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Framework Agreement (panel of contractors)

Question by: Jason

What is the best practice, protocol and governance in relation to contract variations, more specifically:

  • When a panel of contractors have been appointed and one contractor requests a change to the standard contracts terms and conditions e.g. changing payment terms from 30 days to 10 days.
  • Is an addendum always required int this regard or can it be managed operationally? Must all other contractors be treated equally and fair, i.e. if the institution agrees to a change for one contractor must the change also be made to the others?

Thanking you in advance for your assistance.

Answered by
Andy Haigh

Answer

Jason,

As a matter of principle, contracts and framework agreements may be modified without a new procurement procedure if certain conditions are met:

  • The need for modification has been brought about by circumstances which a diligent contracting authority could not have foreseen
  • The modification does not alter the overall nature of the contract
  • Any increase in price does not exceed 50% of the value of the original contract or framework agreement

In this case, the three principles would appear to have been met.  Plus, from the bidders viewpoint, they would appear to be better off.  So it is unlikely any challenge would result, so long as the change applied to all.

If one bidder received these terms and the others did not, this would be illegal and liable to challenge.  The basic principle of equality underpins all UK government procurement and this would apply here.  The change must be made for all.

I would expect that the procurement team would argue that the reduction of payment terms would not be a material change to the contract conditions.  They would say the nature of the contract was unaffected.  The difference would not be sufficient to encourage another competitor to bid, where they not joined the procurement competition previously.  In such a case I would expect the procurement team to write to all the contractors with a notification of the change of contract conditions.  If accepted by the panel of contractors, that would be all that was needed.

Alternatively, they could just pay on 10 day terms with no binding arrangement and without committing to the new terms.   However, that might not be sufficient for the one contractor seeking the change?  And if they only did that for one contractor, the equality rules would be broken.  Probably not a good way forward.

Of course, this is only my response based upon the points in your question.  Framework contracts can have non-standard terms.  If it was a really crucial element of the contractual situation, I would need to see the contracts to be sure.

I hope this helps.  Please call me on 01227 860375 if you need any more information or interpretation.

Andy Haigh