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A basic ordering agreement (BOA) is a document that provides information about an understanding between a prospective buyer and seller, so both parties are familiar with what to expect from doing business with one another. This document does not constitute a formal contract or offer. If the parties decide to move forward with a project, they will need to draw up a contract based on the terms discussed in the basic ordering agreement.
This document should outline the specifications and terms of projects. It provides information about what the buyer expects and what the seller can provide. For example, a basic ordering agreement might cover the construction of canteens on military bases, in which case the document would have specifications like the number of people it can seat, the type of kitchen appliances that should be installed, and so forth. This document can be very detailed to lay the groundwork for a contract.
Another component of the basic ordering agreement discusses pricing. It covers the pricing methods a seller may use, and the estimated prices for the activities discussed in the contract. Working with a basic ordering agreement, both parties can negotiate out the prices they think are fair and reasonable, taking issues like costs of labor and materials into account. These prices are not finalized, and in the event of a contract, the seller will need to back up pricing claims and confirm that they are as stated, or explain how they have changed.
While the document is not a contract or an offer of contract, it can discuss contract opportunities that may arise in the future. It may discuss the terms and conditions associated with contracts, and what to expect from future contracts. Companies might note that they will need more of a given product or service, and could turn to the supplier of a basic order of understanding for several different contracts in the future.
In a typical basic ordering agreement, the parties agree to review the document periodically, as long as it remains valid. Changes may occur that could impact the nature of the agreement, such as a spike in materials prices that makes a quoted labor price impossible to honor. If changes do happen, they can be noted and discussed in an updated version. This keeps the document current and useful for both parties, so they understand what they will and will not get out of contracts based on the document.