What is a Procurement Contract?
A procurement contract is an agreement in which a buyer agrees to acquire goods or services from a seller in exchange for consideration. Most of these contracts are written agreements that specify each party’s obligations in relation to the transaction. Generally, one includes business provisions, detailed price lists, payment information, and other legal terms and conditions applicable to the transaction.
Many companies and government agencies have adopted purchasing procurement programs that include all of the activities that take place when goods and services are acquired from vendors. Pursuant to these programs, a company or government agency may issue a request for proposal, which details the goods requirements or the service specifications. Once the proposal request has been issued, bidders may submit their responses, and those who are able to comply with the proposal requirements may be considered as potential sellers. Once a bidder's proposal is accepted by a buyer, the bidder and the buyer generally enter into a procurement contract.
A number of procurement systems exist in the marketplace, and one increasingly popular method of procuring contracts is through e-procurement systems. E-procurement programs generally operate in the same way as regular procurement programs, except that procurement information is exchanged through the Internet or other electronic network systems. Web-based enterprise resource planning, e-sourcing and e-tendering are common e-procurement methods.
Procurement contracts are usually required by government agencies that are seeking the provision of goods and services from vendors. In these situations, the agencies and bidders are often required to comply with legislation governing the procurement process, and contract terms may even be dictated by statute in some cases. These legal requirements can be burdensome and may make the procurement process more rigorous for sellers who want to work with government agencies.
A procurement agreement is legally binding on each of the contracting parties, so an entity entering into a contract should carefully review all of the business terms and conditions in the contract prior to signing. Additionally, parties entering into an agreement should consult their respective lawyers to ensure the contract is appropriate for the situation at hand.
Construction procurement contracts are common, and they are usually issued when a seller is providing new works, refurbishment, or maintenance project services to a buyer. These agreements can be more complicated than other types of procurement agreements, so given the complex nature of these contracts, buyers and sellers may require the services of an attorney who specializes in construction law.
The Norwegian Agency for Public Management and e Government has made nine procurement contracts, which is available under the Creative Commons license (free to use). All nine contracts are translated into English, and can be found at their web page.
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