Requirements contract

Definition
A requirements contract provides for the procuring activity to order all its “requirements” for goods or services of the type provided for in the contract from the vendor during the term of the contract.

Overview
If the procuring activity has no requirements for these goods or services, it generally “owes” the vendor no orders. However, if the procuring activity has requirements and purchases them from another vendor or, in some cases, develops additional in-house capabilities to perform the work, it could potentially terminate the contract for convenience or even breach it. Requirements contracts are used when the customer anticipates recurring requirements but cannot predetermine the precise quantities needed.