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Contracting 101 Introduces basic elements, potential pitfalls and essential contract drafting techniques. Presenter: Greg Shabram, Contracts Manager. Goal and Objectives. Goal: Provide departments information necessary to support expanded contracting responsibilities

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Presentation Transcript
slide1

Contracting 101Introduces basic elements, potential pitfalls and essential contract drafting techniques

Presenter:

Greg Shabram, Contracts Manager

goal and objectives
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
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.
scenario 2
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
scenario 3
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?

scenario similarities
Scenario Similarities

What were the common factors that made all 3 scenarios contracts?

a contract is
A Contract Is…
  • An agreement by each party to undertake certain responsibilities
    • Offer
a contract is1
A Contract Is…
  • An agreement by each party to undertake certain responsibilities
      • Offer
      • Acceptance
a contract is2
A Contract Is…
  • An agreement by each party to undertake certain responsibilities
      • Offer
      • Acceptance
      • Payment or

Something

Gained

scenario 4 automation software purchase
Scenario 4Automation 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.
the purpose of contracts
The Purpose of Contracts…
  • Help you assure agreement is reached
    • Are both sides on the same page?
the purpose of contracts1
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 contracts2
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
Real Life ExampleMissing 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

factors contributing to fraud occurring 2010 acfe report
Factors Contributing to FraudOccurring (2010 ACFE Report)
  • Lack of internal controls
  • Override of existing controls
  • Lack of management review
segregation of duties
Segregation of Duties
  • Department Purchasing Profile
  • Examples of Duties:
    • Commit Funds
    • Approve Purchases
    • Receive Goods/Services
    • Process Invoice Payment
    • Approve Invoices
    • Management Review
slide18

Authority to Commit Department Funds

(to allow for the use budget funds)

vs.

Contracting Authority

(enter into a written or oral contract)

contracts included in delegated level 1 authority
Contracts Included in Delegated Level 1 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 PCS-approved Hotel/Catering Agreement which do not modify any of the terms of the underlying agreement.
contracts not included in delegated level 1 authority
Contracts Not Included in Delegated Level 1 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

contracts included in delegated level 2 authority
Contracts Included in Delegated Level 2 Authority

Approved UO contract templates

  • Purchase Orders
  • Facility Use Agreements
  • Personal Services Contracts
  • Banquet Event Orders under

existing agreements approved by PCS

contracts excluded from delegated level 2 authority
Contracts Excluded fromDelegated Level 2 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
university purchasing contracting responsibilities
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.
responsibilities of contracting authority
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
compliance approvals
Compliance Approvals
  • Sponsored Projects Services
  • Information Technology (CIO Approval)
  • Business Affairs Office
  • Printing & Mailing
  • Design & Editing Services
  • Marketing and Brand Management
  • (See Approvals List)
legal review
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

example
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?

examples
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.
statement of work
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 work1
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 work2
Statement of Work

Applies to all contracts including:

  • Personal Service Contracts (PSC)
  • Purchase Orders
  • Equipment Leases
  • Real Property Leases
  • Facility Use Agreements
sow scenario
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.
ready to award a contract now what due diligence
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 diligence1
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
example1
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.
slide37

Executed

Contract

Now What?

contract administration
Contract Administration
  • Delivering the fully signed copy of the contract to the Contractor.
contract administration1
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 administration2
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 administration3
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 administration4
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
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?
expired contracts amendments
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 amendments1
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 amendments2
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
    • 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
Additional Tasks
  • Matching invoices to deliverables
  • Notes on purchase results/vendor satisfaction
wrapping it up
Wrapping it Up
  • What remaining questions do you have?
  • Evaluations