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Contracts 101 PJM400 Mod6


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Contracts 101 PJM400 Mod6

  1. 1. Module 6Ken Hogan
  2. 2.  What is a Contract? Categorizing Contracts Initial Development and Submission Formal Review of Contract Terms Time Lines, High-Risks Agreements, and Special Procedure Contracts Finalizing and Executing the Agreement Contract Administration 2
  3. 3.  Determining the Initial Step Everything you wanted to know about contract law squeezed into about 30 minutes. 3
  4. 4. A contract is an agreement between two partiesthat creates an obligation to perform (or notperform) a particular duty. A legallyenforceable contract requires:1. An Offer (I’ll mow your lawn this weekend, if you pay me $30)2. An Acceptance (You’ve got a deal)3. Consideration (The value received and given – themoney and the lawn mowed) 4
  5. 5.  A legally recognized offer and an acceptance creates a “meeting of the minds’, or mutual assent, between the parties. Mutual Assent requires the presence of the following factors: 1. Both parties must exhibit a “contractual intent” [words spoken in jest or frustration will lack the requisite intent]; 2. The terms of the offer must be clear and definite; 3. The acceptance must be clearly communicated. 5
  6. 6.  Required Clarity: For terms to be legally valid, a reasonable person must be capable of readily understanding them. Four primary areas in determining definite terms: 1. the parties; 2. time for performance (term or service schedule); 3. the price; and 4. the subject matter or scope of service. 6
  7. 7.  Consideration must be mutual. Both parties must receive something of value. Involvement of money is not required. Contracts vs. Gifts 7
  8. 8. Sources of Contract Law Common Law – Court made case law governing contracts (primary law for service contracts) Uniform Commercial Code (UCC) – [Tex. Bus.& Comm.Code] – governs sales of tangible goods and secured transactions (not services). Specific Statutes – 8
  9. 9.  Affiliation and  Prof. Service International Program Agreements (for Agreements individuals not Athletic-Specific, or organized as a business) Student-Specific  Procurement Contracts; Contracts (non- Vendor Services procurement in nature).  Sponsored Research Interagency Contracts and Cooperation Sponsored Projects Agreements (IAC) &  University-Provided Inter-local Agreements Services Museum and Exhibit Agreements 10
  10. 10.  University payment is not a defining factor. [Many procurement contracts actually involve a vendor payment to UTSA.] Generally defined as: A formal agreement with a business entity to secure a particular service that is subject to compliance with competitive purchasing requirements or purchasing policies. Competitive requirements can be dictated by: 1. Statutory provisions; 2. UT System polices; 3. Best Value Procedures; and 4. Appropriate business relations. 11
  11. 11.  Determining the Need for an Agreement: 1. Vendor-Originated 2. Determination: The risk of the project may necessitate a formal agreement; or company Policies may require it. Using Sample Agreements 13
  12. 12.  Where to Route: Regardless of value or cost, route Procurement Contracts through the Purchasing Office. Electronic Purchase Requests  Establishes approval authorities – Authorizes implementation – Approves funding Keep in mind that contracts for vendor goods and services are the final stage of a proper procurement and must never precede the purchasing procedures. 14
  13. 13.  Appropriately weighing the risks of the project with the most efficient processing methods requires a clear understanding of the project. Upon submission, include the following information: 1. A clear description of the requested service; and 2. Details related to the purpose and benefit of the requested service;Remember, an enforceable contract requires clear and definite terms! 15
  14. 14. If it is already known that a vendor will berequesting that its agreement be signed, thefollowing information should also be included:1. A short explanation (1-3 sentences) of the extenuating circumstances that require a vendor’s contract; and2. An electronic version of the agreement in modifiable Word format. 16
  15. 15. Routing to Assigned Buyer: The electronic purchase request will automatically route to your department’s assigned buyer in the Purchasing Office. 17
  16. 16. The Purchasing Office Buyer will work withthe Contracts Office and your Department to:1. Determine the most efficient methods for project completion;2. Ensure compliance with company’spurchasing Regulations and Best Value Polices;and3. Accurately define the Statement of Services (SOW) or Scope of Work. 18
  17. 17. Developing an Appropriate Statement of Services (SOS): 1. Does the SOS accurately define what you want? 2. Will the SOS allow for legitimate evaluation of the result? 3. Talk it through with an unaffected party. 19
  18. 18.  Payment schedules: [Ensure terms are acceptable and that the department has the ability to comply.] Service limitations: [i.e. A network license may be limited to compay-controlled computers, when what is really required is a network license that allows remote access.] Length of contract terms: [Changing technology may make a two-year agreement for database services with three option years more preferable than a five- year agreement with less monetary costs.] 20
