contracting strategy

A contracting strategy is a plan that defines how a procurement will be structured and managed in contractual terms. While a procurement strategy sets the overall direction for an organisation's purchasing, a contracting strategy focuses on the concrete contract design for a specific project or procurement — including contract type, division into lots, risk allocation, and pricing model.

How does a contracting strategy work?

A contracting strategy is developed early in the planning phase, typically alongside market dialogue. The strategy should be finalised before the tender documents are prepared. The process begins with analysing the project's needs, complexity, and risk profile, and results in specific decisions about how contracts will be structured.

In practice, this means answering key questions: Should the delivery be divided into several lots, or bundled into a single contract? Should the supplier be responsible for both design and execution, or only execution? Should the price be fixed or cost-based? How should risk be allocated between the contracting authority and the supplier? Under EU Directive 2014/24/EU, contracting authorities are encouraged to consider dividing contracts into lots to facilitate SME participation.

Key elements of a contracting strategy

An effective contracting strategy addresses:

• Contract type: Fixed-price, unit-price, cost-reimbursable, or hybrid models
• Division into lots: Whether to split the delivery into multiple lots or consolidate into one contract
• Risk allocation: Which risks are borne by the contracting authority and which by the supplier
• Incentive mechanisms: Bonuses, liquidated damages, or other mechanisms that encourage desired performance
• Contract terms: Choice of standard conditions or bespoke terms

The contracting strategy must align with the applicable procurement regulations and the chosen procurement procedure. Tools like Cobrief can help suppliers understand how authorities structure their contracts and prepare stronger bids.

A well-crafted contracting strategy lays the foundation for the entire procurement process. Getting these decisions right early on leads to better competition, clearer accountability, and more effective contract monitoring throughout the contract period.