Podcast
Questions and Answers
What is a risk for purchasers in term contracts?
What is a risk for purchasers in term contracts?
- Reduced administration costs
- Potential losses due to rising costs
- Inability to influence specifications
- Being locked into higher rates (correct)
What is a benefit for suppliers in term contracts?
What is a benefit for suppliers in term contracts?
- Commitment of delivery
- Reduced administration costs (correct)
- Reasonable certainty of future demand
- Ability to influence specifications
What does a framework agreement set the terms and conditions for?
What does a framework agreement set the terms and conditions for?
- Ongoing contracts
- Potential contracts (correct)
- Past contracts
- Immediate contracts
What kind of agreement does not itself create a commitment to buy or deliver?
What kind of agreement does not itself create a commitment to buy or deliver?
What type of framework agreement involves multiple suppliers?
What type of framework agreement involves multiple suppliers?
What is involved in setting up a framework agreement?
What is involved in setting up a framework agreement?
What do purchasers issue using the terms set out in the framework agreement?
What do purchasers issue using the terms set out in the framework agreement?
What are framework agreements specified to be?
What are framework agreements specified to be?
What can help mitigate risks and disadvantages for both purchasers and suppliers in term contracts?
What can help mitigate risks and disadvantages for both purchasers and suppliers in term contracts?
What do panel agreements create?
What do panel agreements create?
What can framework agreements allow for based on order size or delivery location?
What can framework agreements allow for based on order size or delivery location?
What is a risk for suppliers in term contracts?
What is a risk for suppliers in term contracts?
What is the main purpose of a framework agreement?
What is the main purpose of a framework agreement?
What is the key factor in determining the type of commercial contract or agreement?
What is the key factor in determining the type of commercial contract or agreement?
What is the fundamental difference between 'contracts' and 'agreements'?
What is the fundamental difference between 'contracts' and 'agreements'?
What is the primary focus of a business case in the context of forming a contract?
What is the primary focus of a business case in the context of forming a contract?
Which of the following is NOT one of the necessary elements for a contract to exist?
Which of the following is NOT one of the necessary elements for a contract to exist?
What percentage of indirect spend in organizations can spot purchasing account for?
What percentage of indirect spend in organizations can spot purchasing account for?
What type of purchases is spot purchasing suitable for?
What type of purchases is spot purchasing suitable for?
What may contract documents for simple spot purchases be like?
What may contract documents for simple spot purchases be like?
For what type of activities are spot-purchase contracts not considered good practice?
For what type of activities are spot-purchase contracts not considered good practice?
What does legal capacity refer to in the context of making a contract?
What does legal capacity refer to in the context of making a contract?
What does spot purchasing refer to?
What does spot purchasing refer to?
What may be the form of contract documents for simple spot purchases?
What may be the form of contract documents for simple spot purchases?
In what situations may verbal spot-purchase contracts occur?
In what situations may verbal spot-purchase contracts occur?
What is the distinction between contracts and spot purchasing crucial for?
What is the distinction between contracts and spot purchasing crucial for?
What type of purchases is spot purchasing suitable for?
What type of purchases is spot purchasing suitable for?
What is the main reason for considering spot-purchase contracts not good practice for complex activities?
What is the main reason for considering spot-purchase contracts not good practice for complex activities?
What type of purchases are framework agreements useful for?
What type of purchases are framework agreements useful for?
What is a characteristic of call offs?
What is a characteristic of call offs?
What is the purpose of blanket orders?
What is the purpose of blanket orders?
What is a distinguishing feature of call offs?
What is a distinguishing feature of call offs?
What is a characteristic of framework agreements?
What is a characteristic of framework agreements?
What is a key aspect of blanket orders?
What is a key aspect of blanket orders?
What is the purpose of call offs?
What is the purpose of call offs?
What is a benefit of framework agreements for small buyers?
What is a benefit of framework agreements for small buyers?
What distinguishes blanket orders from term contracts?
What distinguishes blanket orders from term contracts?
What is a risk of urgent needs where spot-purchase contracts are inadvisable?
What is a risk of urgent needs where spot-purchase contracts are inadvisable?
What is a characteristic of framework agreements in terms of work for suppliers?
What is a characteristic of framework agreements in terms of work for suppliers?
What is a characteristic of call offs in relation to the terms of the contract?
What is a characteristic of call offs in relation to the terms of the contract?
What is a contract?
What is a contract?
What are the main categories or types of commercial contracts and agreements for the purchase and supply of goods?
