Framework agreements: why the headline value is not the sales figure

An award notice says a company won a framework agreement for office furniture worth several million euros. The manufacturer reading it concludes that this company sells several million euros of office furniture to that buyer. Usually it does not. The number is a limit on what the buyer may order over several years, possibly from several suppliers, and the real orders come later and are mostly invisible.

Putting it simply: a framework agreement is a pre-qualified shopping list, not a purchase. Its published value is the maximum the buyer may spend over the whole term, shared among all suppliers on the framework. Treat it as a statement of intent and a proof of qualification, never as revenue.

What a framework agreement is

Directive 2014/24/EU, Article 33, defines a framework agreement as an agreement between one or more contracting authorities and one or more economic operators that establishes the terms governing contracts to be awarded during a given period, in particular with regard to price and, where appropriate, quantity. The term "shall not exceed four years, save in exceptional cases duly justified". In the utilities sectors (water, energy, transport, postal services), Directive 2014/25/EU allows eight years under the same exception.

The contracts actually placed under a framework are usually called call-offs. The Directive's recitals make the timing explicit: call-offs must be awarded before the framework ends, but an individual call-off may run beyond it.

One supplier or several

Article 33 distinguishes two shapes. With a single supplier, call-offs are placed within the agreed terms, and the buyer may ask the supplier to complete its tender in writing where needed. With several suppliers, the buyer has three ways to place orders:

• direct award under the framework's terms, without reopening competition;
• a mix, with some orders placed directly and others after competition among the suppliers;
• reopening competition among the suppliers for every order where not all terms were fixed in advance (a "mini-competition").

Under a multi-supplier framework, being on the framework guarantees nothing. A supplier can be awarded a place and receive no order in four years.

Why the published value misleads

It is a cap, not a forecast

In eForms notices, three values can appear for a lot: the buyer's estimated value (BT-27), the value of the winning tender (BT-720) and, for frameworks, the framework maximum value: BT-271 in the description of the lot, and BT-709 in the results of a contract award notice, calculated on the basis of the winning tenders. The framework maximum is the legal ceiling for the whole term. Buyers set it high on purpose, because exceeding it would require a new procedure, and spending less has no consequence.

It covers the whole term

Four years of potential orders are published as one figure. A figure that looks like a large annual business is, at best, a quarter of that per year.

It is shared

With several suppliers on the framework, the cap is the total for all of them. Nothing in the notice says how it will be divided, and the division is decided order by order.

It may cover many buyers

Central purchasing bodies award frameworks on behalf of other authorities. The cap then aggregates the potential demand of every authority entitled to use the framework, most of which will never call off from it.

The call-offs are mostly unpublished

Article 50(2): for contracts based on a framework agreement, contracting authorities "shall not be bound to send a notice of the results of the procurement procedure for each contract based on that agreement"; Member States may instead allow grouped notices sent within 30 days of the end of each quarter. In practice, the framework award is published and the real sales are not.

How to read framework values

Use the notice to establish facts, and only then make a cautious estimate.

Facts the notice gives you. The buyer intends to buy this category for up to four years. It has pre-qualified this supplier (or these suppliers) on price and capability. The buyer and the supplier will have a live relationship for the term, with a known end date. The number of tenders received tells you how contested the place was.

A cautious estimate. Divide the framework maximum by the number of years, then by the number of suppliers on the lot, then discount for the fact that caps are set high. The result is a rough upper bound for one supplier's annual sales under that framework, not an expected value. If the buyer is a central purchasing body, discount again. If you need the real figure, the notice will not give it; the supplier's own accounts or the buyer's spending data might.

Compare the three values. Where the estimated value and the tender value are both present and the tender value is much lower, the supplier bid aggressively or the buyer over-estimated. Where only a framework maximum is present, you are looking at a ceiling and nothing else. Placeholders such as 0 or 1 appear when a buyer does not want to publish a figure at all.

Why frameworks still matter to a manufacturer

The value is the least useful part of a framework award. The useful part is what it says about the winner:

• it has a product range and price list that passed a formal evaluation in your category;
• it has a multi-year relationship with an institutional buyer, often with reopened competition that rewards new products and better prices;
• it will be re-tendered at a known time, which is when the buyer and every supplier on the framework will be looking for an edge.

A distributor sitting on a multi-supplier framework with mini-competitions has a direct, legal incentive to add a new manufacturer whose products let it win the next call-off. That is a far better conversation opener than the headline value.

What this means for a manufacturer

When you see a framework award in your category, do not ask "how much did they sell". Ask three other questions. Is the winner a reseller (a route) or a manufacturer (a competitor)? How many suppliers share the framework, and is competition reopened for orders? When does it end? The first tells you whether to talk to them, the second tells you what they need from you, and the third tells you when.