Abraham Lincoln
Introduction to Framework Agreements
Low friction, cost certainty and operational agility are important considerations for maintaining an effective supply-chain. One approach to contracting that businesses can leverage to help achieve this, is the framework agreement. These agreements offer pre-negotiated terms with longer-term suppliers over a set period, creating a structured yet flexible procurement approach that can bring significant benefits.
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Pricing
A key advantage of framework agreements is the ability to fix pricing or otherwise agree in advance the terms for any price-change mechanisms. This can protect buyers from market fluctuations or discretionary supplier price increases, enabling better financial planning, budget allocation and cost control.
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Low-friction contracting
Rather than negotiating new contracts for every purchase, framework agreements streamline the procurement process. Buyers can place orders under the pre-agreed conditions, significantly reducing administrative workloads and saving valuable time. This can free up management teams to focus on more strategic matters rather than having their time filled with repetitive procurement negotiations.
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Improved supplier relationships
Building long-term relationships with reliable suppliers fosters trust, consistency, and can lead to an increase in service quality. Framework agreements often encourage suppliers to prioritise the relevant buyer often resulting in better customer service, faster response times, and improved supply chain reliability. These partnerships can also increase the willingness to agree access to volume discounts or priority stock allocations during high-demand periods.
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Flexibility and scalability
Alongside the benefits of having a more structured, efficient procurement process, framework agreements also offer flexibility. They can allow for the adjustment of order volumes based on demand without renegotiating core terms. This is particularly beneficial for growing businesses that need scalable supply arrangements without the risk of restrictive, minimum-purchase, long-term contracts.
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Opportunities for suppliers
Suppliers can also benefit significantly from framework agreements, by bringing efficiencies to account management. These contracts provide a steady stream of business, reducing the uncertainty of securing new clients and projects. They are often viewed positively by buyers, who prefer the certainty and efficiency that a framework arrangement can bring to a relationship. The multiple benefits from the buyers’ side are reflected on the sellers’ side, creating certainty for both parties on key terms such as pricing and key contract provisions
Conclusion: A smart procurement strategy for SMEs
For management teams, framework agreements offer a strategic procurement tool that drives cost savings, operational efficiency and stronger relationships. By leveraging these agreements, both sides can reduce administrative burden, enhance budget predictability and allow for more streamlined supply chain and key account management.
If you’re interested in preparing, updating or negotiating framework agreements, we can help. Please feel free to get in touch at Hello@myinhouselawyer.uk
Written Alex Melrose
Principal at My Inhouse Lawyer
One of our values (Growth) is, in many ways, all about cultivating a growth mindset. We are passionate about learning, improving and evolving. We learn from each other, use the best know-how tools in the market and constantly look for ways to simplify. Lawskool is our way of sharing with you. It isn’t intended to be legal advice, rather to enlighten you to make smart business decisions day to day with the benefit of some of our insight. We hope you enjoy the experience. There are some really good ideas and tips coming from some of the best inhouse lawyers. Easy to read and practical. If there’s something you’d like us to write about or some feedback you wish to share, feel free to drop us a note. Equally, if it’s legal advice you’re after, then just give us a call on 0207 939 3959.
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