Latest Procurement Office's Communication on the Obligatory Nature of Framework Agreements

The Federal Contracting Office (“FCO”), as the agency oversighting the Federal Procurement System, issued Communication No. 14/2022 referring to the binding nature of framework agreements and clarifying some issues regarding its application.

1. Binding nature of the Framework Agreements

First, the FCO repeated the principle set forth in section 25 of the Regulation of the Public Procurement Framework, approved by Decree No. 1030/2016. The principle states that if there is a framework agreement in force, contracting entities included within the scope of application of the Procurement Regulation must procure goods and services through it, if such goods or services are included in the framework agreement and as long as the contracting entity is not included in the exceptions expressly provided in section 126 of the Procedure Manual (approved as an Annex to the FCO Disposition No. 62/16).

2. Ongoing procurement procedures for the same object

Second, the FCO clarified that if the contracting entity had initiated a selection procedure prior to the entry into force of the framework agreement, the entry into force of said agreement will prevent the selection procedure from continuing and the contracting entity will be prevented of contracting a third party outside of the framework agreement.

In these cases, the contracting entity must annul the ongoing procedure. The interested parties or bidders will not have a right to compensation. The annulment must be duly justified on the existence of a valid framework agreement and the obligation provided in section 25 of the Procurement Framework to procure through the framework agreement.

3. Extension of current contracts with the same object

Third, given that the extension does not set up a new contractual relationship, the Communication states that it is possible for contracting entities to extend a contract even when there is a framework agreement in force for procuring the same good or service.

Notwithstanding, the FCO expressly provides that, prior to exercising the option to extend, the contracting agency must verify if the conditions of the framework agreement are more beneficial. If they are, the option to extend cannot be exercised. This will not give the contractor the right to compensation since the extensions are grated upon the Administration’s decision.

4. Exceptions

Finally, the FCO described that the regulations only authorize contracting entities to request the FCO for an exception to procure goods through a current framework agreement when the agency proves: (i) that the products and/or services included in the framework agreement do not conform to the purpose that the procurement seeks to satisfy and (ii) that the entity can obtain more advantageous conditions on its own procurement regarding the objects currently under a framework agreement.

Regarding the first exception, the FCI explained that the agency must give reasons explaining why the specific goods and/or services are not adequate to satisfy the public need. In the second exception, when referring to "more advantageous conditions", the FCO clarified that they will normally (although not exclusively) translate to lower prices, which must be duly verified by the contracting entity.

If the ONC understands that it is not appropriate to grant the exception, the agency must seek procurement under the current framework agreement. Otherwise, the agency may hold its own selection procedure.