Two very different kinds of contract
Open tenders are one-shot competitions for a defined piece of work. Framework agreements and dynamic purchasing systems are agreements with one or more suppliers that set the terms under which subsequent call-offs will be made, sometimes for years.
That distinction sounds administrative. It is not. It is one of the most strategically significant choices a consultancy makes each quarter.
The economics have shifted
In the UK, Crown Commercial Service frameworks now account for a majority of central government professional services spend. The Consultancy Marketplace framework and its predecessors have consolidated a market that used to run through hundreds of individual procurements.
The EU direction of travel is similar. Directive 2014/24/EU formalised the framework agreement as a standard tool, and central purchasing bodies across member states have leaned into it.
The World Bank has expanded the use of framework agreements in its Procurement Framework, particularly for advisory services under a certain threshold.
The strategic asymmetry
Framework agreements are asymmetric bets. Winning a framework place does not guarantee revenue. Losing a framework place typically guarantees no revenue from that buyer for the framework's duration, often four years.
That asymmetry cuts three ways:
- A framework place is worth pursuing even when the immediate revenue is uncertain. It creates optionality on future call-offs.
- A framework place lost is a strategic loss, not just a proposal loss. It closes a channel, sometimes for years.
- Framework pricing is a strategy decision, not a bid decision. Firms that price their framework rates without a call-off strategy consistently regret it.
The three questions worth asking before pursuing a framework
1. What is the historical call-off rate for this framework? Some frameworks are heavily used. Others are ceremonial. UK Crown Commercial Service publishes spend data on its frameworks; EU member states publish similar data through their central purchasing bodies.
2. What is the incumbent advantage? Frameworks with an incumbent on renewal skew the odds. Firms without a delivery history against the framework's use case should assume they are competing at a structural disadvantage.
3. Can we sustain our pricing for the framework's full term? Framework rates typically survive for the framework's duration. Firms that discount to win, then find they cannot sustain the rate, either erode margin or exit the framework.
The unglamorous close
Framework agreements are how a growing share of public spend is being routed. Consultancies with disciplined framework strategies are quietly compounding advantage. Consultancies that treat framework tenders as administrative exercises are quietly falling out of the market.