Framework Agreement in IT contracts 

In the dynamic world of information technology, cooperation between companies often requires flexible and long-term solutions. One of the most common legal tools enabling such cooperation is the Framework Agreement. This type of contract defines the general principles of cooperation, allowing the execution of individual orders on flexible terms, adapted to the current needs of the customer and the capabilities of the supplier.

How to effectively manage long-term cooperation with IT suppliers? What to pay attention to when getting to know a supplier? How to approach reviewing a framework agreement and who to engage? What are the key elements of a framework agreement and why should it be used? Read the article! 

Know Your Supplier 

Even before establishing a business relationship with a supplier, it is a good idea to vet the supplier. Most companies have internal processes for vetting their suppliers, but each provides for the following key areas to be vetted: 

• supplier data; 
• capital group membership; 
• data of the members of its representative body; 
• industry and quality certifications held; 
• implemented business ethics principles. 

Gathering all of the above information makes it possible to assess a supplier’s reliability and trustworthiness – and, consequently, to enter into a stable cooperation with a reliable supplier. 

When using a supplier’s data, also verify them using business registries – most of which are publicly available, particularly within the European Union. This will also give you information about the form, status and, in some cases, financial health of the supplier. 

Who to involve in reviewing and negotiating the framework agreement?

A classic is the involvement of one’s legal department in the review and negotiation of a framework agreement – a common, but also not entirely correct, assumption that the business supervisor of a potential collaboration (e.g., a member of the purchasing department) together with the legal department will both drive the given business case and lead to the conclusion of a framework agreement. 

Framework agreements and related IT projects are multifaceted and highly sophisticated, and as a result – even in the early stages of framework agreement discussions and verification of its content – it is worthwhile to involve staff members from the following departments on your side: 

• Technological and project – consult with your engineers and project managers about the planned services, deadlines, volumes and technologies related to the framework agreement and its orders to be implemented by the supplier. Determine with them the needs of your company and a convenient methodology for cooperation; 
• Financial – discuss acceptable payment terms in your organization, including deadlines, intervals and underlying documents, as well as the necessary elements on the accounting document; 
• Marketing – it is worthwhile to discern and determine whether your cooperation with the supplier and the ongoing project should be communicated to the market and on what principles. Considering announcing the conclusion of a contract and the start of a project can be benefitial for both parties; 
• Purchasing – inform the purchasing department about the potential supplier and obtain the information necessary for onboarding them into your organization. 

The above departments and individuals should be involved in the discussions of the framework agreement until it is concluded. However, this is not the full package of people who need to be involved – remember that once the framework agreement is concluded, it is subject to execution, which may be overseen by people other than those who participated during the negotiations. As a rule, these are project managers or Product Owners, who should be aware of how the framework agreement works. If they did not participate in the above discussions and meetings with the supplier, give them the key essence of the agreement  from a project point of view, i.e.: 

• established catalog of IT services; 
• how to order IT services; 
• order template; 
• acceptance procedures and billing of services; 
• compensation models; 
• communication channels; 
• allocation of resources and tools used under the contract; 
• costs reimbursement; 
• location, hourly range and time zone of IT services delivery;
• escalation paths. 

Contract managers on your side – in addition to being aware that they have an assured vendor from whom they can procure IT services – will approach the implementation and supervision of the framework agreement more efficiently, without unnecessary loss of time to obtain the above information in their organization. This will provide them with greater comfort in their work and allow them to focus entirely on the project under their supervision. 

What is a framework agreement?

A framework agreement is a contract between a customer and a supplier that sets out the basic principles of cooperation, such as the scope of services, division of responsibilities, financial terms or ordering procedures. It is particularly popular in the IT industry, where projects can evolve and technology needs change dynamically. 

An important element of the framework agreement is that it does not define in detail all supplies or services, but leaves this to be determined in separate orders (known as “orders” or “statements of work”) that are concluded under the agreement. 

The main benefit of the framework agreement is that it defines the general principles of cooperation with the supplier, which makes it much easier to order services – the parties have the above principles permanently established in the agreement itself, so that later they only agree on the technological and business details in the order: the scope of services, the required results, performance schedules and financial terms. There is no need to discuss and negotiate a separate agreement each time for the next project – this gives invaluable flexibility in cooperation. 

When to use a framework agreement?

The framework agreement is particularly useful in situations where, for example: 

• The planned cooperation is of a long-term nature and involves multiple orders executed under similar conditions; 
• You need a provider that is ready to provide IT services flexibly; 
• You plan to start a large-scale project with established phases and areas to be determined on an ongoing basis; 
• You want to set all the main conditions for the future in a single negotiation process and later focus only on the business aspects according to your demand. 

It is used when parties want to avoid having to negotiate all aspects of a new contract each time. It works well in relationships where the supplier provides services on a continuous or cyclical basis, such as IT systems maintenance, software development or consulting services. With a framework agreement, you can significantly simplify the purchasing process and increase operational efficiency. 

