Guidelines for Framework Contracting, 2010

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Guidelines for Framework Contracting, 2010

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 Guidelines for Framework Contracting, 2010

Telephone:+254(020) 3244000, 2213106, 2213107 National Bank Building, 10 th Floor

Fax: :+254(020) 2213105, 3244377, 3244277
E-mail: info@ppoa.go.ke Harambee Avenue
Website: www.ppoa.go.ke P.O. Box 58535-00200
NAIROBI
When replying please quote: KENYA

PPOA CIRCULAR NO. 6/2010

18th June, 2010
To: All Accounting Officers
All CEO’s, State Corporations
All Vice Chancellors, Public Universities
All Managers, Co-operative Societies
All Clerks, Local Authorities
All Principals, Public Colleges/Schools
All CDF Account Managers
RE: GUIDELINES FOR FRAMEWORK CONTRACTING

The Public Procurement Oversight Authority (PPOA) has observed that

there is rampant use of the Request for Quotations (RFQ) Method by
procuring entities in most of their procurements. Further, procurement
units pre-occupy about 90% of their time in processing procurements
through the aforesaid method. To forestall these challenges, PPOA has
prepared Guidelines for Framework Contracting as instructions for
making awards of indefinite-delivery framework contracts pursuant to
Section 9(c)(i) and (iv) of the Public Procurement and Disposal Act,
2005
Further, the Guidelines provide clarifications on parts of the Act and the
Regulations that deal with tender security, awarding of tenders,
amendments or variations to contracts, invitation of tenders, preparation
of tender documents and qualifications for contract award. In addition,
the Guidelines should be applied as a creative approach to reduce the
rampant use of the RFQ method and enhance efficiency of the
procurement process and project implementation, pursuant to Section
31(7) of the Act.
Taking cognizance of the foregoing, you are requested to take the
necessary action by ensuring that the Guidelines are availed to all staff of

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 Guidelines for Framework Contracting, 2010
your entity that are involved in the procurement function. The
Guidelines are also found in the PPOA website www.ppoa.go.ke.
Attached are copies of the Framework Contracting Guidelines for your
reference and action.

M. J. O. JUMA
Ag. DIRECTOR GENERAL
Encls.

CC The Permanent Secretary/Secretary to the Cabinet and

Head of Public Service
Office of the President
Harambee House, Harambee Avenue
P.O. Box 30510 -00100
NAIROBI

The Permanent Secretary

Office of the Deputy Prime Minister &
Ministry of Finance
P.O. Box 30007-00100
NAIROBI

The Director
Kenya Anti-Corruption Commission
Integrity Centre, Milimani/Valley Road Junction
P.O. Box 61130-00200
NAIROBI

The Controller and Auditor-General

Kenya National Audit Office
Anniversary Towers, University Way
P.O. Box 30084-00100
NAIROBI

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 Guidelines for Framework Contracting, 2010

The Public Procurement

Guidelines
For
Framework Contracting

These Guidelines for Framework Contracting were issued by the Public

Procurement Oversight Authority under Section 9(c)(i) and (iv) of The
Public Procurement and Disposal Act, 2005, and distributed to all
Accounting Officers and Chief Executive Officers and Heads of
Procuring Entities.

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 Guidelines for Framework Contracting, 2010
PART I – PRELIMINARY

Short Title 1. These instructions may be cited as the Public Procurement Guidelines for
Framework Contracting.

Purpose of the 2. These Guidelines are instructions for making awards of indefinite-delivery
guidelines
framework contracts.

3. The guidelines are a further clarification on parts of the Act and the Regulations
that deal with tender security, awarding of tenders, amendments or variations to
contracts, invitation to tenders, preparation of tender documents and qualifications
for contract award.

Application of 4. These guidelines may be applied by procuring entities as a creative approach to

the Guidelines
enhance efficiency of the procurement process and project implementation,
pursuant to Section 31(7) of the Act.

Definitions 5. In these guidelines unless the context otherwise requires –

“Definite-quantity framework contract” means a contract to provide for delivery of

a definite quantity of specific goods, services or works for a fixed period, with
deliveries or performance to be scheduled at designated locations upon order.

“Requirements framework contract” means a contract to fulfil all actual purchase

requirements of one or more public bodies for goods, services or works during a
specified contract period, with deliveries or performance to be scheduled by placing
orders with the contractor.

