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Procurement contracts: choose wisely, and things run like clockwork. Choose badly, and you're knee-deep in delays, disputes, and endless “just checking in” emails.
This guide gives you the clarity you need to choose well. You’ll learn when to use which contract, what to watch out for, and how to reduce the back-and-forth when managing them – and get trusted tips to help you get to ‘signed’ faster.
Looking for specific procurement contract management tips? Read Juro’s full guide here – and learn how to stay in control from first draft to final renewal.
What is a procurement contract?
A procurement contract is a legal document that sets the terms for buying goods or services – who’s doing what, when, how much it’ll cost, and what happens if things go off track.
This isn’t just legal paperwork. It’s how you stay in control: locking in costs, setting expectations, and avoiding the dreaded “but we thought...” conversations later on.
Take a simple example – buying IT equipment. If your contract’s vague on delivery or quality, you could end up with the wrong kit, delivered late, and no clear fix in sight.
But with clear terms (and a few well-placed penalty clauses), everyone knows what’s expected – and what happens if something goes wrong.
Types of procurement contract
Different contracts suit different situations, from fixed prices to flexible scopes, one-offs to long-term partnerships. The key is knowing which one fits best.
This section breaks down the most common procurement contract types, when to use them, and what to watch out for – so you can pick the right one and reduce risk from day one.
Fixed-price contracts
What is it?
A fixed-price contract sets a non-negotiable price for the work. You agree on a clear scope and deliverables – and the supplier takes on the risk if costs run over.
When is it used?
Ideal when scope is predictable – like ordering equipment or standard services. Popular in the public sector where budget certainty matters.
What does it typically include?
- Deliverables and deadlines
- Total fixed price
- Payment schedule
- Clauses for delays or underperformance
What to look out for
Scope creep. If requirements shift, suppliers may push back or delay. Keep scope tight and penalties clear.
Variants worth knowing:
- FFP: No price changes allowed.
- FPIF: Adds incentives for early or under-budget delivery.
- FP-EPA: Allows inflation-based price tweaks – good for long-term deals.
Cost-reimbursable contracts
What is it?
A cost-reimbursable contract shifts the risk balance. Instead of agreeing a fixed price, the buyer agrees to cover the supplier’s actual costs – plus a pre-agreed fee. That could be a fixed amount, a percentage of cost, or a performance-based incentive.
When is it used?
Best for projects with undefined scope – like R&D or innovation work – where change is expected. Cost plus contracts are commonly used in construction projects, for example. Grab a copy of Juro’s cost plus construction contract template here.
What does it typically include?
- Reimbursable cost categories
- Fee structure
- Spend caps
- Reporting milestones
What to look out for
Costs can spiral. Set clear expense rules, monitor progress, and cap spend where possible.
Variants worth knowing:
- Cost plus fixed fee (CPFF): Fixed fee, no performance bonus.
- Cost plus incentive fee (CPIF): Rewards cost or timeline targets.
- Cost plus award fee (CPAF): Bonuses based on performance reviews.
- Cost plus percentage of cost (CPPC): Risky – more spend = more supplier profit. Use sparingly.
Time and materials contracts
What is it?
A time and materials (T&M) contract is all about flexibility. You pay the supplier for hours worked and materials used. There’s no fixed price – just a flexible setup that scales with the work.
When is it used?
Use it when the scope is unclear or evolving – great for agile projects or fast starts.
What does it typically include?
- Hourly or daily rates
- Material costs
- Billing terms
- Optional spend caps
What to look out for
Costs can balloon without oversight. Add checkpoints and track hours closely to stay on budget.
Master Services Agreements (MSAs)
What is it?
A Master Services Agreement (MSA) sets the ground rules for a long-term relationship. It’s a framework contract that covers the standard legal and commercial terms between a buyer and a supplier – so you don’t have to renegotiate them every time you kick off a new project.
When is it used?
Ideal for long-term supplier relationships with repeat projects. Common in IT, consulting, and logistics.
What does it typically include?
- Payment terms
- IP and confidentiality clauses
- Liability and indemnities
- Termination and dispute resolution
What to look out for
Make sure the MSA fits your risk profile. Review it regularly – what worked two years ago might not now.
Check out these tips from Juro’s GC, Michael Haynes, on how to optimize your MSA. Or, get started with Juro’s MSA template.
Statements of Work (SOWs)
What is it?
An SOW defines the specific work under an MSA – outlining deliverables, timelines, and costs for one project.
When is it used?
When you need clarity on what’s being done, by when, and for how much – especially for defined, one-off projects.
What does it typically include?