Key elements of the framework agreement

Any framework agreement should include several key provisions to ensure transparency and efficiency in cooperation: 

• Parties to the contract: Determine who are the parties to the contract, i.e. which entities enter into the contract on your side and on the supplier’s side.
• Related parties: Discern whether you want to provide your affiliates within your group with the ability to place orders with the supplier of your choice.
• Consortium & Partnership: Determine if there is a consortium on the supplier’s side or if the supplier has partners who will participate in the contract with your knowledge and consent.
• Type of contract: Adopt a framework model of the agreement and rely on such a perspective during negotiations – the content is to be the starting point and should include the general terms of cooperation.
• Definitions: Establish a catalog of definitions of terms used in the contract – it is useful to have a complete list in one place. Avoid definitions further down in the contract – with extensive contracts, it is easy to overlook definitions.
• Subject of the contract: Identify a potential catalog of services or products to be provided by the supplier. You will determine the detailed scope in your orders.
• Hierarchy & Attachments: IT contracts are elaborate and multi-level – they often contain numerous appendices, sample documents and purchase orders. Determine which document takes precedence in case of contradictions. Determine the mode and form of changing attachments. Allow the possibility of changing the order design from the attachment by adding or removing elements – not all of them will always fit.
• Orders: Define an ordering procedure and a procurement template that includes key elements: scope of services, schedule, payment, terms of acceptance (including UAT) and milestones, if not directly derived from the contract. Orders should always be jointly discussed with the supplier and entered into with the consent of both parties.
• Method of service provision: Specify the method of service delivery – whether it will be provided remotely, on-site, or in a hybrid model. Provide a gateway to allow modification of the established method in the body of the contract.
• Schedule: If the framework agreement is for a specific project or area, specify – preferably in the form of an appendix – an implementation schedule, divided into phases with responsibilities.
• Division of responsibilities: List responsibilities, such as providing access or information to the supplier, to avoid misunderstandings during the project.
• AI: Clarify whether the supplier can use AI as a tool in the course of service delivery and whether its use occurs in accordance with your AI policy adopted in the enterprise.
• Acceptance: Determine the acceptance procedure, if the nature of the services requires it. Specify the deadline and conditions for proper execution of acceptance. Establish the acceptance procedure as an option that can be allowed in the order – some services may not be subject to acceptance.
• Change Request: Each party should be able to report the need for a change in the scope of services, stating the rationale, the scope of the changes, the associated costs and any changes in the implementation schedule and the impact on the services themselves and their completion dates.
• Copyrights or licenses: The main output of IT services are the IT deliverables (works) that you should be able to use. This can be achieved in two ways:
  • Copyright (IPR): acquisition of full author’s economic rights to a given work (digital IT product) in certain fields of exploitation. In this case, you become the owner of the deliverables – it is advisable in this case to limit the exercise of moral copyrights by creators to a minimum.
  • License: the supplier remains the owner of the copyright (IPR), and you can use the works. Note the scope of the license, including its duration and territorial restrictions.
• Salary: A key business aspect for both parties – clearly define the terms of remuneration for the supplier, including acceptable billing models, the basis for calculating the remuneration, the terms of its payment. Rates and intervals or separate settlement terms are established in the respective contract.
• Costs: Determine how they will be borne and approved if you intend to cover them.
• Communications: Due to the complexity and multifaceted nature of the agreement, it is worth establishing clear rules for communication, including the designation of contact persons on each side.
• NDA (non-disclosure agreement): Safeguard your company’s confidential information with an appropriate NDA specifying the scope of confidential information, exceptions, purpose of use, duration and deadlines for deletion.
• Duration of the contract: Specify the duration of the contract. In the case of framework agreements, it is recommended to conclude them for an indefinite period. Remember that the mere fact of concluding a framework agreement does not yet oblige you to place an order – it’s a good idea to keep it indefinitely and have a supplier available when needed.
• Termination of contract: Each party should have the right to terminate the contract with a notice period without cause, and to terminate immediately in the event of a material breach of the terms and conditions, which it is worth specifying precisely, taking into account the remedial period before termination.
• Marketing consent: Determine whether you and the supplier can freely and generally communicate about the collaboration, including publicly communicating general information about the services provided and the collaboration undertaken. Include your brand book in the clause requirements, if you have one in your organization.
• Personal information: The provision of IT services may require supplier access to and processing of your databases with personal data, which requires a data processing entrustment agreement. It is worthwhile to provide for a model of the above agreement as an appendix to the framework agreement, and to establish the obligation to conclude it in case the entrustment of processing occurs.
• Attachments: List all the annexes to the contract, which are an integral part of it.
• Form of contract: The agreement must be made in writing, preferably using qualified electronic signatures, and must be accompanied by all agreed and listed attachments.

• Flexibility – allows you to order services quickly without having to negotiate all the terms each time. 
• Transparency – defines the general principles of cooperation, which minimizes the risk of misunderstandings and reduces subsequent negotiations in the future. 
• Saves time – shortens the paperwork for subsequent orders – one contract, unlimited orders. 
• Better cost control – allows better budgeting and management of IT expenses. 

Summary

A framework agreement is an effective tool for managing long-term cooperation with IT suppliers. When properly structured, it allows you to flexibly adapt the terms of cooperation to changing business needs, while ensuring transparency and control over the services provided. That is why it is so important to consider all key aspects when drafting it, including the basic principles of cooperation that will ensure the stability and effectiveness of the contract. 

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