.

So, what’s the point?

After reading the above, you may be wondering why Framework Agreements even exist in the first place. Well, for procurement teams they provide a number of important benefits. These types of agreements can help a buyer:

• Reduce the time taken to create individual contracts (as the majority of terms & conditions are covered by the Framework Agreement)
• Allow a wide range of similar products/services/projects to be purchased more efficiently
• Reduce risk associated with a single supplier (who could go bust or fail to deliver)
• Provide fixed prices for goods/services (or at least a base price for the purposes of a further negotiation)
• Reduce costs further on a project-by-project basis, due to the ongoing ‘mini-competition’ between suppliers on the Framework - who are continually trying to outbid each other (although the effectiveness of this approach is definitely debatable, as you’ll see below…)

Why Frameworks often fail to deliver (for everyone)

Imagine you own an apple orchard and sell your produce.

Here are two potential customers:

Customer 1 – “We will commit to buying 10,000 apples every week and pay in advance. What is your best price?”

Customer 2 – “We can’t tell you how many apples we will buy each week. It should be a few thousand, maybe more than 10,000, but it might be none at all. What is your best price? Please bear in mind, every time we need more than 1,000 apples, we will ask you and four other suppliers for prices again and will probably chose the cheapest option.”

Which of these customers would you give your best price and service to?

Unfortunately buyers often lack the risk appetite or business backing to be Customer 1 and prefer the perceived security and flexibility that the Customer 2 approach offers.

Great for them (or at least they think) – sucks for you, the supplier.

In reality, there is a range of reasons that Framework Agreements fail to deliver for the buyer and their suppliers.

Buyer / Procurement Issues

• Supplier fatigue associated with constant re-bidding / re-tendering
• Potential for overinflated pricing during mini-competition (even when using an agreed schedule of rates)
• Poor supplier performance as a result of non-commitment from buyer
• ‘We never win anyway’ syndrome, resulting in complete breakdown in the supplier relationship and disengagement with the Framework Agreement

Supplier Issues

• Volume of business is uncertain and can fluctuate wildly
• Difficult to quantify risk and therefore put best price forward
• Additional administrative effort (on top of initial tendering)
• Frustration with limited volume of work received compared to other Framework suppliers

Making the most out of Framework Agreements

Before the tender

The first and most important step, as with any bid or tender exercise, is to consider if you really want the Framework Agreement. Look through the tender documents in detail, especially the T&C’s, and if you’re still unclear, ask the procurement team questions until you understand the following:

• Does winning the Framework Agreement guarantee any level of business?
• If so, can this be added to the agreement?
• How many suppliers will be on the Framework Agreement?
• Will there be a ‘mini-competition’ for each contract, or can orders be raised without this process?
• Are there any thresholds or parameters that trigger multiple quotes from Framework suppliers?
• How much was spent on this Framework Agreement in the previous year and how many suppliers was it divided between?

After the award

If you make it onto the Framework Agreement (or even if you are part way through the term of an existing agreement), there are a number of simple steps you can take to maximise the opportunities for orders. For example:

• Make sure your customer’s employees know who you are and how to contact you
• Push the procurement team for information on upcoming projects and demand forecasts
• Ask for visibility of volume distribution between you and the other Framework suppliers
• Streamline your processes for providing bids/quotes under the Framework Agreement to ensure you can respond quickly to requests
• Remind customer employees why you offer superior service compared to other Framework suppliers
• Consider offering a special rate or improved levels of service in exchange for a guaranteed level/volume of business from the buyer

Lloyd is the Founder of SME Bidder, experts in providing small and medium-sized businesses (SMEs) with bid and tender support.

If you’re looking for tailored advice on getting the most out of your Framework Agreements, or winning more tenders for your business, feel free to get in touch.

[email protected] / 020 7096 1284 / www.smebidder.com