What are the main categories or types of commercial contracts and agreements for the purchase and supply of goods?
What determines the type of contract that is appropriate for purchasing goods or services?
What determines the type of contract that is appropriate for purchasing goods or services?
Is there a difference between 'contracts' and 'agreements'?
Is there a difference between 'contracts' and 'agreements'?
What is a key benefit for the purchaser of spot purchases?
What is a key benefit for the purchaser of spot purchases?
What risk is associated with spot purchases for purchasers?
What risk is associated with spot purchases for purchasers?
What is a key benefit for suppliers in spot purchases?
What is a key benefit for suppliers in spot purchases?
What is a potential disadvantage of spot purchases for the public sector?
What is a potential disadvantage of spot purchases for the public sector?
What may undermine the position of a term contract supplier?
What may undermine the position of a term contract supplier?
What is a disadvantage for suppliers in spot purchases?
What is a disadvantage for suppliers in spot purchases?
What is a major disadvantage for both purchasers and suppliers in spot purchases?
What is a major disadvantage for both purchasers and suppliers in spot purchases?
What are term contracts used for?
What are term contracts used for?
What does a term contract specify?
What does a term contract specify?
How may payment for term contracts be agreed?
How may payment for term contracts be agreed?
Which element is not necessary for a contract to exist?
Which element is not necessary for a contract to exist?
What percentage of indirect spend in organizations can spot purchasing account for?
What percentage of indirect spend in organizations can spot purchasing account for?
Which of the following is not a suitable scenario for spot purchasing?
Which of the following is not a suitable scenario for spot purchasing?
What type of contracts may not even be in writing for simple spot purchases?
What type of contracts may not even be in writing for simple spot purchases?
What is legal capacity in relation to making a contract?
What is legal capacity in relation to making a contract?
What type of activities are spot-purchase contracts not considered good practice for?
What type of activities are spot-purchase contracts not considered good practice for?
What type of organizations have limitations in legal capacity for making a contract?
What type of organizations have limitations in legal capacity for making a contract?
What does outsourcing invoice processing to a finance company lead to?
What does outsourcing invoice processing to a finance company lead to?
What type of purchases does spot purchasing refer to?
What type of purchases does spot purchasing refer to?
What may contract documents for simple spot purchases be?
What may contract documents for simple spot purchases be?
What type of contracts may occur for simple arrangements like ordering lunch for a meeting?
What type of contracts may occur for simple arrangements like ordering lunch for a meeting?
What are the necessary elements for a contract to exist?
What are the necessary elements for a contract to exist?
Which document sets out the detailed requirements for the goods, services or works being procured?
Which document sets out the detailed requirements for the goods, services or works being procured?
What is the most important core element of both the procurement process and the resulting contract?
What is the most important core element of both the procurement process and the resulting contract?
What is the foundation on which everything else in the contract is built?
What is the foundation on which everything else in the contract is built?
What is the consequence of getting the specification wrong in a contract?
What is the consequence of getting the specification wrong in a contract?
What is the key purpose of a well-thought-out specification?
What is the key purpose of a well-thought-out specification?
What is the primary focus of a purely performance-related specification?
What is the primary focus of a purely performance-related specification?
What is a potential disadvantage of specifying brands in a technical specification?
What is a potential disadvantage of specifying brands in a technical specification?
What determines the choice between performance-related and technical specifications?
What determines the choice between performance-related and technical specifications?
What is a key consideration when designing a specification?
What is a key consideration when designing a specification?
What is a distinguishing feature of a technical specification?
What is a distinguishing feature of a technical specification?
Why might some purchasers use the expression 'or equivalent' in regulated procurement?
Why might some purchasers use the expression 'or equivalent' in regulated procurement?
What is the primary risk associated with a performance-related specification?
What is the primary risk associated with a performance-related specification?
What is a potential disadvantage of a technical specification?
What is a potential disadvantage of a technical specification?
What is a crucial factor in determining the type of specification to use?
What is a crucial factor in determining the type of specification to use?
What is a key aspect to consider when designing a specification?
What is a key aspect to consider when designing a specification?
What is a potential risk associated with a technical specification?
What is a potential risk associated with a technical specification?
In designing Key Performance Indicators (KPIs), how many key stages are involved?
In designing Key Performance Indicators (KPIs), how many key stages are involved?
What are the three main types of measurement mentioned for KPIs?
What are the three main types of measurement mentioned for KPIs?
How many important variables are advisable to focus on when setting KPIs?
