The world of procurement involves an awful lot of specific terms and jargon – some of it contractual, some of it legislative and some of it just obscure. We continue our procurement and purchasing glossary to clear up some of the more opaque terminology.
Reasonable price, or ‘fair and reasonable price’ refers to an agreed contractual value that serves both the buyer and seller, taking into account the market factors, purchasing power, and legal trade regulations. In reality, it’s open to interpretation and hence somewhat meaningless, so the term is best avoided.
Regulation 84 report
Regulation 84 states the requirement for contracting authorities to keep a report detailing specified information about the procurement process. This is necessary for all contracts over the EU’s defined financial threshold.
This sets out the circumstances in which unsuccessful tenderers can seek compensation or nullification of an awarded contract if they believe procurement rules have been broken.
Request for proposal (RFP)
Similar to an invitation to tender, an RFP invites contractors to propose solutions to an outlined buyer need.
A procurement process in which interested suppliers must complete a pre-qualification questionnaire. Based on the responses, the buyer shortlists suitable suppliers and invites them to tender.
The chance of unwanted outcome (and that outcome’s impact) when taking action.
A document used as a management tool for assessing the degree of risk involved within a project. The register should define each risk; its impact; and action to be taken to avoid it, or to manage it in the event of it occurring.
This can refer to either the transfer of risk (and therefore its financial impact) to an insurer – or the transfer of risk from a contracting authority or prime contractor to sub-contractors to enable PFI proposal approval.
Schedule of rates
A list of jobs or services provided with relevant costs. Differs from the bill of quantities in that no quantities are inserted.
A way of evaluating responses to determine the most economically-advantageous tender. Should closely relate to the award criteria specified in tender information.
Shows potentially-suitable contractors after a shortlisting exercise (such as a pre-qualification questionnaire) has been undertaken.
The key factors used to determine whether an interested contractor is deemed suitable to be invited to tender.
Service level agreement (SLA)
A contract – or part of a contract – where the expectations of the service that a buyer is to receive from a contractor are clearly stated. Includes scope, quality and responsibilities.
Support functions (such as HR, IT) within an organisation or group can be seen as separate business entities, and even grouped to provide a more general support service across an organisation or group.
Small and medium-sized enterprise. In the EU these constitute private sector companies with fewer than 250 employees or less than €50m turnover.
A business that invests profit to tackle social problems, improve communities, help the disadvantaged and preserve the environment.
The process of finding, evaluating and contracting suppliers to obtain required goods or services.
A contract with a special designation attached to it, such as purchase and sale, lease, loan or insurance. In procurement the term usually refers to a call-off contract under a framework agreement. Also known as a ‘nominate contract’.
A description of the goods, works or services required, and the standards they should meet. Forms a key element of the tender document so that prospective suppliers appreciate the requirement and submit proposals and costs accordingly.
A contractual agreement where payments are made either on completion of project stages, or at pre-defined dates in the project’s duration.
Any party with a financial stake or active interest in a particular project or organisation. Examples might include funders, members, contractors and beneficiaries.
Communication of the contract award decision, after which the standstill period commences. Sometimes known as the award decision notice.
A period of ten calendar days in which the contract which is to be awarded cannot be commenced. Begins the day after the communication of the standstill letter/award decision notice.
Sub-central government authority
All contracting authorities below central government level.
Outsourcing part of a contract to a separate individual or organisation to help complete a project.
Subject to contract
This phrase can often used before a formal contract has been drawn up. They are to be treated with caution as they are not legally binding.
Subject to negotiation
This phrase suggests that while a broad understanding has been reached, details are still to be agreed. A contract cannot be signed until deliverables and costs are agreed by both parties.
Programmes designed to increase the number of minority-owned (ethnic, women, veteran-owned etc.) businesses supplying goods and services to public and private sector organisations.
A system of organisations involved in getting products, works or services to the customer. Suppliers are ‘tiered’ depending upon how many organisations sit between themselves and the main contractor.
The process of buying with consideration given to environmental and social issues, rather than purely economic ones.