As a rule, seller and buyer both tend to be satisfied when they have signed a framework agreement. However, experience shows that only a small proportion of framework agreements end up being used in line with these people’s intentions. There are three main challenges with framework agreements that you need to be aware of:
- Too many framework agreements. Businesses often sign framework agreements with several different suppliers, and different personnel tend to have been involved in each of these agreements. Framework agreements can often cross and overlap with each other, either partially or completely. Since framework agreements typically grant the highest discounts the more they are used, buyers will often end up spending too much money, for example using 10 different framework agreements only 20 % of what they could be. It would obviously be a lot more profitable to use one agreement 100 %.
- Framework agreements are not used by the organisation. As a rule, the reason why they are not used is quite simply because they are not visible or available to middle managers, heads of department or managers at other locations. The agreements can ‘hide’ on someone’s PC in SharePoint files or folders.
- Monitoring is forgotten or overlooked. You would like to think that framework agreements are monitored by the seller, and that he or she will ensure that new orders and renewals of the framework agreement will earn the expected discount or bonus. As buyers, we expect to receive automatic notification when we earn a bonus or new benefits. However, this is not always the case in our busy working lives. It is the buyer who needs to monitor the agreement closely, and this is an instance of when a small effort can reap dividends in terms of the bottom line.
If you would like to make the best use of your framework agreements, and have a positive effect on your bottom line, the only way is to set up a structured, automated system for contract management.