“Indefinite-quantity framework contract” means a contract to provide an indefinite

quantity, within stated limits, of goods, services or works during a fixed period, and
may be a delivery order framework contract; a service order framework contract; or
a works order framework contract.

Preference for 6. As an interim measure, procuring entities are required to make use of single-award
single-award
framework framework contracts, under which frequently bought items would be consolidated
contracts into contracts for supply at an agreed price over a defined contract term, with orders
being placed at the contract price when required. By consolidating such
requirements into framework contracts, the procuring entity should be able to make
savings on the administrative costs of procurement and to achieve better prices
through larger volume contracts.

Multiple-award 7. While it is the Authority’s intention to advocate a preference for making multiple
framework
contracts not awards of indefinite-quantity framework contracts, this will require an amendment
allowed. to section 66 (4) of the Act, which states that the successful tender shall be the
tender with the lowest evaluated price and does not provide for multiple awards.
Unless the provision is amended, multiple awards are not allowed.

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 Guidelines for Framework Contracting, 2010
PART II – GENERAL FRAMEWORK CONTRACTING RULES

Types of 8. There shall be three types of indefinite-delivery framework contracts:

framework
contracts (i) definite-quantity indefinite-delivery framework contracts,

(ii) requirements framework contracts, and

(iii) indefinite-quantity framework contracts.

General 9. The appropriate type of indefinite-delivery framework contract may be used to:-
conditions for
use of (i) acquire goods, services and/or works when the exact times and/or exact
framework quantities of future deliveries are not known at the time of contract
contracts award;

(ii) permit stocks to be maintained at minimum levels; and

(iii) acquire goods, services and/or works on a “when-required” basis.

Tender 10. A tender document and a contract agreement for an indefinite quantity
Documents and
Contract framework contract must—
Agreements
(i) Specify the period of the contract, including the number of options, if
any, and the period for which the procuring entity may extend the
contract under each option;

(ii) Specify the total minimum and maximum quantity (ceiling amount) of
goods, services or works the procuring entity will acquire under the
contract (to ensure that the contract is legally binding, the minimum
quantity must be more than a nominal quantity, but it should not exceed
the quantity that the procuring entity is fairly certain to order);

(iii) Include a statement of work, specifications, or other description, that

reasonably describes the specific requirements, nature, complexity, and
purpose of the goods, services or works the procuring entity will
acquire under the contract in a manner that will enable a prospective
firm or individual to decide whether to submit a tender; and

(iv) State the procedures that the procuring entity will use to issue orders,
including the ordering means, e.g. electronically.

Performance 11. The value of any performance security for framework contracts must be based
security value
on the minimum value of the contract – not the maximum value.

Indexing prices 12. For goods, services or works whose prices are expected to be volatile,
framework contracts should include an indexing mechanism to adjust prices
based on the Market Price Index issued by PPOA

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 Guidelines for Framework Contracting, 2010
PART III – OPTIONS

General 13. Consistent with Regulation 20(3) of the Public Procurement and Disposal
Provisions for
Multi-year Regulations, 2006, procuring entities may award multi-year framework
Framework contracts, provided that:
Contracts
(i) Procuring entities included the multi-year framework contract in their
annual procurement plan as provided for by Section 26(3) of the Public
Procurement and Disposal Act, 2005;

(ii) All options periods are priced, and the price can be indexed as described
in paragraph 9 above; and

(iii)The framework contract, including all option periods, does not exceed
two years.

14. Approval of the procuring entity’s tender committee is required for all price
changes included in framework contracts.

PART V – ORDERING

General 15. (1) Procuring entities are not required to advertise or invite quotations for orders
Provisions for
Ordering issued under framework contracts.

(2) Individual orders shall clearly describe all services to be performed or goods
to be delivered or works to be done so that the full cost or price for the
performance of the work can be established when the order is placed. Orders
shall be within the specific requirements, issued within the period of
performance, and be within the ceiling of the contract.

(3) Orders may be placed by using any means, e.g. electronically (faxed, etc), as
specified in the contract.

(4) The procuring entity must ensure the price for all the orders does not exceed
the ceiling amount of the contract.

(5) ) Orders placed under framework contracts must contain the following
information:

(i) Date of order;

(ii) Contract number and order number.

