Transcript Contracting 101Introduces basic elements, potential

Contracting 101
Introduces basic elements, potential pitfalls
and essential contract drafting techniques
Presenters:
Greg Shabram, Contracts Manager
Kristen Jackson, Contracts Technician 2
Goal and Objectives
• Goal: Provide departments
information necessary to
support expanded contracting responsibilities
• Present key concepts and learning activities that
will help demonstrate contracting best practices.
Scenario 1
• A UO Department meets with the owner of a
large plot of land.
• They agree that UO Department can place
research instruments on the land and in
exchange UO will build a fence.
• UO Department and the land owner shake
hands.
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Scenario 2
• UO Department sends a letter to Bethel
School District containing the terms of a
proposed arrangement.
• UO Department signs the letter and
requests that the School District also sign
the letter if the terms are acceptable.
• Bethel School District signs the letter and
returns it to the Department
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Scenario 3
• UO Dept creates a PO with the standard
terms and conditions for ten hand radios
• What is the agreement if they
call in the order and file the PO in their file
cabinet?
• What is the agreement if send
PO to the vendor?
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Scenario Similarities
What were the common factors
that made all 3 scenarios
contracts?
A Contract Is…
• An agreement by each party to
undertake certain responsibilities
• Offer
A Contract Is…
• An agreement by each party to
undertake certain responsibilities
• Offer
• Acceptance
A Contract Is…
• An agreement by each party to undertake
certain responsibilities
• Offer
• Acceptance
• Payment or
Something
Gained
• May be oral or
written
Scenario 4
Automation Software Purchase
• Written agreement to customize software to
automate paperwork processing.
• Statement of work contains no specific
deliverables.
• Agreement does not include a maximum not to
exceed dollar amount.
• Agreement does not list milestones for work
progress.
• The only remedy for breach is termination.
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The Purpose of Contracts…
• Help you assure agreement is
reached
– Are both sides on the same page?
The Purpose of Contracts…
• Help you assure agreement is
reached
– Are both sides on the same page?
• Help you manage risk
– Who is at risk?
– Are we at risk?
– Are we able to absorb
the risk?
The Purpose of Contracts…
• Help you assure agreement is
reached
– Are both sides on the same page?
• Help you manage risk
– Who is at risk?
– Are we at risk?
– Are we able to absorb
the risk?
• Help you ensure fiscal responsibility
– Is the action fiscally appropriate?
– Is the money available?
Real Life Example
Missing a Key Purpose
• Oregon DMV Software Purchase Contract
– A five year project took eight years
– Budget grew from $50M to $123M (146%
increase)
– Public outcry killed project
– No provisions for remedies
– Resulted in DOJ legal
sufficiency review
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Fraud Triangle
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Factors Contributing to Fraud
Occurring (2010 ACFE Report)
• Lack of internal controls
• Override of existing controls
• Lack of management review
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Segregation of Duties
• Department Purchasing Profile
• Examples of Duties:
– Commit Funds
– Approve Purchases
– Receive Goods/Services
– Process Invoice Payment
– Approve Invoices
– Management Review
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Authority to Commit
Department Funds
(to allow for the use budget funds)
vs.
Contracting Authority
(enter into a written or oral contract)
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Level 1 vs. Level 2
Contracting Authority
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Contracts Included in Delegated
Level 1 Contracting Authority
• Direct purchases of goods & trade services up to
$5000
– Online / phone order
– No written contract/signature
– Pay invoice
• Purchase Orders up to $5000
• Banquet Event Orders pursuant to a PCSapproved Hotel/Catering Agreement which do
not modify any of the terms of the underlying
agreement.
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Contracts Not Included in Delegated
Level 1 Contracting Authority
• All purchases greater than $5000 (requires
written contract or PO).
• All purchases of personal services
• All rental of space (hotel, hostel, office
space, etc).
• BEO with additional terms &
conditions or changes in total
dollar amounts
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Contracts Included in Delegated
Level 2 Contracting Authority
Approved UO contract templates
– Purchase Orders
– Facility Use Agreements
– Personal Services Contracts
– Banquet Event Orders under
existing agreements approved by PCS
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Contracts Excluded from
Delegated Level 2 Contracting Authority
• Purchases or Contracts in excess of $25,000
• Contract templates with any change to approved
template terms and conditions
• UO Custom Contracts
• Vendor Contracts
• BEO with additional terms & conditions
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University Purchasing &
Contracting Responsibilities
• Programmatic Review
– Does purchase relate to business purpose or meet the
objectives of university’s and department’s mission?
• Budgetary Review
– Are funds available for purchase?
• Compliance Review
– Purchase meets all applicable laws, regulations,
policies, and procedural requirements and that the
purchase or contract is completed using good business
practices.
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Responsibilities of Contracting
Authority
•
•
•
•
•
Act within OUS Code of Ethics
Apply best value principles
Obtain all relevant approvals
Establish and apply internal controls
Collect documentation to support
purchases and contract awards
• Ensure reconciliations are performed and
documented
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Compliance Approvals
•
•
•
•
•
•
Sponsored Projects Services
Information Technology (CIO Approval)
Business Affairs Office
Printing & Mailing
Marketing and Brand Management
(See Approvals List)
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Legal Review
As of January 1, 2012:
– Custom Software Contracts > $250,000
– Settlement or Release Agreements
– Faculty or Student Exchange Agreements
– Technology Transfer Agreements involving UO
obtaining an equity interest
– Purchase or sale of real property
– Employments Contracts >$300,000/yr
– Any solicitation resulting in one of the above
agreements
– Any document submitted to the State Bd
Performed by UO General Counsel
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Contracting with Individuals
• All individuals must be Independent
Contractors.
