A procurement agreement delineates and governs the relationship between the service/product provider and the company hiring them for services. The service provider is typically paid by the company for services/products that take place over time.
It specifies the scope of products or services that will be supplied and how often. The service provider will articulate their obligations to the company. The scope of the services may vary depending on the type of services being offered, but typically include payment terms, availability, and obligations.
What should a procurement agreement cover?
- The scope of services that will be supplied and how often
- Payment terms, availability, and obligations
- Notification procedures
- Force majeure clauses
What are the benefits of including performance reporting in procurement agreements?
The effect of performance reporting may depend on what the company is looking for.
If the company wants help with procurement decisions, it should include performance reporting. Performance reporting is one of the most frequent audit points that auditors use, which is easy for the company to prepare for. Performance reporting helps the company to answer the question: “Are you really getting what you need from the contract?”
If the company is more interested in having a contract within the budgetary limits, it may benefit them to include performance reporting. Performance reporting helps the company to answer the question: “Does the amount of the agreed-upon price reflect the items I am actually getting in my purchase?”