Procurement Glossary
Contract for work and services: definition, application and significance in Procurement
November 19, 2025
A contract for work and services is a special form of contract in which the contractor undertakes to produce a specific work. In procurement, the contract for work and services plays a central role in the commissioning of development services, prototyping or individual production projects. Find out below what characterizes a contract for work and services, how it differs from other forms of contract and what significance it has for modern procurement strategies.
Key Facts
- Contract for work and services obliges to produce a specific, defined work or result
- Differs from a service contract in that the contractor is liable for performance
- Typical application in development projects, prototype construction and individual production orders
- Warranty rights apply to the finished work, not just to the work performed
- Payment is usually made after completion of the agreed work
Contents
Classification & purpose of contracts for work and services in procurement
The contract for work and services is a fundamental form of contract characterized by the obligation to produce a specific work.
Key features and delimitation
A contract for work and services is characterized by the following core elements:
- Obligation to produce a specific work or result
- Performance liability of the contractor for the agreed result
- Warranty rights in the event of defects in the finished work
- Remuneration dependent on the successful creation of the work
Work contract vs. service contract
The distinction between this and a service contract is crucial: while only the proper performance of work is owed under a service contract, the contractor is liable for the success of a contract for work and services. In the case of outsourcing projects, this distinction significantly determines the distribution of risk between the contracting parties.
Meaning of work contract in Procurement
In procurement, the contract for work and services enables the targeted commissioning of development and production services. Particularly in the case of prototype procurement and individual projects, it offers legal security through a clear definition of success and warranty claims.
Structure, contents and application
The structured drafting of contracts for work and services requires a precise definition of the work to be performed and a clear delineation of services.
Contract structure and main contents
A professional contract for work and services comprises the following core elements:
- Detailed work description with measurable quality criteria
- Deadlines for partial services and final acceptance
- Remuneration regulations and payment modalities
- Warranty provisions and warranty rights
Areas of application in Procurement
Contracts for work and services are typically used for mold making procurement, development projects and small series production. This type of contract is particularly suitable for projects with a clearly definable end result and individual requirements.
Acceptance and quality assurance
Factory acceptance is a critical milestone. Systematic inspection procedures and documented acceptance processes are used to verify the fulfillment of contractual obligations and trigger the warranty period.
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KPIs & criteria for managing work contracts
The systematic measurement and evaluation of work contract projects requires specific key figures and management tools.
Quality and deadline indicators
Central KPIs include on-time delivery, quality rate and rework rate. The first-pass yield measures the proportion of error-free work acceptances, while the lead time from commissioning to acceptance assesses the efficiency of the work contract process.
Cost and profitability figures
Cost adherence and budget compliance are critical success factors. Total Cost of Ownership (TCO) takes into account not only direct factory costs but also follow-up costs for tool maintenance and support. Return on Investment (ROI) evaluates the profitability of the commissioned work.
Supplier performance indicators
Suppliers are evaluated on the basis of quality indices, delivery reliability and innovation contribution. In the case of contract manufacturing, flexibility and scalability are also relevant assessment criteria for the long-term quality of the partnership.
Risks, dependencies and countermeasures
Contracts for work and services entail specific risks that can be minimized through appropriate contract design and project management.
Performance risks and quality defects
The main risk lies in incomplete or inadequate factory production. Unclear specifications can lead to rework and delays. Preventive measures include detailed specifications and regular quality checks during the project.
Schedule risks and project dependencies
Delays in factory production can jeopardize downstream processes such as series start-up or ramp-up management. Critical dependencies should be safeguarded by buffer times and alternative supplier strategies.
Legal and financial risks
Inadequate warranty provisions and unclear definitions of liability can lead to costly legal disputes. A careful legal review of contractual clauses and appropriate insurance cover are essential for risk management.
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Practical example
A car manufacturer commissions a toolmaker to develop and manufacture an injection mold for a new component. The contract for work and services precisely defines the technical specifications, quality requirements and delivery dates. After successful sampling and approval, the mold is handed over to the series manufacturer. The warranty covers 24 months from acceptance and includes subsequent improvements in the event of quality defects.
- Detailed factory specification with CAD data and tolerance specifications
- Step-by-step acceptance: design release, initial sampling, series release
- Integrated guarantee for tool quality and service life
Current developments and effects
Digitalization and new technologies are significantly changing the design and processing of contracts for work and services in the procurement environment.
Digital transformation of work contract processes
AI-supported systems are revolutionizing contract design through automated risk analysis and clause optimization. Digital platforms enable transparent project monitoring and facilitate communication between the client and contractor throughout the entire construction process.
Agile development methods
The integration of agile project management approaches requires flexible work contract structures. Iterative development processes and ramp-up phases require adaptable contract structures that take changes during the project term into account.
Sustainability and ESG compliance
Environmental and social standards are increasingly being integrated into contracts for work and services. Suppliers must prove that their factory production complies with ESG criteria, which places new demands on documentation and supplier management.
Conclusion
The contract for work and services is an indispensable instrument for the procurement of individual services and development projects. Its liability for success offers clients legal security and clear quality standards. The digital transformation opens up new opportunities for efficient contract design and project monitoring. Precise work definition, structured acceptance processes and appropriate risk management are crucial for successful application.
FAQ
What distinguishes a contract for work and services from a purchase contract?
In the case of a contract for work and services, an individual work is created according to customer specifications, whereas in the case of a purchase contract, existing goods are acquired. The contract for work and services includes a manufacturing service with liability for success, while the purchase contract is purely a delivery service for existing products.
When does a contract for work and services make sense in Procurement ?
Contracts for work and services are suitable for individual development and production projects where a specific result is required. Typical applications include prototyping, toolmaking, software development or customized systems. The liability for success offers the client additional security compared to pure service contracts.
What warranty rights exist for contracts for work and services?
In the event of defective workmanship, the client shall be entitled to subsequent performance, reduction or withdrawal. The warranty period is generally two years from acceptance. Five years apply to buildings. In addition, contractual guarantees can be agreed that go beyond the statutory warranty rights.
How is remuneration regulated for contracts for work and services?
Payment can be agreed as a fixed price, on a time and material basis or as a mixture. Partial payments according to project progress with retention until successful acceptance are typical. In the case of complex projects, milestone payments are often agreed that are linked to defined interim results.
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