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A Multi Supplier Framework Agreement is a strategic procurement tool that allows you to establish formal relationships with multiple suppliers while maintaining the flexibility to select the best provider for each specific requirement. Under Indonesian law, this agreement creates a structured framework where suppliers compete for individual call-off contracts based on predetermined terms and conditions.

When do you need this document?

You need this agreement when your organization requires ongoing access to goods or services from multiple suppliers over an extended period. It's particularly valuable for large corporations, government agencies, or institutions that want to maintain supply security while ensuring competitive pricing. The framework is ideal when you need to balance supplier diversity with operational efficiency, or when regulatory requirements mandate multi-supplier arrangements. Many organizations use this structure for IT services, construction projects, professional services, or supply of goods where market conditions and requirements may change over time.

Key legal considerations

The agreement must clearly define the relationship between the framework owner and suppliers, ensuring it doesn't create exclusive dealing arrangements that could violate competition law. Performance monitoring mechanisms should be objective and measurable to avoid disputes. Pricing structures need careful consideration to ensure fairness and prevent anti-competitive behavior. Bank guarantee requirements should align with Indonesian banking regulations and be proportionate to contract values. Termination clauses must balance flexibility with reasonable notice periods to protect all parties' commercial interests. The agreement should also address intellectual property rights, confidentiality obligations, and liability limitations appropriate to the scope of services or goods being procured.

Legal requirements in Indonesia

Under the Indonesian Civil Code, the agreement must meet standard contract formation requirements including clear offer and acceptance, consideration, and legal capacity of parties. Law No. 7 of 2014 on Trade requires compliance with trading regulations and supplier registration requirements. Presidential Regulation No. 16 of 2018 provides important guidelines for framework structures, particularly regarding transparency and fair competition principles. Law No. 5 of 1999 on Prohibition of Monopolistic Practices ensures the framework doesn't create unfair competitive advantages or market manipulation. Foreign suppliers must comply with Law No. 25 of 2007 on Investment regarding business licensing and registration. The agreement should also address dispute resolution mechanisms, preferably through Indonesian courts or recognized arbitration institutions, and ensure all suppliers maintain proper business licenses and tax compliance throughout the framework period.