Episode 181 - Building Framework Agreements

This week we will be talking about Building Framework Agreements. This episode content meets PC5 - Building Procurement of the Part 3 Criteria.

Resources from today's episode:

Websites:

• https://constructingexcellence.org.uk/tools/frameworkingtoolkit/what-is-a-framework/
  
  

Book:

• Which Contract? 6th Edition

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Transcript

Episode 181:

Hello and Welcome to the Part3 with me podcast. 

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I am your host Maria Skoutari and this week we will be talking about Building Framework Agreements. Todays’ episode meets PC5 of the Part 3 Criteria.

By the end of this episode, you’ll know:

• What they are
• Why they exist
• How they’re set up and used in real life
• How can architects use them

Let’s get into it.

What is a Framework Agreement:

A framework is an agreement with suppliers to establish terms governing contracts that may be awarded during the life of the agreement. In other words, it is a general term for agreements that set out terms and conditions for making specific purchases. It is a structured agreement designed to streamline the procurement and delivery of construction projects. It tends not to be utilised for one single project but a series of potential projects over a period of time. 

A framework covers the provision of a generic group of goods, works or services (or a combination), for example:

• Goods – such as office furniture
• Services – such as design consultancy
• Works – such as construction of schools.

Typically you would have one ‘framework’ for each generic group, but you may have a ‘framework agreement’ with more than one supplier under each framework.

It provides a set of guidelines, procedures and pre-approved suppliers or contractors to streamline the process and ensure efficiency, transparency and accountability. 

Frameworks vary in scope and complexity, ranging from traditional procurement methods to innovative partnership models. They might include:

• Design and build contracts
• Construction management agreements
• Framework agreements
• Public-private partnerships
• Performance-based contracts
• Alliance contracts
• Frameworks for innovation

The key purpose of a framework is to optimise project delivery by promoting collaboration, risk-sharing, and best practices among various stakeholders.

Frameworks help clients achieve their goals by minimising administration tasks while maximising value for money and reducing any chances of potential hazards. Frameworks play a key role within the construction industry, allowing clients to strive for success at all times.

Now, a key aspect of framework agreements is that they shouldn’t be confused with contracts:

At the end of the procurement process for a contract, the winning bidder(s) agrees to undertake the supply, works or services that the authority requires. Whereas at the end of the procurement process for a framework agreement, however, successful suppliers win a place on the framework agreement with no guarantee of future work.

A framework agreement is an agreement about the terms and conditions that would apply to any contract that would be awarded.

A client does not need to appoint from every or any consultant/contractor that wins a place on its framework agreement. Instead, the client runs mini competitions or ‘call off’ competitions among the consultants/contractors on the framework agreement each time it has a requirement. The successful consultant/contractors fulfils the requirement. During the life of a framework agreement, the client may call off as many times as they need.

The reason why clients tend to use framework agreements is that they encourage competition and the opportunity for new suppliers/contractors to participated, allowing clients to do business with a wider pool of contractors or consultants. They also tend to be chosen for their promotion of collaboration allowing all parties involved to develop positive and long lasting relationships. 

How do Framework Agreements vary from Tendering Processes:

The main difference between open tendering and frameworks, is that frameworks offer time and cost savings, whereas open tendering allows for open competition. 

An open tender, typically known as competitive bidding, involves offering invites to potential suppliers or contractors who want to provide services or materials for a clients upcoming projects.

The open tender pipeline varies, depending on the project itself. Typically, the process involves advertising the available opportunity, and then inviting parties who are interested in the opportunity to bid for the work. Unlike closed tendering, which takes the alternative route of inviting selected people or organisations, the invitation to bid for work is open to all parties who are both fully eligible and qualified. However, open tendering does have its flaws. The process can be laborious and time-consuming for public sector bodies. When planning projects and managing public resources, government agencies and departments may struggle with the volume of tenders that come forward. This can lead to administrative burdens and even delays in project timelines. As each tender needs to be fully evaluated, and feedback must be given to each supplier, which undoubtedly takes time. In many cases, open tender attracts bids from inexperienced suppliers, which can increase risk and costs associated with outsourcing compliance-checking. It’s important to find suppliers who meet specific criteria and compliance standards – open tender is likely to make this process more time-consuming.

For example, with increased legislation around procurement, many construction companies and suppliers now need to prove that they’re dedicated to achieving net zero targets by providing evidence. As open tender allows a large selection of suppliers to come forward, it could mean having to check each individual organisation to ensure they’re both compliant and committed to such achievements.

On the other hand, looking at Framework Agreements:

They promote communication and transparency, but they also streamline the procurement process, helping to ensure projects are delivered on time and within the set budget. As the construction industry is high risk, it is vital that suppliers hold the necessary accreditations, experience and compliance standards to work on a public sector construction project. By using a reliable framework, clients can feel confident that each supplier has been vetted as part of the initial bidding process undertaken to be on the framework.

