A Brief Introduction About the Blanket Purchase Agreement
A Blanket Purchase Agreement (BPA) is a legal document that is created between two or more parties where the first party is usually a government agency or organization and the second party is a vendor who is engaged in the business of providing repetitive services and or work products to the government. In simple terms, this is a legal document that is created so that the government can easily and efficiently a legal understanding among its vendors and repeatedly fulfill its requirements. In other terms, a BPA is a charge account set up by the government with its trusted vendors.
In this piece, we will be addressing, what is a blanket purchase agreement and blanket purchase definition.
Who Takes the Blanket Purchase Agreement? – People Involved
While creating the agreement, there are usually two parties involved. The first party in the creation of this contract is the government agency or organization that has a repeated need that demands to be fulfilled. The second party in the creation of this contract is the trusted vendor who has the government has chosen to fulfill all its orders. In legal terminology, the first party is defined as the Governing body, the second party is defined as the Vendor, and the legal document is referred to as the Agreement.
Purpose of the Blanket Purchase Agreement – Why Do You Need It?
The underlying purpose of the creation of this agreement is to establish a legal understanding between both parties involved and to make sure that they are aware of the terms and conditions, along with the rules and regulations at all times.
While the use of the contract is common enough in today’s industry, there are still instances when parties are confused with its actual use.
Below are a few most important aspects of this agreement:
- The terms of this agreement are negotiated at an agency level meaning that only a few numbers of trusted vendors by the government can fulfill its requirement.
- The selection of the vendors who are marked as trusted is made on a merit basis, the amount of infrastructure that the vendor holds and also his or her reputation in the industry.
On the other hand, a GSA schedule or General Services Administration agreement is a legal contract that is negotiated with a large number of vendors in participation. Once the terms of a GSA have been negotiated and finalized upon, any government agency, be it at the federal level, or the state can make use of the same to fulfill its requirement.
After the terms of a BPA has been negotiated, it is mandated at not exceeding 100,000 USD on the total value of orders that can be placed. On the other hand, a GSA has no such limit, and it can be used by a federal or state agency to go above and beyond to fulfill its requirement.
One of the most significant advantages of having a BPA is that a buyer can use a onetime negotiated BPA to acquire a full range of services from a said vendor. This saves the agency from the trouble of renegotiating terms regularly and also makes it cost-efficient in the long run.
While BPA s might be used by a government agency under any circumstance to fulfill its requirement, the governing body for acquisitions, i.e., the Federal Acquisition Regulation (FAR), has put forward several criteria under which a BPA might be used. Some of these are; when there is a wide variety of services and or work products that will be required at different times, but the exact quantity of work product and or service is not known in advance.
When there is a need for a government agency to make commercial purchases in an area or for a project, where it otherwise does not have the authorization to do so. And last but not the least, the use of a BPA will save the government agency from signing multiple receipts, agreements and going through the process of choosing a trusted vendor time and time again.
Contents of the Blanket Purchase Agreement – Inclusions
- Involved Parties: In the formation of this contract, there are usually two parties involved. The first party is known as the Governing Body and is one who needs a repeated request to be fulfilled. The second party in this transaction is the trusted vendor whom the government has chosen to fulfill its requirement.
- Effective Date: In this section of the agreement, the date on which the contract was created, and the date from which the same will hold effective is mentioned.
- Application: This agreement is legally binding within the state, county, and city in which it was created.
How to Draft the Blanket Purchase Agreement?
This agreement can be drafted by simply following the steps mentioned below.
Call for a meeting between both the parties and discuss the terms and conditions that will be mentioned in this contract. Specifically, the details of the order that needs to be fulfilled, the number of funds that will be exchanged for the facilitation of the same, and also the total duration until which this setup will be active. After the two parties mutually agree to the conditions of the agreement, they can consult a lawyer and draw this agreement according to the requirements and specifications.
Both parties need to sign the documents in front of the lawyer after the agreement is drawn.
The negotiation strategy of the agreement is simple: the interests of the primary and the secondary party should be taken into consideration. Also, the common cause must be addressed.
Benefits & Drawbacks of the Blanket Purchase Agreement
The most significant benefits of having an agreement are as follows.
Benefits of Having a Blanket Purchase Agreement
The contract mentions the responsibilities, obligations, and limitations and hence makes sure that both parties are well aware of them at all points in time.
This is document acts as legal proof and thus can be produced in court if there is a need in the future.
Some other benefits of having a Blanket Purchase Agreement are as follows.
- Increased Purchasing Power & Reduced Costs: If you look at the contents of this agreement, you will quickly realize that it is designed in a way such that the cost of fulfilling recurrent needs is reduced over time, and the governing agency can enjoy an increased purchasing power. One of the key ways this is done is by allowing the business to purchase products for different departments all at the same time, thus allowing for higher bargaining power and also bulk order items whenever it is needed.
- Improves Efficiency and Delivery Time: A lot of times to fulfill 100 orders at the same time, a company needs to create 100 different purchase orders. This is not only expensive to the company in terms of time, but also money as more workforce is needed to create all these purchase orders. On the other hand, by having this agreement in place, a company can acquire the same product hundreds of times against one purchase order(1). In the long run, this will not only save the company a lot of time but also encourage greater efficiency and efficacy.
Cons of Not Having a Blanket Purchase Agreement
In case the agreement isn’t created, neither of the parties will have proof of the repetitive purchase. Also, the purchaser will not be able to get any benefit from the negotiated discount. In case there is a dispute, the vendor or the purchaser wouldn’t have any legal proof to present in front of the court.
What Happens in Case of Violation?
In the case of violation of this agreement, certain points come into effect and in a few instances of the contract, are dissolved, and a new set of terms and conditions are agreed upon. Other than violation of a Blanket Purchase Agreement, if both parties mutually decide to end the agreement, they can do the same.
A Blanket Purchase Agreement is created with the thought of initiating a smooth and efficient transaction between two parties and to make sure that both are mutually profited from the transaction. Thus, it is always advised that both parties create a Blanket Purchase Agreement when such a sale is concerned.