Maneuvering Around Landmines: Contracts, Purchasing Agreements, Insurance, and Open Records

1. Maneuvering Around Landmines: Contracts, Purchasing Agreements, Insurance, and Open Records 1-15-09

2. Presentation Overview

3. Presentation Overview

4. Office of General Counsel: Contacts Brian Nelson General Counsel Shelby Boseman Associate General CounselSylvia M. SalinasManager, System Contracts ComplianceGloria Forster Assistant II

5. General Overview: Definition of a Contract What is a Contract? Generally, a contract is: * An agreement (written, oral, verbal, express, or implied)* Between two (2) or more parties * Creates an obligation on both parties to either do a particular thing or not to do a particular thing * Signed by all-related parties

6. General Overview: Definition of a Contract Generally, contracts are:* Written documents, whether called contracts: - Agreements-Leases - Licenses - Memorandum of Understanding (MOU) - Purchasing Orders (PO) - Proposals - Terms and Conditions - Invoice* that seek to obligate the System or any of it’s Colleges to pay money, to purchase insurance, to provide staff or other in-kind services, to another party

7. General Overview: Who is a Party? “Lone Star College System”is the only legally recognized entity that can enter into an agreement;Thus, a contract that states the agreement is between “Lone Star College-Montgomery and Y Corporation” is NOT valid.Contract Must state: “Lone Star College System, on behalf of ….”

8. LEVEL 2: Vice-Chancellor/President level agreements LEVEL 3: Purchase Orders General Overview: Contract Levels There are generally 3 levels of contracts that we see: LEVEL 1: Board of Trustees/Chancellor-level agreements

9. Types of Contracts: Level 1 LEVEL 1: Board of Trustees-Signed AgreementsThe Board approves and signs:* Employment contracts; * Finance agreements;* Agreements to purchase or sell real property; * Contracts, excluding legal services, with a term exceeding one year (including options to renew) that have a cumulative expenditure of $50,000 or more over the contract term;* Contracts involving the sale of Intellectual property or technology transfer, including software licenses, owned in whole or part by the System.

10. Types of Contracts: Level 1 LEVEL 1: Chancellor-Signed AgreementsThe Chancellor signs:* All contracts not reserved to the Board; * All contracts on which the Board of Trustees has authorized the Chancellor to finalize an agreement (authorization to negotiate and execute); * Contracts necessitated by emergency or other circumstances; * Real estate closing documents on transactions approved by the Board.

11. Types of Contracts: Level 2 LEVEL 2: Vice Chancellor/President-Signed Agreements The VC’s and Presidents can sign:* Facility Use agreements;* Educational/Affiliation agreements (reported on an annual basis);* Agreements with a term exceeding one year (including options to renew) that have a cumulative expenditure less than $50,000 over the contract term;* Agreements to facilitate student loans & work/study Grant contracts for state funding.

12. Types of Contracts: Level 2 LEVEL 2: Vice Chancellor/President-Signed Agreements Location Executive Officer (LEO) = Campus President or System Vice ChancellorWho is authorized to sign?Senior Vice Chancellor/COOVice Chancellor, Administration & FinanceVice Chancellor, External AffairsVice Chancellor, Student SuccessVice Chancellor, Technology Services/CIOPresident of LSC-CyFairPresident of LSC-KingwoodPresident of LSC-MontgomeryPresident of LSC-North HarrisPresident of LSC-Tomball

13. Contracts: Unauthorized Signatures Only the BOARD, CHANCELLOR, VC’S, & PRESIDENTS are authorized to sign agreements!* An unauthorized signature may lead to:* Lawsuits against the System to attempt to enforce contract;* Personal liability for the employee who signed;* Potential disciplinary action against employee.* Purchase Orders approved by Director of Purchasing are only exception

14. Execution of Contracts DEFINITION: “Execution” means placing an authorized signature on a contract. The contract is enforceable against all parties who signed. Any contract requiring Board’s signature must be approved by the Board of Trustees and executed by the Board Chairman or the Chancellor.

15. Contract Review: Board Contracts OGC is REQUIRED to review and approve all contracts going before the Board and Chancellor* OGC will review all other contracts at the request of Presidents & VC’s* OGC will review the legal terms to ensure compliance with laws NOT the business terms* Generally, OGC needs 2-3 weeks to review and return agreements due to workload and limited staffing; Send all agreements to Contracts Coordinator FIRST for entering into tickler system

16. Contract Review: Problem Provisions LSCS is a governmental entity of the State of Texas; therefore, the OGC must ensure that contracts are in compliance with applicable state and federal laws. The System also has special duties and restrictions that private parties do not have, thus OGC review is strongly recommended

17. Contracts Checklist

18. Contract Review: Problem Provisions These are typical contractual provisions we always attempt to revise:* Indemnification/Hold Harmless* 30-Day Payment Terms* Governing Law/Venue of Other States* Arbitration * Non-Compete Clauses* Confidentiality* Waiver of System’s Immunities

19. Definitions: Indemnification & Hold Harmless “Indemnification” or “Hold Harmless” means that one party agrees to accept the other party’s liabilities and to pay their legal expenses in a contract “gone bad”This violates the Texas Constitution because it is considered a “gift of public funds” to a private person or entity (Attorney General Opinion MW-475 [1982])We generally revise this provision to state, “To the extent authorized by the laws and Constitution of Texas….”

