Managing procurement for a business can be a time-consuming task, especially when you're frequently ordering the same goods or services. A Blanket Purchase Agreement offers a streamlined solution by allowing you to lock in terms with a supplier for multiple purchases over a set period.

A Blanket Purchase Agreement (BPA) is a streamlined purchasing method where an organisation sets up an agreement with a supplier to provide goods or services at pre-negotiated prices over a set period, without defining exact quantities upfront.

This approach simplifies the process for recurring purchases, allowing the buyer to place orders as needed within the agreed terms, often leading to cost savings and efficiency.

In this Aatos guide, we’ll break down the essentials of BPAs, explain how they work, and provide tips for setting one up effectively. Whether you’re looking to save money, simplify your ordering process, or strengthen supplier relationships, understanding BPAs is crucial for improving your procurement strategy.

What is a Blanket Purchase Agreement?

A BPA is a convenient way for businesses to buy things they need regularly without the hassle of creating a new order each time. Instead of negotiating each purchase separately, a BPA establishes an agreement with a supplier that covers all key details like prices, delivery times, and payment terms, for a specified period. This makes the entire process quicker and more efficient.

One of the biggest advantages of a BPA is cost savings. By committing to purchase a certain amount over time, you can often secure better prices or discounts from the supplier. It’s similar to buying in bulk - you get a better deal because you’re committing to larger, consistent orders over a longer period.

Additionally, a BPA helps build stronger relationships with suppliers. By working with the same supplier under agreed terms, you can benefit from better service and reliability, as the supplier values your ongoing business.

Organisations Using BPA

BPAs are commonly used by government agencies, corporations, and large institutions to reduce administrative tasks for frequently needed items or services, providing flexibility and ease in managing ongoing procurement needs.

• Government Agencies: BPAs are popular in government procurement to simplify repetitive purchases from approved suppliers, reducing administrative costs and time. For instance, the U.S. federal government uses BPAs to manage routine purchases with vendors pre-approved through the General Services Administration (GSA).
• Large Corporations: Businesses with complex supply chains or large, dispersed operations (like manufacturing companies) use BPAs to ensure quick access to necessary supplies, manage costs, and maintain consistency across locations.
• Healthcare Organisations: Hospitals and medical facilities use BPAs to maintain steady access to critical supplies such as medical equipment, drugs, and consumables. This arrangement allows them to respond quickly to fluctuating demand without renegotiating terms each time.
• Educational Institutions: Universities and schools often set up BPAs for supplies, maintenance services, or office essentials to facilitate regular and cost-effective purchasing.
• Retail Chains: Retailers with multiple outlets may use BPAs to procure merchandise, equipment, or fixtures consistently across locations, often benefiting from bulk pricing and streamlined procurement processes.

How to Set Up a Blanket Purchase Agreement?

Although setting up a BPA can be straightforward, there are a few things you’ll need to bear in mind to set one up:

1. Identifying Your Needs:

The first step in setting up a BPA is to take a close look at your business's purchasing patterns. Ask yourself: What items do you order regularly? How often do you need them?

Identifying the products or services that you frequently purchase is key to determining whether a BPA is the right fit for your business. If you’re finding that you repeatedly order the same things, a BPA could be right for you.

2. Negotiating Terms

When negotiating a BPA, it's important to get the terms right from the start. You’ll want to ensure that the prices, delivery times, and payment conditions are all favourable to your business.

Take your time to negotiate the best possible deal, and make sure the agreement is flexible enough to adapt to your needs. For example, if your order volume fluctuates, you might want to build some flexibility into the quantities you're committing to.

Clear communication with the supplier is essential for both parties to benefit from the agreement.

3. Implementation and Monitoring

Once the BPA is in place, the work isn’t over. It’s important to carefully monitor the orders you place under the BPA to ensure they align with the terms of the agreement. Tracking your spending and making sure you’re getting the agreed discounts or benefits is crucial to ensure you’re seeing the benefit of your BPA.

Regularly reviewing the agreement’s performance can help you identify any areas for improvement or renegotiation, ensuring you’re getting the best possible deal.

Blanket Purchase Agreement – Free Template

The template covers the key elements of a BPA, including pricing, ordering procedures, delivery terms, billing, and contacts. Modify it as needed based on the specifics of your arrangement.

⚠️ This template is provided for general informational purposes only and may not be suitable for all situations. It is recommended that you consult with a legal professional to ensure that this Blanket Purchase Agreement meets your specific needs and complies with applicable laws and regulations.

Blanket Purchase Agreement (BPA) Template

Agreement Number: [BPA Number]

This Blanket Purchase Agreement (BPA) is entered into between:

• Buyer: [Name of Buyer/Organisation]
• Supplier: [Name of Supplier/Vendor]

Effective Date: [Start Date]
Expiration Date: [End Date]

1. Scope of Agreement

This BPA establishes terms for the provision of [Description of Goods/Services] by the Supplier to the Buyer. Orders may be placed as needed, without specific quantities committed at the time of agreement.

2. Pricing and Discounts

• Unit Prices: Prices for goods/services are established as follows:
  • [Item/Service 1]: [Unit Price]
  • [Item/Service 2]: [Unit Price]
• Discounts: [List any volume or loyalty discounts, if applicable]

3. Ordering Procedures

• Orders will be placed by the Buyer through [Specify method: online portal, email, phone, etc.].
• Each order will reference the BPA number and include item quantities, delivery instructions, and any special instructions.

4. Delivery Terms

• Delivery Locations: [Specify locations]
• Delivery Timeframe: Deliveries must be made within [number of days] after the order is placed.
• Shipping Costs: [Indicate who is responsible for shipping, if applicable]

5. Billing and Payment Terms

• Invoicing: Supplier will issue invoices referencing each order under this BPA.
• Payment Terms: Payments will be made within [number of days, e.g., 30 days] from the receipt of a valid invoice.
• Billing Address: [Specify billing address or department]

6. Agreement Modification

• This BPA may be amended or modified upon written agreement by both parties.

7. Termination

• Either party may terminate this agreement by providing [number of days, e.g., 30 days] written notice to the other party.

8. Points of Contact

• Buyer Contact: [Name, title, phone, email]
• Supplier Contact: [Name, title, phone, email]

9. Signatures

Buyer:
[Name, Title]
[Date]
[Signature]

Supplier:
[Name, Title]
[Date]
[Signature]

Common Mistakes to Avoid

Here are some common mistakes to watch out for when using Blanket Purchase Agreements:

1. Over-Commitment

One common mistake businesses make with BPAs is overcommitting to volumes they don’t actually need.

It can be tempting to lock in larger quantities for better pricing, but if your business can’t use all of those goods or services, you might end up wasting resources or paying for things you don’t need. It’s important to carefully assess your actual requirements before agreeing to high volumes.

2. Lack of Monitoring

Another pitfall is failing to keep track of your orders and spending under the BPA. If you don’t monitor usage, you could overspend, miss out on negotiated savings, or even fall short of meeting the terms needed to get the agreed discounts.

Regularly checking in on your BPA will help you stay on top of your spending and make sure you’re following the agreement correctly.

3. Failure to Review Terms

Lastly, don’t forget to review and update the terms of your BPA as your business grows or the market changes. What worked for your company a year ago might not be the best fit today.

Regular reviews can help you renegotiate better deals or adjust the agreement to suit your evolving business requirements.