- No UO direction and control
- Rarely UO employees (requires PCS
review and approval)
- External review when services are
provided in foreign countries
- Must complete Independent
Contractor Certification (See Supplement)
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Example
• Dept XYZ wants to hire a developer
to customize software package to be
used campus-wide for $400,000
($200K for software; $200K for
services).
– What does the department need to do the
complete this purchase and
ensure compliance with
UO policies?
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Examples
• Department XYZ wants to hire a speaker
for an open lecture for $900.
• Department XYZ wants to pay the
University of Florida for some research
materials they are selling.
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Statement of Work
• Basic Components:
– Work elements of tasks
– Milestones (tasks that support the deliverables, and
when they are due)
– Timeline/timeframe for performance of services
– Detailed description of services (requirements,
assumptions, purpose, benefits)
– Clearly defined UO responsibilities and contractor
roles
– Fees for services and expense reimbursements
– Payment Schedule (fixed, time and material, per unit
rate, rate schedule)
Statement of Work
• Additional items to consider:
– Write in a way that one can easily understand the
transaction and know what is expected to happen
– Clearly define the tasks, specifications for deliverables,
key dates and deadline expectations (both from the
Contractor and University)
– Use active voice and consistent terms
– Do not include contractor qualifications
– Do not use words that are by their nature uncertain
• (e.g. should, expect, anticipate, assist, contribute)
– Do not include details about the competitive process
Statement of Work
Applies to all contracts including:
– Personal Service Contracts (PSC)
– Purchase Orders
– Equipment Leases
– Real Property Leases
– Facility Use Agreements
SOW Scenario
• Hiring a consultant to provide a 3 day team building
workshop.
• Topics to be covered include motivation, trust, stress
management and communication.
• Workshop includes participation in activities and games
that promise to be fun and to unite the group.
• Training materials provided.
• Consultant fees are $300/day for 4 hour sessions. 50%
deposit with remainder due at workshop completion.
• Paying consultant travel & expenses up to set amount.
• Consultant fees include a follow up meeting in 6 months
to evaluate team progress.
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Ready to Award a Contract…Now What?
Due Diligence:
READ THE CONTRACT
Crucial Contractual Items
− Money – amount of the
contract and payment terms
− Term and termination
− Statement of Work
− Other document references
− Use official legal names
− Insurance
Ready to Award a Contract…Now What?
Due Diligence:
READ THE CONTRACT
Crucial Contractual Items
− Money – amount of the
contract and payment terms
− Term and termination
− Statement of Work
− Other document references
− Use official legal names
− Insurance
Common Issues
− Indemnity
− Attorney Fees
− Governing law
− Control of defense
− Late fees
− Confidentiality
Example
• A faculty member within Dept. XYZ wants to hire a
consultant to provide a series of one-hour lectures.
• Please identify what you need to make sure this
contract meets its purposes and responsibilities are
met.
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Executed
Contract
Now What?
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Contract Administration
– Delivering the fully signed copy of the contract to the
Contractor.
Contract Administration
– Delivering the fully signed copy of the contract to the
Contractor.
– Maintain a contract file which includes all pertinent
information regarding the purchase.
Contract Administration
– Delivering the fully signed copy of the contract to the
Contractor.
– Maintain a contract file which includes all pertinent
information regarding the purchase.
– Ensuring that services/goods received under contract
conform with language of the contract.
Contract Administration
– Delivering the fully signed copy of the contract to the
Contractor.
– Maintain a contract file which includes all pertinent
information regarding the purchase.
– Ensuring that services/goods received under contract
conform with language of the contract.
– Track Important Dates – e.g.
deliverables, expiration, amendments
Contract Administration
– Delivering the fully signed copy of the contract to the
Contractor.
– Maintain a contract file which includes all pertinent
information regarding the purchase.
– Ensuring that services/goods received under contract
conform with language of the contract.
– Track Important Dates – e.g.
deliverables, expiration, amendments
– Payment is within contract terms
• PCS is always available for questions or
concerns.
Contract Administration Examples
• PSC for design, editing and printing of a
catalog for parents (assume printing
waiver completed)
• SOW includes all work to be completed in
vendor’s studio
• Four months later, for same project,
vendor submits invoice for printer rental
used to print the parent catalog
• What are the issues?
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Expired Contracts &
Amendments
• Contract Renewals
– Must be done before end of contract term and according to
the renewal terms laid out in the contract.
Expired Contracts &
Amendments
• Contract Renewals
– Must be done before end of contract term and according to
the renewal terms laid out in the contract.
• End of contract term
– Contract ceases to exist… it is DEAD
– Contract cannot be reinstated by amendment alone
Expired Contracts &
Amendments
• Contract Renewals
– Must be done before end of contract term and according to
the renewal terms laid out in the contract.
• End of contract term
– Contract ceases to exist… it is DEAD
– Contract cannot be reinstated by amendment alone
• Contract amendments
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–
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Explanation of how the contract is being revised
Implementation instructions
Useful only if you have a complete copy of the contract
Party’s name change does not require an amendment
Additional Tasks
• Matching invoices to deliverables
• Notes on purchase results/vendor
satisfaction
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Tools & Support
Policy
Practitioners Guide
Training
Templates
Written Procedures and Instructions
Website
Direct assistance from PCS Staff via phone, email and
in-person meetings; and
• Central Emails:
– [email protected]
– [email protected]
– [email protected]
– [email protected]
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Wrapping it Up
• What remaining questions
do you have?
• Evaluations
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