- Scope and objectives
- Deliverables and deadlines
- Pricing and payment terms
- Change control
What to look out for
Ambiguity slows everything down. Be specific, and tailor each SOW to the project – no lazy copy-paste jobs. It's fine to kick off with an SOW template, but you'll need to personalize it to your specific use case.
Purchase Orders (POs)
What is it?
A Purchase Order (PO) is a buyer-issued document that confirms an order for goods or services. Once accepted by the supplier, it becomes a binding contract. It’s simple, standardised – and widely used for everyday procurement.
When is it used?
Perfect for routine buys – like office supplies or software licences – especially when terms are already agreed.
What does it typically include?
- Buyer/supplier info
- Item details and pricing
- Delivery and payment terms
- Reference to main contract (if any)
What to look out for
POs aren’t enough for complex deals. Make sure they align with your wider contract process – or things might fall through the cracks. Want a rough idea what your PO should look like? This Purchase Order template can help.
Framework Agreements & IDIQs
What is it?
A Framework Agreement (also known as an Indefinite Delivery/Indefinite Quantity or IDIQ contract) sets up terms for future purchases – without locking in quantities or timing. It’s the legal equivalent of saying, “We’ll call you when we need you.”
When is it used?
When you expect multiple orders over time but need flexibility. These agreements are common in public sector and large-scale procurement.
What does it typically include?
- Pricing structure
- Ordering process
- Service levels
- Contract duration
What to look out for
Make sure teams know how to use it. Track performance across orders to avoid missed obligations or overspending.
Consultancy agreements
What is it?
A consultancy agreement sets the terms for bringing in external expertise. It outlines what the consultant will do, how much they’ll be paid, who owns the output, and what happens if things go off track.
When is it used?
When you’re hiring experts for short-term or project-based work.
What does it typically include?
- Scope and deliverables
- Fees or rates
- IP ownership
- Confidentiality and termination terms
What to look out for
Clarify who owns the work produced. Watch for overreaching liability limits or vague deliverables.
Get started in minutes with Juro’s consulting agreement templates:
- Consulting agreement template
- Marketing consulting agreement template
- IT consulting agreement template
Subcontractor agreements
What is it?
A subcontractor agreement outlines the terms for hiring a third party to deliver part of a larger project.
When is it used?
Use this contract when you’re engaging a third party to deliver specific tasks under a broader contract, and you want to set clear guardrails and responsibilities.
What does it typically include?
- Scope and deadlines
- Payment terms
- Key flow-down obligations
- IP, confidentiality, and liability clauses
What to look out for
Always flow down the key terms from your main contract – especially around delivery standards, liability, and IP. If your subcontractor causes a delay, you might still be on the hook.
Need visibility across the chain? Juro’s audit trail and contract repository make it easy to track subcontractor commitments alongside your main supplier agreements.
Or, if you’re ready to get started, check out Juro’s subcontractor agreement template here.
Procurement addendums
What is it?
An addendum updates an existing contract, without you needing to start from scratch.
When is it used?
When you’re changing scope, extending timelines, or adding compliance terms mid-contract.
What does it typically include?
- Reference to the original contract
- The changes being made
- Effective date
- Signatures from both sides
What to look out for
Keep wording clear and avoid conflicts with the original terms. Stay on top of version control to reduce risk.
Pro tip: Use Juro’s smart fields to auto-sync key data across contract versions – no more tracking changes in spreadsheets.
Get started with Juro’s procurement addendum template here.
Choosing the right contract: a quick decision guide
You don’t need to memorise every contract type – you just need to know what fits where.
Here’s a quick guide to help you choose the right procurement contract based on your project, budget, and risk appetite.
How to manage procurement contracts
Picking the right contract is only half the battle. The real magic? Managing it properly once it’s signed.
To stay compliant, move quickly, and avoid nasty surprises, you need a smarter way to handle procurement contracts from end to end.
Here are a few top tips on how to do this:
- Centralise your contracts: Keep all your contracts in one searchable workspace. For example, with Juro, you can store, organise, and access all your contracts in one place.
- Automate the admin: Use smart templates, approval workflows, and in-browser collaboration to draft and negotiate faster.
- Track key metrics: Set up automated reminders for key dates and track obligations like SLAs and renewal windows.
- Work from one version: Let everyone work from the same live contract, with full visibility into status, comments, and edits.
By following the recommendations above, you can ensure smooth sailing from draft to renewal.
Better yet, Juro's contract management platform is designed for legal and business teams, offering all of the functionality listed above.
The outcome? Legal and procurement teams collaborate effortlessly on contract management, reducing delays and keeping on top of those pesky post-signature obligations.
To find out what's possible, hit the button below.
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