Contract Characteristics

What you procure will inform the terms and conditions included in your approach to market and contract documentation as well as how the contract is reported.

Contracts may be made up of a combination of goods, services and consultancy services in varying proportions.

The identification of a contract for goods is relatively straightforward. The seller agrees to transfer the ownership of goods to the buyer.

It is often more difficult however to distinguish between a contract for services and a contract for consultancy services. The difference generally depends on the nature of the services and the level of direction and control over the work that is performed to develop the output.

The below table outlines the characteristics that define each.

Characteristics of consultancy contracts Characteristics of non-consultancy contracts
(only some may apply)
Nature of Services
  • Involves specialist professional knowledge or expertise that may not be maintained in-house.
  • There is a need for independent research or assessment.
  • Involves development of an intellectual output, e.g. research, evaluation, advice, and recommendations, to assist with entity decision-making.
Involves a one-off task, a set of tasks or irregular tasks (making employment of permanent staff impractical or undesirable).
Nature of Services
  • Services performed are the day-to-day duties of the entity – e.g. a recruitment firm providing personnel to fill a temporary vacancy for a personal assistant, or in a program area. The skills required to perform the services would normally be maintained within the entity.
Involves professional or expert services to implement an existing proposal or strategy – e.g. training specialists to deliver training in line with an existing strategy.
Direction and Control
  • Performance of the services is left largely up to the discretion and professional expertise of the consultant.
  • Performance is without the entity's direct supervision.
  • The output reflects the independent views or findings of the individual or organisation.
  • The output is being produced for the entity.
The output may not belong to the entity.

Direction and Control

  • Services are performed under supervision of the entity. The entity specifies how the work is to be undertaken and has control over the final form of any resulting output.
  • Professional or expert services provided under non-consultancy contracts are generally delivered without a high level of supervision and direction from the entity, however, the output produced will not necessarily represent the independent views of the service provider – i.e. the entity controls the form of the output.
  • The output is being produced on behalf of the entity.
The output is generally regarded as an entity product.

Integration or Organisation Test

Work performed is an accessory to the entity's business.

Integration or Organisation Test

Work is an integral part of the entity's business.

Use of Equipment and Premises

  • The Consultant provides their own equipment.
The Consultant may work from their own premises for some or all of the assignment.

Use of Equipment and Premises

  • The entity provides all equipment and supplies.
The Contractor will usually be engaged to work in the entity's premises.

Remuneration

Consultancy payments are usually made when agreed milestones are reached or when a task or project is completed.

Remuneration

Remuneration is based on the time worked, usually calculated on an hourly rate.

 


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