(iii) For goods, services or works, contract item number and description,
quantity, and unit price or estimated cost;

(iv) Delivery or performance schedule;

(v) Place of delivery or performance (including consignee);

(vi) Any packaging, packing, and shipping instructions; and

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 Guidelines for Framework Contracting, 2010
(vii) Method of payment and payment office, if not specified in the
contract.

(6) Procuring entities are not exempt from the requirement of Regulation 20 of
The Public Procurement and Disposal Regulations, 2006 to prepare
procurement plans even when ordering under a framework contract.

(7) Performance securities may be required at the discretion of the procuring

entity as a basis of the order.

PART IV – DEFINITE QUANTITY FRAMEWORK CONTRACTS

Description 16. A definite-quantity framework contract provides for delivery of a definite
quantity of specific goods, services or works within a fixed period, with
deliveries or performance to be scheduled at designated locations upon order.

When may be 17. A definite-quantity framework contract may be used when it can be determined
used
in advance that—
(i) A definite quantity of goods, services or works will be required during the
contract period; and
(ii) The goods, services or works are regularly available or will be available
after a short lead time.

PART VII - REQUIREMENTS FRAMEWORK CONTRACTS

Description 18. A requirements framework contract provides for filling all actual purchase
requirements of a procuring entity’s activities for goods, services or works
during a specified contract period, with deliveries or performance to be
scheduled by placing orders with the contractor.

When may be 19. A requirements framework contract may be appropriate for acquiring any goods,
used
services or works when a procuring entity anticipates recurring requirements but
cannot predetermine the precise quantities of goods, services or works that the
procuring entity’s activities will need during a definite period.

20. For the information to tenderers and resultant contractors, the procuring entity
shall state a realistic estimated total quantity in the tender and resulting contract.
This estimate is not a representation to a bidder or contractor that the estimated
quantity will be required or ordered, or that conditions affecting requirements
will be stable or normal. The procuring entity may derive the estimate from
records of previous requirements and consumption, or by other means including
market research, and should base the estimate on the most current information
available.

21. The contract shall provide that all purchases by the procuring entity for the
specified goods, services or works will be made under the contract.

Procedure of 22. The contract shall state, if feasible, the maximum limit of the contractor’s
requirements
framework obligation to deliver or perform and the procuring entity’s obligation to order.
contracts The contract may also specify maximum or minimum quantities that the
procuring entity may order under each individual order and the maximum that it
may order during a specified period of time.
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 Guidelines for Framework Contracting, 2010

Public assets 23. When a requirements framework contract is used to acquire work (e.g., repair,
furnished for
repair. modification, or overhaul) on existing public assets, equipment or stores, the
procuring entity shall specify in the contract that failure of the procuring entity
to furnish such items in the amounts or quantities described in the contract as
“estimated” or “maximum” will not entitle the contractor to any equitable
adjustment in price.
PART VII - INDEFINITE-QUANTITY FRAMEWORK CONTRACTS

Application. 24. Procuring entities may use an indefinite-quantity framework contract when the
procuring entity cannot predetermine, above a specified minimum, the precise
quantities of goods, services or works that will be required during the contract
period, and it is not advisable for the procuring entity to commit itself for more
than a minimum quantity. The procuring entity should use an indefinite-quantity
framework contract only when a recurring need is anticipated.

Contract 25. (1) An indefinite-quantity framework contract shall provide for an indefinite
agreement
Documents quantity, within stated limits, of goods, services or works during a fixed
period. The procuring entity then places orders for individual requirements.
Quantity limits may be stated as number of units or value.

(2) The contract shall require the procuring entity to order and the contractor to
furnish at least a stated minimum quantity of goods, services or works. In
addition, if ordered, the contractor must furnish any additional quantities, not
to exceed the stated maximum. The procuring entity should establish a
reasonable maximum quantity based on market research, trends in recent
contracts for similar goods, services or works, survey of potential users,
consumption records, or any other rational basis.

(3) To ensure that the contract is binding, the minimum quantity must be more
than a nominal quantity, but it should not exceed the amount that the
procuring entity is fairly certain to order.

(4) The contract must also specify the maximum and minimum quantities that
the procuring entity may order under each task or delivery order.

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Guidelines for Framework Contracting, 2010

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Guidelines for Framework Contracting, 2010

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