  19. 19.  Assistance from Purchasing and Distribution Services Defining Business Risks Minimizing the Risks Departmental Ownership 21
  20. 20.  The Principle Issue: Ensure there is a clear understanding of the two parties’ commitment. Ensuring Enforceability: 1. Establish objective measures of performance (did you get what you wanted?) 2. Create methods to resolve disputes without affecting progress. 3. Determine means of recourse and remedies, if all else fails. 22
  21. 21.  Review from other departments: The Contracts Office may request a review and/or approval from other affected departments and additional University experts. Departmental Ownership: As The ‘owner’ of the contract, the department should take reasonable steps to secure all departmental approvals. 23
  22. 22.  Guidelines for review by the company’s Legal Office Requirements for Review by the company’s system Office of General Counsel 25
  23. 23.  Purchase Order vs. Formal Contract Incorporating Contractual Terms into POs, Bids, and RFPs 26
  24. 24.  Refining the SOS, if necessary Matching the Terms to the SOS Negotiation  The Contracts Office will facilitate any required negotiations with the vendor’s legal office or contract officers.  The Contracts Office will maintain continuous consultation with the department, specifically in the area of business issues. 27
  25. 25. Parties WarrantiesEffective Date and Terms RemediesStatement of Service (SOS) Risk AllocationPricing BoilerplatePerformance Standards Signatures 28
  26. 26. Three commonly negotiated/contentiousprovisions:1. Warranties2. Indemnification [protection against loss or liability from 3rd party claims]3. Liability & Damages [legal responsibilities] 29
  27. 27.  Sovereign Immunity Prohibition Against Agency Debt Right to Suit 30
  28. 28.  Governing Law (Jurisdiction) and Venue Financial Standing Dispute Resolution Electronic and Information Resources Accessibility (EIR Provision) Standard Addendum 31
  29. 29.  Standard or Template Agreements with no Substantive Changes:  typically reviewed (redrafted, if necessary) and comments relayed to the department and/or vendor within company policy. Minor Contracts (approx. 1-5 pages with relatively high clarity and minor risk):  typically analyzed, redrafted, and relayed to the department and/or vendor for review within company policy. 33
  30. 30.  Determining the Risk: Certain agreements, because of value, policies, or subject matter, can signify potential high risk to the company. Timeline: The time required to analyze, redraft, and coordinate issues (and departments) may be significant, but an initial review will generally be provided to the department and/or vendor within company policy. 34
  31. 31.  Special Procedure Contracts  Requires review by the UT System Office of General Counsel (OGC). The Contracts Office will review the agreement locally and then forward to OGC for approval as to legal form. General Business Contracts > $500,000  Requires review and approval by OGC. The only exceptions to this requirement are those contracts designated by Standard Contracts. 35
  32. 32.  Timelines  Special Procedure Contracts and OGC review will require additional processing time (add an estimated 60-90 days to the normal process). Board of Director’s Approval  Generally speaking, all contracts with a value exceeding $1M must be approved by the Board. Again, this is dependant on company policy 36
  33. 33.  Final Negotiations with the Vendor Departmental Approval Required Additional Necessary Approvals 38
  34. 34.  Upon completion of negotiation, the Contracts Office will: 1. route the Agreement to obtain appropriate signatures; and 2. distribute signed copies accordingly. For example: President-Delegated Authority: 1. V.P. for Business Affairs 2. Associate V.P. for Administration 3. Associate V.P. for Financial Affairs 39
  35. 35. If company funds are used, the departmentmust maintain on file the followingdocumentation:1. A cost-benefit analysis for the services, or a justification of the need for the services; and2. The relationship of the services to thestaffing plan, if required by the company. 41
  36. 36.  Upon completion of the procurement process and contract negotiations, the final phase of contracting is administration. Critical Nature of Administration:  Regardless of how well a contract is drafted, the contract will be ineffective if proper contract administration is not performed. 42
  37. 37. A Department’s Contract Administrationresponsibilities include:1. Verifying the contractor complies with the terms and conditions of the agreement;2. Ensuring all services have been received to your specification prior to authorizingpayment (or all revenue received); and3. Ensuring the collection of renewaldocumentation (i.e. insurance, bonds). 43
  38. 38. Departmental Guide for Contract Administration:  To ensure compliance, departmental administrators are strongly encouraged to review the guidelines found in the companys Department Guide for Administration of Major Service Contracts. 44
  39. 39.  Definition of a Contract Types of Contracts Initial Development and Submission of Contractual Project Overview of Contract Terms Time Lines, High-Risks Agreements, and Special Procedure Contracts How to finalize and execute an agreement Contract Administration Resource information 45