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Calculating the contract value

Before you initiate a procurement process, you must first make sure that an agreement on what you intend to buy does not already exist. If there is no agreement, it is the total cost of your purchase that will determine how you should proceed.

First of all, you must calculate the value of your contract.

The following aspects will determine the appropriate procurement process for you:

  • Factor in the entire contract period. You are not permitted to divide the deal into parts over time. Under normal circumstances, the period is 1 year. For recurring needs, you can count on a contract period of 4 years.
  • It is better that your calculations are too high than too low. All possible options and renewal clauses contained in the agreement will be factored in as if they will be utilised.
  • Do not include VAT.
  • If a contract contains goods as well as services, both parts need to be included in the calculation. The total value is always the determining factor.
  • Even if you make purchases from multiple suppliers the estimated value of your contract is based on the total goods and/or services. Use broad categories and include items that sound similar in the same category.

Total needs

The contract value is to be calculated on the basis of the entire University's overall needs – a difficult task for any single department. The following rules apply:

  • Every department shall be prepared in such a way that they can anticipate when their own department exceeds a procurement threshold.
  • If there is uncertainty with regard to the cost calculation and if the amount is close to a threshold – assume that the final amount will exceed the threshold.
  • For larger amounts: If possible, find out if other departments/equivalent are interested in the product in question. You can try to coordinate the procurement process and/or notify the Purchasing and Procurement office.

Not permitted:

  • to divide a procurement so as not to exceed the procurement threshold. The contract value is to be based on our overall purchasing needs for a particular category of goods or services.
  • to enter into contracts with several suppliers for the same product category, so as to establish one or more of these agreements below the threshold.

Procurement thresholds

After you have estimated the contract value it is time to decide which procurement process you should use. The options you have to choose from are direct award of contract, procurement below threshold with notice obligation and procurement over threshold with notice obligation.