Contracts

A contract is a mutually binding legal relationship. The vendor or supplier is obligated to provide specified goods, works or services, and the customer is obligated to pay after delivery and acceptance. NATO uses this definition in its procurement procedure.

In Canadian federal procurement, a contract is an agreement between two or more persons that creates an obligation to do, or not do, a particular thing. Public Services and Procurement Canada (PSPC) and other departments use contracts to acquire goods, services and construction on behalf of the Crown. For a supplier, the signed contract is the document that fixes what must be delivered and what will be paid.

How the Government of Canada defines a contract

The CanadaBuys Supply Manual glossary defines a contract as an agreement between two or more persons that creates an obligation to do or not do a particular thing. It adds that under the Government Contracts Regulations, a contract includes a construction contract, a goods contract or a service contract entered into on behalf of Canada by a contracting authority.

A federal procurement guide published on publications.gc.ca describes the same idea in practical terms: a legal agreement between the Crown and a supplier to provide goods, construction services or other services.

Contract types and instruments

Federal procurements can result in several kinds of instruments, depending on the requirement and the procurement method:

• Goods contracts
• Service contracts
• Construction contracts
• Purchase orders
• Standing offers
• Supply arrangements

NATO describes a procurement contract as ordinarily a written document containing the agreement and the terms and conditions between NATO and the supplier. It is formed through an offer and acceptance. The NATO Procurement Manual lists purchase orders, service and works contracts, systems contracts, blanket purchase agreements and lease agreements as contractual instruments. It states that a procurement contract is used principally to purchase or lease property, or to purchase goods or services for NATO's use or benefit.

Contracting as a phase of procurement

CanadaBuys divides procurement into pre-contractual, contracting, contract-administration and post-contractual phases. The contracting phase runs from bid solicitation through contract award. The Supply Manual glossary identifies progress monitoring, delivery follow-up, payment action, amendments, proof of delivery, final claims, audits and close-out as contract-administration or post-contractual activities.

NATO draws a similar distinction. Contracting is the broader activity that includes describing requirements, soliciting and selecting suppliers, preparing and awarding contracts, and managing them. The Bi-SC contracting and procurement regulations set out this scope. The contract itself is one output of that activity, and the management work continues after it is signed.

What contracts mean for a supplier

A supplier's obligations are determined by the signed contract and the documents it incorporates. These include the solicitation, the statement of work or specifications, the applicable terms and conditions, pricing, security requirements and any amendments. Bid teams should read each of these documents as part of the contract and not only the signature page.

After award, the supplier must perform the work or deliver the goods in accordance with the contract. It must also support inspection or acceptance, provide required documentation and invoices, and meet the contract-management requirements that apply. Payment follows delivery and acceptance, so proof of delivery and accurate invoicing directly affect when a supplier is paid. Any change to scope, price or schedule is handled through a formal amendment.