Systems Contracting


Systems contract ,as the term suggets, is a contract of system of buyer with that of the seller.
It is a release system in which items, usually, commonly available off-the-shelf, are identified and pre-priced in anticipation of certain usage.

Delivery releases are made against existing orders placed by purchase. This is a procedure intended to help the buyer and the seller to reduce administrative expenses and at the same time to ensure proper controls.

The system authorises the designated persons of the buyer to place orders directly to the supplier with the specific materials during a given contract period.

The contract is thus finalised only after it is ensured that an attempt has been made to integrate as many buyer-seller materials management functions as possible. In this

system the original indent, duly approved by competent authorities, is shipped back with the items and avoiding the usual documents like purchase orders, materials requisitions, expediting letters and acknowledgements, goods in transit report, etc. The contract is simple, covering only delivery period, price and invoicing procedure. Systems contracting is particularly useful for items with low unit price and high consumption profile and thus relieves the buyers of the routine work.


While Systems contract has certain features in common with other purchasing agreements , it is this integration of buyer-seller operations that clearly distinguishes it from other types of contracts.




Obviously, the Systems contracts are an excellent way of simultaneously cutting costs while building efficiencies through simplifications.