In addition, framework agreements act as a vehicle for effective performance management. Terms and conditions are set within framework agreements to protect clients and uphold high standards in project delivery. With a framework agreement in place, stakeholders can mitigate potential risks while making informed decisions throughout the entire project lifecycle. It’s easy for ongoing construction projects to lead to cost overruns and delays – by utilising an effective framework, you can help prevent such issues from occurring. 

Framework agreements help in establishing long-term relationships, allowing frameworks and their suppliers to negotiate more easily and encourage open communication. Typically, frameworks are a much quicker alternative to open tender – with frameworks, you can access a pre-approved list of suppliers or contractors.

What are the pros and cons of using Framework Agreements:

First looking at the benefits, using a framework in construction comes with numerous benefits. From streamlining the procurement process to reducing costs, there are many reasons why frameworks are favoured by those operating in the construction industry.

They offer stability and predictability, frameworks in construction provide a stable platform for both clients and suppliers alike. With stability and predictability comes better long-term planning and resource allocation. Frameworks have transparent, set terms and conditions, helping to ensure contract stability and uphold compliance and quality standards with chosen contractors. Procure Partnerships Framework ensures every contractor on the framework is subject to a rigorous vetting process, though the compliance-checking doesn’t stop there. All contractors on the framework are monitored on their policies, insurances and financial stability in real time, to ensure no slippages in regulatory standards.

Another key benefit is the streamlined process that it has to offer. Using a framework agreement helps save resources – all pre-qualified parties involved in the process won’t need to repeat the tendering process. Having a streamlined procurement process allows suppliers to focus on delivering quality goods and services, whilst saving clients time and money that may be involved in repeating the pre-qualification process.

Framework Agreements also offer Quality Assurance. Typically, suppliers are selected based on both their Capability and Track record. Selecting suppliers based on these criteria helps ensure that projects are awarded to those who have proved their experience and ability to deliver high-quality results while complying with set standards. Awards based on quality assurance increase the likelihood of project success.

A key benefit also includes cost savings. Many organisations find using frameworks can help to reduce costs. A recent construction industry forecast from BCIS has predicted that building costs will increase by 15% over the next five years, and tender prices will rise by 17% during the same time period. So, it’s more important than ever for public sector buyers to choose routes that provide cost-savings and value for money. Frameworks provide freedom to award contracts without having to re-advertise – this helps save substantial time and cost of repeat bidding. Ultimately, using a framework means that you can handle your budgets more effectively and save time overall.

Now in terms of the Potential Drawbacks of Frameworks, although using framework agreements comes with many advantages, there are some potential drawbacks, too. Some organisations believe that using frameworks in construction reduces competition and increases the risk of dependency.

Although framework agreements are great for saving time and costs, some believe they reduce competition. Frameworks have a limited set of contractors who can bid on projects within each lot, which in turn can reduce competition. However, framework agreements increase market visibility and provide opportunities to acquire contracts from multiple organisations. This increased visibility can help promote healthy competition across the construction sector.

Another drawback is that in some cases, suppliers can struggle with flexibility while using framework agreements. Some might perceive the terms and conditions in framework agreements as challenging, which is thought to limit flexibility for suppliers – but this isn’t always the case. Framework agreements can actually provide great flexibility for multiple call-off methods.

There is also the Risk of Dependency. sSome clients could potentially become overly reliant on a small pool of suppliers within a framework agreement. If this occurs, it could lead to a lack of diversity and possible long-term dependency issues.

Frameworks are not just for contractors, architects can also enter into such agreements as well. This would involve the practice:

Bidding to get onto one, by preparing a submissions for the practice. This typically involves capability statements, fee proposals, case studies, and sometimes interviews.

Once a project comes through the framework, practices might negotiate scope and fee, prepare a project plan, and then deliver the work. But once in, the practice will have a steady pipeline of potential work, have the opportunity to build strong relationships and streamline their procurement paperwork for each project assisting with future bidding.

A key item to highlight for practices considering bidding for a framework is firstly, understanding its constraints. Frameworks often dictate deliverables, report formats, approval processes, and even sustainability standards. It can also impact fees due to others on the framework offering more competitive services. Being on a framework isn’t always a guarantee for workload and practices need to be wary of the contract terms to avoid signing up to something too onerous. 

To sum up what I discussed today:

• A framework agreement is a pre-arranged set of terms and conditions with approved suppliers or contractors for a range of goods, works, or services over a period of time, not tied to a single project. They streamline procurement, ensure compliance, promote collaboration, and reduce administrative burdens compared to open tendering.
• Framework agreements in comparison to open tendering, pre-vet suppliers, allowing for faster “call-off” competitions from a smaller pool, ensuring speed, quality control, and cost efficiency.
• The key benefits of using framework agreements includes time and cost savings, stability and predictability, quality assurance, long-term relationships, reduced need for repeated tendering, and better budget control.
• The drawbacks include potential reduced competition, possible inflexibility for suppliers, and risk of over-dependence on a limited number of suppliers.
• Architects can also join framework agreements by bidding with capability statements, case studies, and fee proposals.