How many important variables are advisable to focus on when setting KPIs?
Who should set the KPIs before approaching the suppliers?
Who should set the KPIs before approaching the suppliers?
What is advisable in terms of the number of KPIs to avoid wasting time and resources?
What is advisable in terms of the number of KPIs to avoid wasting time and resources?
When should KPI targets be reviewed to ensure they are realistic?
When should KPI targets be reviewed to ensure they are realistic?
Who should collect KPI data according to the text?
Who should collect KPI data according to the text?
What is crucial when embedding KPIs in a contract?
What is crucial when embedding KPIs in a contract?
What does a pure measurement become meaningless without?
What does a pure measurement become meaningless without?
How can KPI targets impact the price to be charged?
How can KPI targets impact the price to be charged?
What type of contracts may require adjustments to KPIs due to the evolving operating environment?
What type of contracts may require adjustments to KPIs due to the evolving operating environment?
What is the main purpose of measuring performance according to the text?
What is the main purpose of measuring performance according to the text?
What is a key benefit for the purchaser of spot purchases?
What is a key benefit for the purchaser of spot purchases?
What is a risk and disadvantage for purchasers of spot purchases?
What is a risk and disadvantage for purchasers of spot purchases?
What is a potential risk for suppliers in term contracts?
What is a potential risk for suppliers in term contracts?
What are term contracts often used for?
What are term contracts often used for?
How may payment for term contracts be agreed?
How may payment for term contracts be agreed?
What is a potential disadvantage of specifying brands in a technical specification?
What is a potential disadvantage of specifying brands in a technical specification?
What is a distinguishing feature of a technical specification?
What is a distinguishing feature of a technical specification?
What may spot-purchase contracts used when a central term contract is in place undermine?
What may spot-purchase contracts used when a central term contract is in place undermine?
What is a potential risk associated with a technical specification?
What is a potential risk associated with a technical specification?
What is a key aspect of blanket orders?
What is a key aspect of blanket orders?
What type of purchases are framework agreements useful for?
What type of purchases are framework agreements useful for?
What is a benefit of framework agreements for small buyers?
What is a benefit of framework agreements for small buyers?
In procurement, what is the primary purpose of a framework agreement?
In procurement, what is the primary purpose of a framework agreement?
What distinguishes call offs from spot-purchase contracts in procurement?
What distinguishes call offs from spot-purchase contracts in procurement?
What is the main purpose of a blanket order in procurement?
What is the main purpose of a blanket order in procurement?
When might a call off be considered complex in procurement?
When might a call off be considered complex in procurement?
What sets blanket orders apart from term contracts in procurement?
What sets blanket orders apart from term contracts in procurement?
What is the primary focus of a call off in procurement?
What is the primary focus of a call off in procurement?
What is the key benefit of framework agreements for small buyers in procurement?
What is the key benefit of framework agreements for small buyers in procurement?
What is a distinguishing feature of blanket orders in procurement?
What is a distinguishing feature of blanket orders in procurement?
In procurement, what is the primary purpose of a call off?
In procurement, what is the primary purpose of a call off?
What is a key aspect of framework agreements for small buyers in procurement?
What is a key aspect of framework agreements for small buyers in procurement?
What distinguishes call offs from spot-purchase contracts in procurement?
What distinguishes call offs from spot-purchase contracts in procurement?
What is the main purpose of a blanket order in procurement?
What is the main purpose of a blanket order in procurement?
When using KPIs to measure performance in a contract for services, what is the recommended approach?
When using KPIs to measure performance in a contract for services, what is the recommended approach?
What are KPI measurements used for in the context of a contract?
What are KPI measurements used for in the context of a contract?
In the context of contracts, what is the purpose of KPIs?
In the context of contracts, what is the purpose of KPIs?
What is the business efficacy test used for in contract terms?
What is the business efficacy test used for in contract terms?
How can implied terms arise in a contract?
How can implied terms arise in a contract?
What is the role of KPIs in identifying supplier performance issues?
What is the role of KPIs in identifying supplier performance issues?
What is the recommended approach to the number of KPIs used to measure performance in a contract?
What is the recommended approach to the number of KPIs used to measure performance in a contract?
What is the primary function of KPI targets in a contract?
What is the primary function of KPI targets in a contract?
What is the significance of express terms in a contract?
What is the significance of express terms in a contract?
How are KPIs different from targets in a contract?
How are KPIs different from targets in a contract?
What is the recommended approach to the weight of KPIs in a contract?
What is the recommended approach to the weight of KPIs in a contract?
