In rate contracts, the rate for the item procured is feted for a particular time period. Sometimes, it is fixed for a set of defined quantity sizes. Normally, a running contract is a rate contract and means that the validity regarding the quantity is flexible. Normally, it is around f 25%. Usually, a rate and running contract is used by a centralized procurement agency like DGS &D or any centralized store to procure items from various approved and contracted sources. More than one source is used to negotiate a good price and also so as not to "keep all the eggs in one basket". Sometimes,'it is done as one supplier may not be able to meet their variable needs. Some rate contracts also enable their branches to procure their requirements from the approved rate contract vendors directly at the contracted prices. Thus, the centralized operations in fixing rates save negotiations across the organisation, while at the same time, the large quantities enable a good price. The user departments now can order items with shorter lead times as the rigmarole of procedures has already been dealt with.
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