Contract giver definition is an entity responsible for evaluating the ability of a contract acceptor to deliver work successfully. The contract acceptor, through audits and records, must provide the contract giver enough assurance that it has the required facilities, technology, and staff with the requisite knowledge and experience to perform the work.

What are the duties of a Contract Giver?

The duties of a contract giver include the following:

  • Selection of contract acceptors
  • Outlining of requirements to be met by the contract acceptor
  • Transfer of relevant documentation to the contract acceptor
  • Signing of secrecy and contract manufacturer agreements with contract acceptor
  • Audit and endorsement of the contract acceptor
  • Approval of manufacturing guidelines

What is a Contract Giver's Agreed Wishlist?

A contract giver's wish list covers the following areas:

  • The type of third-party services required and the location
  • The proposed duration of contract manufacturing
  • The potential benefits of the agreement
  • The expected delivery date of these benefits

The wish list, also known as the requirements statement, will also cover the quality of the product, technical transfer, and the regulatory impact of transferring components of the supply chain to a third party. Complexity factor must be given adequate consideration and sufficient safeguards put in place to mitigate risk, ensure patient safety, security of supply, and compliance with regulatory oversight.

What is Contract Manufacture?

Contract manufacture is a situation whereby pharmaceutical manufacturers outsource some of their manufacturing functions to third parties. This can be due to insufficient production capacity as a result of equipment, premises, or staff shortfalls.

Multiple components make the pharmaceutical supply chain work efficiently. However, several crucial factors prevent pharmaceutical companies from performing a large part of their production by themselves. Some of these factors include supply security, shortage of specialist skills and equipment, access to a market, in-licensing, product cycle management, and optimization of cost, among others. For the supply chain to be cost-effective, pharmaceutical companies have to use third parties for some of their manufacturing processes.

In addition to the reasons outlined above, companies use third parties for some of the following:

  • Product development
  • Specialized processing
  • Testing
  • Logistics

Is outsourcing complicated?

Complexities arise when you involve third parties in your supply chain with factors such as language barriers, culture, time zones, and other communication gaps increasing the risk associated with the arrangement.

How are Contract Manufacturers Controlled?

It's difficult to exercise control over contract manufacturers, because they have the executive authority over the work they were contracted to deliver. It's the responsibility of the contract giver to ensure that only third parties that can be trusted to maintain the contract giver's production and regulatory standards are hired.

Regulatory agencies are aware of the risks which complex supply chains pose to supply security, patient safety, and regulatory compliance. This is why they make sure contract givers deploy sufficient management oversight and control over the conduct of the contract manufacturer.

Where a contract giver defaults in putting the right controls in place, regulatory agencies may sanction the company through financial penalties or blocking of supply.

What are the Constraints to Outsourcing?

One of the biggest constraints to outsourcing in the pharmaceutical industry involves regulatory compliance, which varies by country. Different countries have different rules guiding what can be produced by whom in specific facilities.

Contract givers need to consider the regulatory impact of choosing a contract manufacturer on the market before involving any third-party supplier.

Advantages of Outsourcing

In some countries, access to the local market requires manufacturing in that market. Hiring a good third-party manufacturer in that market may be a cost-effective way to reach your target market in that country.

Using third parties can also be beneficial when you require small volumes of specialist production. Instead of building such capabilities from scratch, it's cheaper and faster to hire a third party with expertise in that area.

Third Party Selection

Once the contract giver has created a wish list outlining requirements on eligible third parties, the search for potential contract acceptors can commence.

What Must Be Considered When Looking for a Contract Manufacturer?

When choosing third parties, you should consider the following:

  • The strengths and weaknesses of the third-party supplier
  • Ability to maintain robust communication
  • Transparency regarding manufacturing errors
  • Understanding of audits
  • Knowledge sharing

If you need more information regarding being or using a contract giver, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.