What is the purpose of KPI scores in a contract?
What is the purpose of KPI scores in a contract?
What is a key benefit for the purchaser of spot purchases?
What is a key benefit for the purchaser of spot purchases?
What is a risk for purchasers of spot purchases?
What is a risk for purchasers of spot purchases?
What is a key benefit for suppliers in lack of competition for spot purchases?
What is a key benefit for suppliers in lack of competition for spot purchases?
What is a risk for both purchasers and suppliers in spot purchases?
What is a risk for both purchasers and suppliers in spot purchases?
What are term contracts used for?
What are term contracts used for?
What is a key consideration for term contracts?
What is a key consideration for term contracts?
What can undermine the position of a term contract supplier?
What can undermine the position of a term contract supplier?
What makes it difficult for suppliers to plan production in spot purchases?
What makes it difficult for suppliers to plan production in spot purchases?
What is a major disadvantage for both purchasers and suppliers in spot purchases?
What is a major disadvantage for both purchasers and suppliers in spot purchases?
What is involved in setting up a term contract?
What is involved in setting up a term contract?
What is a possible payment agreement for term contracts?
What is a possible payment agreement for term contracts?
What is a potential disadvantage for suppliers in term contracts?
What is a potential disadvantage for suppliers in term contracts?
Study Notes
Understanding Term Contracts, Framework Agreements, and Panel Agreements
- Term contracts provide commitment of delivery and agreed prices for purchasers and reasonable certainty of future demand for suppliers
- Buyers benefit from simple order mechanisms and electronic procure-to-pay systems, while suppliers benefit from reduced administration costs and the ability to influence specifications
- Risks for purchasers include being locked into higher rates and preventing innovation, while risks for suppliers include potential losses due to rising costs and restrictions on production updates
- Well-written contract documents and shorter contract periods can help mitigate risks and disadvantages for both purchasers and suppliers
- A framework agreement is an overarching agreement that sets the terms and conditions for potential contracts, but it does not itself create a commitment to buy or deliver
- Framework agreements include mechanisms for determining price and may allow for different rates based on order size or delivery location
- Framework agreements can be one-to-one, one-to-many, many-to-one, or many-to-many, depending on the number of purchasers and suppliers involved
- Panel agreements are framework agreements with multiple suppliers, creating a group of suppliers for potential contracts
- The process of setting up a framework agreement involves a tender process or negotiations to select the supplier(s), and the agreement sets out call-off procedures, price calculation, and agreement duration
- Purchasers issue call-off orders or contracts using the terms set out in the framework agreement, which may require a mini-competition based on the agreement's terms
- Framework agreements are a closed system, and limitations such as the duration of contracts established under the agreement are specified
- Understanding the differences and implications of term contracts, framework agreements, and panel agreements is crucial for both purchasers and suppliers in the procurement process
Spot Purchases vs Term Contracts: Key Considerations
- Key benefits for the purchaser of spot purchases include quick delivery and local purchasing, allowing for more control over specifications and supporting local businesses
- Purchasers can make savings when prices are falling or when there is an over-supply in the local market, and can take advantage of local special offers
- For suppliers, lack of competition allows them to set their own price and may result in significant total income even for low-value orders
- Risks and disadvantages for purchasers of spot purchases include maverick spend, lack of price control, limited investigation of market pricing and quality options, and potential ill-informed decisions by end users
- The use of spot purchasing may lead to breaches of process rules and lack of compliance with regulations in the public sector
- There is no guarantee that spot purchase suppliers conform to standards or regulations, unless an approved supplier list is used
- Spot-purchase contracts used when a central term contract is in place can undermine the term contract supplier's position
- For suppliers, ad hoc orders in spot purchases make it difficult to plan production, and small quantity orders may be uneconomic to produce
- Lack of control is a major disadvantage for both purchasers and suppliers in spot purchases, reducing the ability to plan budgets and production
- Term contracts are used for regular goods or services provided by a single supplier, and are often used for servicing and maintaining equipment, off-site services, and supply of regularly required goods
- A term contract has a fixed duration and will specify the goods or services provided, the location for delivery, and the period of time during which the contract will be in force
- Payment for term contracts may be agreed as an annual fee, or based on a schedule of rates for more complex supplies and services.
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Description
Test your knowledge of procurement processes with this quiz on term contracts, framework agreements, call offs, and blanket orders. Understand the benefits, risks, and differences between these essential components of procurement, and learn how they impact both purchasers and suppliers.