20. Payment Terms Most private corporations and governmental agencies operate with 30-day payment provisionsBecause the System’s Board meets once per month, we operate on a 45-day payment provision under Chapter 2251.021(b) of Texas Government CodeIn 2005, Texas Atty. General stated governmental entities do NOT have authority to agree to other payment terms beyond those granted by statute (Attorney General Opinion GA-0302 [2005])Late fees limited to 1% per State of Texas

21. Definitions: Governing Law & Venue “Governing Law” refers to the laws of the particular state that will be applied to the contract in the event of a dispute“Venue” refers to the court location where a contract dispute will be resolved (i.e., Harris or Montgomery County)Because our immunities are unique to Texas, they are not recognized by other states. Thus, the System may be held liable where in Texas we may not because we are immune.

22. Arbitration “Arbitration” is a BINDING dispute resolution process that results in a (generally) unappealable decision made by an independent 3rd party. Board approval is required to arbitrate a contract dispute.Non-binding mediation is recommended and encouraged.

23. Non-Compete Clauses There are three types of non-compete clauses usually found in contracts: * Not doing business with other party's competitors * Not allowing the System to compete against the other party * Not recruiting each other's employeesThe System must be free to responsibly expend its funding and must comply with purchasing laws to do so, therefore, non-compete clauses are generally unacceptable

24. Confidentiality As a governmental entity of the state, the System is subject to Public Information Act. Therefore, we cannot agree to keep a company’s information confidential if we cannot do so by statute. We are required to inform a company about a protest to the Attorney General about release of their information to a third party.Sample Language: “Subject to the Texas Public Information Act, …”

25. Contract Retention OGC retains all original contracts signed by Board and Chancellor; some agreements signed by VC’s Original contracts signed by Presidents should be stored in one centralized location at College with copies sent to OGC & Purchasing

26. Renewals / Addendums / Amendments “Renewal” refers to the practice of extending the term of an already executed contract for an additional length of time. “Amendment” refers to the practice of revising specific terms of an already executed contract. “Addendum” refers to additional documents that add provisions, programs, or services to an existing agreement

27. Contracts: Review of Contracts All contracts required to be signed by the Chancellor or the Chair of the Lone Star College System Board of Trustees must be reviewed and approved by the General Counsel prior to presentation for signature. The General Counsel will indicate approval by the notation “Approved as to Form” and signature on all contracts presented to the Chancellor or the Chair of the Board.

28. Contracts: Review of Contracts FORM OF AGREEMENTSAs a general rule, no contract should be executed that includes certain provisions. Any contracts containing those particular terms or provisions MUST BE REVIEWED AND APPROVED BY THE SYSTEM’S OFFICE OF GENERAL COUNSEL prior to execution. Any contracts to be reviewed by the General Counsel are to be forwarded by the College President or Vice Chancellor.

29. OGC Resources Brian Nelson, General Counsel, x6508Shelby Boseman, Associate General Counsel, x6898Sylvia M. Salinas, Manager System Contracts Compliance, x6843Gloria Forster, Administrative Assistant II, x6508Karen Vance, Program Coordinator, Public Records, x6852Paralegal I, Contracts Coordinator (Open Position), x Law Clerk, (Open Position), xContracting Webpage at OGC Website:www.lonestar.edu/Templates/Content.aspx?pid=3695

30. OGC Resources Timeline Example AprilS M T W TH F S 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Submit Contracts to Legal for review (4/1)Legal Returns reviewed Contracts to Campus Sponsor (4/15)Contract finalized (4/25)

31. Purchasing Staff Kerri Duhon Valerie Iltis Director, Purchasing Manager, Purchasing Gina Morrison Lynn ThompsonBuyerDepartment Assistant Matthew Glidden Candis Hargrave BuyerSpecialist IIINancy Farmer Helen KubiakPurchasing Agent Program Coordinator, P-Cards

32. Purchasing Department Operates Under: http://tlo2.tlc.state.tx.us/statutes/docs/ED/content/htm/ed.002.00.000044.00.htm

33. Education Code 44.031 SUBCHAPTER B. PURCHASES; CONTRACTS § 44.031. PURCHASING CONTRACTS. (a) all school district contracts, except contracts for the purchase of produce or vehicle fuel, valued at $25,000 or more in the aggregate for each 12-month period shall be made by the method, of the following methods, that provides the best value for the district: (1) competitive bidding; (2) competitive sealed proposals; (3) request for proposals, for services other than construction services; (4) interlocal contract; (5) design/build contract; (6) contract to construct, rehabilitate, alter, or repair facilities that involves using a construction manager; (7) job order contract for the minor construction, repair, rehabilitation, or alteration of a facility; (8) reverse auction procedure; or (9) formation of a political subdivision corporation

34. Purchasing Contracts: RFP and RFQ Request for Proposals (RFP) and Request for Quotations/ Qualifications (RFQ) are contractsVendor agrees to supply product and services based defined terms and conditions.

