Financial Management Authority
Framework agreements and framework agreement tenders
Framework agreements are long-term contracts for the purchase of goods and services. By entering into such an agreement, buyers undertake to purchase the relevant goods or services exclusively from the suppliers that are parties to the agreement.
Long-term agreements make it possible to fix prices, discounts and other terms for a particular product category. This can save the public sector both time and money.
Framework agreement tenders are advertised on the Financial Management Authority’s tendering website. Suppliers must monitor the website and participate in open tendering procedures by submitting bids.
A framework agreement is established after a public entity conducts a tender in accordance with the Financial Management Authority’s procurement process. This is known as a framework agreement tender.
Framework agreement tenders follow the Financial Management Authority’s general procurement process, which is divided into four stages:
Procurement analysis – The buyer conducts a procurement analysis and develops plans in consultation with the Financial Management Authority.
Preparation – The buyer and the Financial Management Authority jointly prepare the tender documents.
Tendering – Framework agreement tender – The period from the publication of the tender notice until the suppliers’ bids have been evaluated.
Framework agreement established – Suppliers are admitted to the framework agreement, which is then formally established.
When preparing and drafting the tender documents, several aspects relating specifically to the framework agreement must be considered.
Key considerations when establishing a framework agreement
Clear definition of scope
It must be clear which supplies, works, or services are covered by the agreement and which are excluded.
Duration of agreements
Generally four years, but the duration may be longer in exceptional cases related to the nature of the agreement.
Maximum duration to preserve competition
A limit should be placed on the duration to prevent excessive restrictions on competition.
Maximum value and/or quantity
Buyers must specify the maximum and estimated quantity and/or value of purchases. Setting limits is important to prevent misuse and inefficiency.
Division of the framework agreement into lots
The agreement may be divided into lots to increase competition and make it easier for smaller businesses to participate.
Precision in award criteria
The terms of the framework agreement must describe precisely how the award criteria will be evaluated.
Selection among suppliers under multi-supplier agreements
The terms must describe the methods for selecting among suppliers during the agreement period and the purchasing procedures that may be used.
Rules on deviations and new products or technologies
Clear rules must specify how deviations from the agreement and new products or technologies entering the market will be handled.
Flexibility and precision
The agreement must be sufficiently flexible to accommodate changing circumstances while remaining precise and transparent in its implementation.
The duration of a framework agreement may not exceed four years, except in exceptional circumstances.
For example, an agreement may be concluded for one year with three optional one-year extensions, or for four years with no extension options.
The parties to framework agreements are buyers on the one hand and suppliers on the other.
Buyers are identified at the outset of each framework agreement during the framework agreement tendering process.
This ensures clarity as to which buyers are entitled to use the agreement.
Buyers may be identified individually or by reference to a category of public entities. This makes it easier to determine whether an entity falls within or outside the scope of the framework agreement.
Buyers may also be identified in the terms of the agreement or by reference to another specified location, such as a website.
Buyers:
select suppliers that meet the qualification requirements of public procurement legislation;
seek to secure better terms for public entities than are generally available on the market by achieving economies of scale in procurement; and
obtain lower prices and/or higher quality than would be available through separate tendering procedures.
Suppliers are the vendors that have been admitted to a framework agreement following the completion of the procurement process and that meet the qualification and quality requirements set out in the agreement.
They provide buyers with the goods or services covered by the framework agreement in accordance with its agreed terms and conditions.
Suppliers:
meet the qualification and quality requirements of the framework agreement;
provide goods or services in accordance with the terms of the agreement;
undertake to provide buyers with the agreed terms; and
participate, where applicable, in mini-competitions or other procurement procedures under the framework agreement.
Agreement with a single supplier
When one company is awarded all business for the duration of the agreement, there may be scope for volume discounts and more favourable terms. The procurement process is also simpler, as there is no need to choose between multiple suppliers for each purchase. Contract management and monitoring may also be more efficient because communication and follow-up are focused on a single supplier.
When an agreement is concluded with a single supplier, competition is limited for its duration. The market may change while the agreement is in force, and other companies may begin offering better terms, products or new solutions. Reduced competition may also diminish transparency.
If the agreement needs to be renegotiated, this may affect prices, product selection, delivery times or services. Contracting with only one company may also increase risk if the supplier experiences product shortages or other operational difficulties.
Agreement with more than one supplier
When an agreement is concluded with more than one supplier, all companies that submit a valid tender are admitted to the agreement in most cases.
An agreement with multiple suppliers may help increase availability and provide greater scope to meet buyers’ differing needs. Multiple suppliers can offer different products, services and solutions under the same agreement.
However, an agreement with multiple suppliers may be more complex to manage and require greater administration. Particular attention may also be needed to ensure that suppliers remain active and engaged throughout the agreement period, especially when many suppliers compete for the same purchases or projects.
The procurement may be conducted on behalf of one or more public-sector buyers.
Framework agreement for individual buyers
The framework agreement model may be used to establish an agreement between an individual buyer and one or more suppliers. This approach is used when the volume of the agreement is not known in advance, including the quantity and total value of the transactions.
To establish a framework agreement for an individual buyer, a public entity must submit a service request to the Financial Management Authority and consider the guidance on establishing framework agreements in the section below.
Central framework agreement
These framework agreements are established by a central body, such as the Financial Management Authority, on behalf of buyers. Buyers may include Part A government entities, state-owned enterprises, municipalities and other public institutions. These entities become parties to central agreements through a separate subscription agreement.
In Iceland, framework agreements are binding on Part A government entities.
Entities and buyers that are parties to these agreements cannot choose whether to make their purchases under the agreement.
Part A Institutions
Central government Part A institutions must purchase under Financial Management Authority agreements when an agreement covers the goods or services being purchased.
Part A institutions are primarily funded through tax revenue. When a relevant agreement is in place, they cannot choose whether to use the Financial Management Authority’s agreements. They must comply with the terms and requirements of the applicable agreement.
Approximately 160 government institutions fall within Part A.
Other Entities
Other public-sector entities may also be parties to Financial Management Authority agreements, including:
state-owned enterprises
municipalities
institutions that have entered into a specific participation agreement
These entities are covered by central agreements through a specific agreement or subscription.
Public-sector entities can check whether they are parties to the Financial Management Authority’s framework agreements or dynamic purchasing systems by downloading the list of buyers.
The list identifies the entities authorized to purchase under the Financial Management Authority’s agreements.
Download the list of buyers (.csv):