RFQ and Supplier Contracts

RFP and Suppliers

In business the definition for the term Contract is a binding agreement between two or more business entities which is legally enforceable or a business arrangement for the supply of goods or services at a fixed price.

In the above instance or in the purchasing environment in general there is always a Supplier and a Buyer. As a Buyer, it is your duty to protect the interests of the company you represent by getting the required goods at the right time, cost, place and quality. When you make this purchase of goods or services from a Supplier you might use a document called a Purchase Order (PO) form. If this is a commodity or an item you might make several repeat purchases for throughout the year you may opt to create a Supplier Contract. For many organizations this would be known as a Standing Order or a Blanket Order Contract. The standing order contract allows a Buyer to issue releases against the negotiated master agreement. Pick up the phone and ask the vendor to send another truckload of widgets and basically your good to go (we prefer faxing or emailing a notification). This works because all of the commercial terms have already been nailed down and are documented in the formal contract.

In many cases this form of contract is a glorified PO with a set of terms and conditions. The Buyers use this agreement as a means to lock in pricing, FOB point, freight and other commercial terms which would be binding for the term of the contract with this Vendor. A beefed up PO is not the optimal way of managing this type of arrangement.

Our suggestion on a possible way to manage this process would be to issue a formal quotation or RFQ and as part of your tender documents include a sample form of the supplier contract as reference only. In your quotation suggest that the agreement format supplied as Appendix “B” is provided as a sample only. Bidder is not required to address this agreement as part of this quotation request but should be familiar with the content.  In the event you are awarded this quotation request, Bidder will be required to sign a form of this agreement.

When it is time to finalize award use a form of contract you provided with the RFQ. By being upfront with the type of supply agreement they would be required to enter into if they are awarded the contract allows for the process to be expedited at this stage.

Some benefits of supplier contracts would be price stabilization. With price stabilization you are helping the budgetary process by allowing users of the commodity to forecast or to know operating costs for this product for the term of the contract. From an administration standpoint, you are saving time when placing orders as your master agreement governs or manages all the details. The supply agreement can cover everything from price, taxes, freight, and packaging, quality and even safety standards. They allow you to focus your efforts on other duties and not be concerned over market fluctuations or price changes.

About DSB

Legal secretary for 15 years, SEO content specialist trained in accuracy in written documents, including grammar, punctuation and syntax.
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