35. Purchase Contracts:Cooperatives An Interlocal Agreement is: * Required to participate in a Cooperative purchasing program. * A contract between two governmental entities. * Competitive bid on behalf of its members for products and services LSCS Policy: Market Analysis is required for purchases $25,000 or more

36. Cooperative Purchase Programs Approved Cooperative Purchasing Programs: * Harris County Department of Education (HCDE) * U.S. Communities * Term and TXMAS Contracts (Texas Comptroller’s Office) * BuyBoard * Department of Information Resources (DIR) * The Cooperative Purchasing Network (TCPN)

37. Purchase Contracts: Purchase Orders PURCHASE ORDERS (PO) are a contract between the System and the vendor.* Vendor agrees to provide the product and/or service* System agrees to pay the vendor for the product and/or service provided* Typically, issued as a result of an RFP or RFQ

38. Purchasing Contracts When making a purchase, a purchase order (PO) may not be the only contract that must be signed.A contract is essential for purchase of services as it defines the specific deliverables/expectations of each party.

39. Purchasing Contracts: Examples

40. Level 3, Purchase Orders: Delegation of Authority Board Policy: Delegation of Authority The Chancellor is authorized to delegate specific contract authority to System LEOs and Director of Purchasing. Director of Purchasing is only authorized to sign purchase orders (PO).Any additional contracts required for a purchase must be signed by the authorized agent of the System, i.e., Level 1 or 2 agreements.

41. Purchasing Procedures: Overview Purchase less than $5,000:Via purchase order (PO), check request (up to $2,499) or petty cash reimbursement (less than $75) with proper approval.Does not require a competitive process. End-user is required to obtain the best value.Contract shall be signed by LEO and submitted with the purchase requisition.Insurance Certificate must be on file prior to starting work on premises.

42. Purchasing Procedures: Overview Purchase between $5,000 - $9,999:Via purchase order (PO) only, with limited exceptions.Informal Competitive Bid Process:* Secure three (3) quotes - obtained by phone, fax or email (must document in writing) OR * Provide written justification describing the selection process (Director of Purchasing approval required) OR * Purchase through a Cooperative(no additional quotes necessary)Contract shall be signed by LEO and submitted with the purchase requisitionInsurance Certificate must be on file prior to starting work on premises

43. Purchasing Procedures: Overview Purchase between $10,000 - $24,999: • Via purchase order only, with limited exceptions. • Prepare written specifications or scope of services • Competitive Bid Process: • * Three (3) written proposals are received from qualified vendors • OR • * Written justification describing the selection process (Director • of Purchasing approval) • OR • * Cooperative purchase (no additional quotes required) • Contract signed by LEO shall be submitted with the • purchase requisition • Insurance Certificate must be on file prior to starting work • on premises

44. Purchasing Procedures: Overview Purchases: $25,000 or More • Via purchase order only, with limited exceptions. • Contact System Office Purchasing Department • Written specifications or scope of services are developed • Competitive Bid Process: • * Formal Request for Proposal (RFP) is released • OR • * Utilize Cooperative purchase contract (market • analysis is required)

45. Purchasing Procedures:Overview Purchases: $25,000 or More over the contract term • Administrative Approval required for purchases between $25,000 and $49,999 over contract term • Board Approval is required for purchase more than $50,000 over contract term • Contract signed by LEO (less than $50,000) or Board of Trustees ($50,000 or more) • Insurance Certificate must be on file prior to starting work on premises

46. Request for Proposal (RFP)Process

47. RFP Process: Timeline for Board Approved Purchases ** RFP and Approval process takes approximately 8-10 weeks to complete **

48. RFP Process: Timeline for Board Approved Purchases Example: May Board Meeting Deadline

49. RFP Process: Timeline for Board Approved Purchases TIMEFRAME: APPROXIMATELY 8-10 WEEKS TO COMPLETE RFP & APPROVAL PROCESSES

50. RFP Process: Communications No communications with vendors during RFP process, except by a Purchasing Representative. All vendor questions must be submitted in writing. Addendum is issued to all respondents to ensure they receive the same information. Award Notification: All Respondents are notified by formal letter Mailed to Respondents after Board approval