Framework agreements

Framework agreements

The spider-sense starts tingling – there’s no time to review the risks, re-draft or negotiate the contract and this is where thoughts turn to procurement compliance and, wait, is it lawful to enter into this contract at all?  At this point, I usually get a phone call and it is usually a pretty blunt one confirming what said in-house counsel invariably knows to be the answer.

At this stage, I am looking to help clients find solutions to meet their objectives, and one of the simplest avenues is the public sector framework agreement. There is an increasing proliferation of framework agreements available to assist in purchasing goods and services, ranging from commodities and stationery through to multi-million pound construction projects or complex managed IT solutions.

The key compliance issues for clients are to identify whether the contracting authority itself is sufficiently “explicitly” identified; and then separately to identify whether the supplier is a party to the framework agreement.

The use of frameworks is an area where procurement law overlaps with practical commercial sense. The rules regarding the use of frameworks have been clarified by the EU courts, which have clarified the use of framework agreements by contracting authority users. A framework agreement is defined as:

“an agreement between one or more contracting authorities and one or more economic operators, the purpose of which is to establish the terms governing contracts to be awarded during a given period, in particular with regard to price and, where appropriate, the quantity envisaged”.

A purist reading of this definition might conclude that a framework agreement requires the framework users to be parties to the framework at the time of the procurement: it must be an agreement “between one or more contracting authorities”. This would make the process of creating a framework agreement unwieldy – a central purchasing body might need, for instance, to obtain the approval of hundreds of contracting authorities – and, for potential users, impractical – it would not be possible to use a previously procured framework agreement where the user was not specifically included in the initial procurement.

Instead, the court held that it was sufficient that a contracting authority appears as “a potential beneficiary of that framework agreement from the date on which it is concluded by being clearly identified in the tender documents”. The court went further, to indicate that there needs to be an “explicit reference” to the contracting authority purchaser itself, although that reference can appear in the framework agreement itself and not necessarily in the contract notice. This does raise a potential puzzle for all those framework agreements that were let in accordance with previous UK government guidance and only referred to a specific class or group of permitted users.

Separately, the UK courts have already held that the specific supplier entity identified as the framework supplier must be the party entering into the call-off contract. This is where compliance issues can arise, because the service discussed with a supplier’s sales representative is being provided by a different operating company in the same group with (often) a similar or near-identical name – it could be a credit provider affiliate or a corporate joint venture. In that case it is worth being careful that the framework agreement is the right procurement vehicle for the project.