João N. Veiga Malta & Diomedes Berroa Sr. Procurement Specialist jveigamalta@worldbank

1. João N. Veiga Malta & DiomedesBerroa Sr. Procurement Specialist jveigamalta@worldbank.org Framework Contracts

2. Definitions • EC: Framework Agreements = agreement between one/more contracting agencie(s) and economic operator(s) … to establish the terms governing contracts to be awarded during a given period … with regard to price and … the quantities envisaged • USA: Government-Wide Acquisition Contracts (GWAC) Indefinite Delivery/Indefinite Quantity (IDIQ), Multiple Award Schedules (MAS) = multiple standing contracts with subsequent competition for task or delivery orders

3. Definitions • UNCITRAL: Framework Agreements = transaction to secure the supply of a product or service over a period of time (periodic/recurrent purchase arrangement, periodic requirements arrangement, periodic supply vehicle)

4. back office function central to strategic management sourcing considerations strategic business decisions largely goods complete service solutions suppliers strategic partners simple process complex contracts & relationships low value, low risk high value, high risk Changing Nature of Government Buying Government procurement is being driven by budget and performance expectations to become more complex and strategic

5. Re-Focus of Procurement Systems and Capabilities Value Chain Complex Procurement High Level Expertise Risk Process Performance Management Knowledge Technology Complexity & Risk Simple Procurement Basic Expertise Codified Process Compliance Management Transactions Technology Potential Gain

6. Rationale • Facilitated by electronic means, framework agreements are increasingly applied in public procurement • Countries worldwide, including client countries (e.g. LCR), use framework agreements as part of their public procurement systems • EU Directive refers to framework agreements and dynamic purchasing systems

7. Rationale Cont. • Revised Procurement Model Law of UNCITRAL will include framework agreements • USA: 40% of $400 billion federal procurement volume through interagency framework agreements

8. Benefits and Risks • Benefits include: • reduced transaction costs • increased efficiency of the procurement process • cost savings by aggregated demand • mandatory use – reducing maverick buying • Risks include: • lack of transparency and competition • market distortion/concentration • Potential for misapplication in procurement of Services • discrimination against SMEs

9. Standard Components • Typically for common use goods, services, or works • Competitive selection of and award to one/multiple economic operators (EO) with terms and conditions set out in the framework agreement • Subsequent purchase orders (call-offs, contracts, etc.) based on the terms and conditions set out in the framework agreement

10. Different Models (e.g. UNCITRAL) • Traditional Framework Agreements (Model 1): • One EO and defined terms (period, min/max quantity, price) • Option of multiple EOs (purchasing orders based on lowest price or availability) • Facilitated by E-Catalogues

11. Different Models (e.g. UNCITRAL) • Closed Framework Agreements (Model 2): • Multiple (at least 3) EOs • Not all terms need to be defined • Competitive purchase orders (e.g. ERA, quotations) • Open Framework Agreements (Model 3): • Same as Model 2 • Admit new EOs (e.g. DPS) • No obligation for purchaser/EO

12. Issues • Type of goods, services, works • Legal Obligations for purchasers and Eos – mandate Vs non-mandated • Number of framework awardees and equal treatment within framework agreement • Terms of framework agreements

13. Issues Cont. • Terms of framework agreements • Competition within framework agreements • Thresholds for framework agreements and purchase orders within a framework agreement

14. Examples (Practice) • ChileCompra – electronic catalogue for frequently-demanded products allows government agencies to purchase without the expense and delays of inviting bids (average price reductions of 7-10%) • WAEMU Directive – framework agreements typically based on max/min quantity or value for the duration of one year – with option to extend for another year

15. Examples (Practice) • USA GSA – MilleniaLite = MA IDIQ GWAC for IT, period of three years with option of 7-year extension, $ 20 billion ceiling, competed task order requests among prime contractors (e.g. $ 107.5 million task order to CSC)

16. QUICK GAINS Opportunity for Savings • Provide information and concrete proposals to achieve quick economic savings in government’s expenditures (purchasing). • Two steps: (1) Diagnostic and proposals of cost reduction strategies; (2) Implementation • Effective entry point to engage country clients to pursue significant subsequence changes • Key ingredients: Clients’ ownership, CMU/SMU’s commitment, management expectation, team work

17. QGs in LAC through the use of Framework contracts

18. CASE: Difference in prices purchasing bond paper is up to 37% Bond Paper Precio por Papel [Lempira resma] 84.00; 600 u 82.88; 50 u 81.20; 200 u +D 25% 76.72; 150 u 72.80; 200 u 69.44; 3 u 67.20; 750 u 66.25; 1420 u 61.60; 1100 u 63.20 Promedio Ponderado 61.56; 1012 u 61.56; 1012 u 59.34; 700 u -D 12% 54.58; 1832 u 53.75; 80 u 53.50; 650 u 53.00; 1724 u Sec. de Salud Sec. Obras Públicas Seguridad Social Universidad Autónoma Sec. de Finanzas Sec. de Educación Sec. de Seguridad 18

19. Implications for the Bank - LAC • LAC - many countries adopting framework contracts • More transparent alternative to shopping • Framework contract prices better than individual NCB e.g. Computers in Chile

20. Implications of FA for the Bank - LAC • ChileCompra – framework agreements (electronic catalogue) accepted as alternative to shopping • Future - challenge to ensure that Bank funded procurement can be carried out through framework contracts whilst not closing opportunities for NCB

21. João N. Veiga Malta & DiomedesBerroa Sr. Procurement Specialist jveigamalta@worldbank.org Framework Contracts Thank You