An introduction to contracts

Contracting involves earning income from payment for goods and services delivered according to the terms set out in a contract between an organisation and a third party known as a purchaser. Contracts specify service requirements and make clear what and how a service is to be delivered, and for what payment.

Contracting is particularly suitable for organisations involved in some form of public service delivery work such as health, social care, education or similar provision where services are purchased directly by a local authority or other public sector agency.

Key terms

  • Commissioning - the entire cycle of assessing the needs of people in a local area: designing services and then securing them
  • Procurement covers the specific activities within the commissioning cycle that focus on the process of buying services, from the initial advertising through to the final contract arrangements
  • A tender is a written bid outlining a supplier’s desire, capacity and plan to deliver a piece of work, service or supplies. Exact contents will be determined by the requirements outlined in the service specification and must demonstrate how a supplier will meet these requirements
  • Tendering is the process of bidding and negotiating for a contract.

What are the benefits?

Other key terms:

  • Commissioning - the entire cycle of assessing the needs of people in a local area: designing services and then securing them
  • Procurement covers the specific activities within the commissioning cycle that focus on the process of buying services, from the initial advertising through to the final contract arrangements
  • A tender is a written bid outlining a supplier’s desire, capacity and plan to deliver a piece of work, service or supplies. Exact contents will be determined by the requirements outlined in the service specification and must demonstrate how a supplier will meet these requirements
  • Tendering is the process of bidding and negotiating for a contract.

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Some of the benefits of contracting are:  

  • Length: due to the investment needed and the impact they have, contracts tend to be longer than some grants
  • Legally binding for both parties, meaning that there is a legal obligation on the funder as well as the provider of services
  • Scale and demand: the vast majority of government contracting happens at the local level and is where the significant sums of money are spent
  • Negotiation: some contracts are negotiable, which means organisations should feel confident about challenging unfavourable terms and conditions
  • Transparency: through European Union regulations contracts should be paid promptly and be awarded transparently
  • Involvement: contracts enable organisations to improve the design and delivery of services to beneficiaries
  • Partnership: there are a growing number of chances to collaborate and work with other organisations to deliver contracts

Contracting is particularly suitable for organisations involved in some form of public service delivery work such as health, social care, education or similar provision where services are purchased directly by a local authority or other public sector agency.

Explore contracts