By MDA Attorneys Director Euan Massey

Framework agreements are long term contracts which permit an employer to issue several task orders to a contractor (or to various contractors) for the performance of work.  These task orders are issued at the employer’s discretion, usually on a piecemeal basis. The framework agreement contains the generic contractual terms applicable to the framework, whilst each task order will provide for more specific contractual terms which will relate to the work to be performed. Framework agreements are either purpose-written, or the parties adopt a standard form, such as the NEC3 or the NEC4.

The use of framework agreements in South Africa is growing. At MDA Attorneys, we have seen these agreements implemented by the City of Cape Town, the Western Cape Government, Eskom (mostly for maintenance) and in the mining sector (typically for high-risk projects).

One of the benefits of using framework agreements is that procurement lead times can be shortened once the agreement is in place. They also address the risk of possible resource shortages due to the long-term nature of the contracts, which bind contractors to carry out task orders.  As long-term contracts, framework agreements assist in fostering collaborative contracting, allowing for cost reduction and improved quality.

In the South African context,  the ability to actively enhance local community participation and the management of high-risk work are noteworthy advantages of using these agreements.

The current approach to achieving local participation adopted by public sector employers is to place this obligation solely at the door of the contractor, who is typically penalised by any underspend. Certain employers are realising that their active participation, from conducting feasibility studies into the available skills in the local community, to assisting in the adjudication of subcontracts to local small, medium and micro enterprises (SMMEs), is a must.  Long term frameworks allow for sustainable local participation and facilitate the establishment and growth of local skills and SMMEs.

Executing projects in certain mining environments is high risk – from underground works to brownfields works in operating plants. To manage these high-risk environments, mines are seeking contractors with specific skill sets, which may not always be available in a single organisation. By entering framework agreements with more than one contracting organisation, mines are employing the best fit skill set for discrete packages of works, thus reducing possible exposure to risk.

Although this contracting strategy offers unique advantages, employers should know that this is not a one-size-fits-all approach. This strategy requires active participation from employers which can be overly time-consuming, and the advantages mentioned above are not available across all projects.