Contract 101
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Transcript of Contract 101
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Vendor Service
Contracts:Processes and Procedures
(AM 541)
Initiating, Processing, &
Establishing VendorContractsRobert Lee Dickens - Contracts Manager
Richard Rancher Wollney Jr. - Contracts Specialist
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Agenda
What is a Contract?
Categorizing University Contracts
Initial Development and SubmissionFormal Review of Contract Terms
Time Lines, High-Risks Agreements, and
Special Procedure ContractsFinalizing and Executing the Agreement
Contract Administration
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What is a Contract?Contract Law 101
Determining the Initial Step
Everything you wanted to know about contract law thatwe can squeeze into 30 minutes.
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What is a Contract?
Acontract is an agreement between two partiesthat creates an obligation to perform (or notperform) a particular duty. A legallyenforceable contract requires:
1.An Offer(Ill mow your lawn this weekend, if youpay me $30)
2.An Acceptance(Youve got a deal)
3. Consideration(The value received and giventhe money and the lawn mowed)
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Establishing Offer andAcceptance: A Meeting of the
MindsA legally recognized offer and an acceptancecreates a meeting of the minds, or mutual
assent, between the parties.Mutual Assent requires the presence of thefollowing factors:
1. Both parties must exhibit a contractual intent
[words spoken in jest or frustration will lack therequisite intent];
2. The terms of the offer must be clear and definite;
3. The acceptance must be clearly communicated.
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The Requirement for Clear andDefinite Terms
Required Clarity: For terms to be legallyvalid, a reasonable person must be capable ofreadily understanding them.
Four primary areas in determiningdefinite terms:1. the parties;2. time for performance (term or service
schedule);3. the price; and4. the subject matter or scope of service.
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Consideration:The Importance of the Bargained Exchange.
Consideration must be mutual. Bothparties must receive something of value.
Involvement of money is not required.
Contracts vs. Gifts
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What Authority Defines a Contract?
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 tangiblegoods and secured transactions (notservices).
http://tlo2.tlc.state.tx.us/status.bc.toc.htm
Specific Statuteshttp://www.capitol.state.tx.us
http://tlo2.tlc.state.tx.us/status.bc.toc.htmhttp://www.capitol.state.tx.us/http://www.capitol.state.tx.us/http://tlo2.tlc.state.tx.us/status.bc.toc.htmhttp://tlo2.tlc.state.tx.us/status.bc.toc.htmhttp://tlo2.tlc.state.tx.us/status.bc.toc.htm -
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Categorizing UniversityContracts
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Types of University Contracts
Affiliation andInternational Program
Agreements
Athletic-Specific, orStudent-SpecificContracts (non-procurement in nature).
Interagency Cooperation
Agreements (IAC) &Inter-local Agreements
Museum and ExhibitAgreements
Prof. Service Agreements(for individuals notorganized as a business)
Procurement Contracts;Vendor Services
Sponsored ResearchContracts and SponsoredProjects
University-ProvidedServices
See Categorizing Contracts
http://www.utsa.edu/purchasing/contracts/categorize.cfmhttp://www.utsa.edu/purchasing/contracts/categorize.cfm -
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Classifying a Procurement Contract
University payment is not a defining factor. [Manyprocurement contracts actually involve a vendorpayment to UTSA.]
Generally defined as: A formal agreement with abusiness entity to secure a particular service that issubject to compliance with competitive purchasingrequirements or purchasing policies.
Competitive requirements can be dictated by:1. Statutory provisions;2. UT System polices;3. Best Value Procedures; and4. Appropriate business relations.
See Procurement Contracts Defined.
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Initial Evaluation,Development, andSubmission
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Initial Contract Evaluation andDevelopment
Determining the Need for an Agreement:
1. Vendor-Originated
2. UT Determination: The risk of the projectmay necessitate a formal agreement; or UT
Policies may require it.
Using Sample Agreements
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Routing and Submission ofContractual Projects
Where to Route: Regardless of value or cost, routeProcurement Contracts through the Purchasing Office.
Electronic Purchase Requests (PB4 Point) Establishes approval authorities Authorizes
implementation Approves funding
Keep in mind that contracts for vendor goods andservices are the final stage of a proper procurement andmust never precede the purchasing procedures.
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Required SubmissionDocumentation
Appropriately weighing the risks of the projectwith the most efficient processing methodsrequires a clear understanding of the project.
Upon submission, include the followinginformation:1. A clear description of the requested service; and
2. Details related to the purpose and benefit of therequested service;
Remember, an enforceable contract requires clear and definite terms!
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Required SubmissionDocumentation
If it is already known that a vendor will berequesting that its agreement be signed,the following information should also be
included:1. A short explanation (1-3 sentences) of the
extenuating circumstances that require avendors contract; and
2. An electronic version of the agreement inmodifiable Word format.
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Purchasing Office Assistance
Routing to Assigned Buyer: The electronicpurchase request (PB4) will automaticallyroute to your departments assigned buyer
in the Purchasing Office.
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Purchasing Requirements
The Purchasing Office Buyer will work withthe Contracts Office and your Departmentto:
1. Determine the most efficient methods forproject completion;
2. Ensure compliance with UT purchasing
Regulations and Best Value Polices; and3. Accurately define the Statement of Services
(SOW) or Scope of Work.
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Reviewing the Business Issues
Developing an Appropriate Statement ofServices (SOS):
1. Does the SOS accurately define what youwant?
2. Will the SOS allow for legitimate evaluationof the result?
3. Talk it through with an unaffected party.
See Crafting the Agreement for more information.
http://www.utsa.edu/purchasing/contracts/craft_agrmt.cfmhttp://www.utsa.edu/purchasing/contracts/craft_agrmt.cfmhttp://www.utsa.edu/purchasing/contracts/craft_agrmt.cfm -
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Reviewing the Business Issues
Payment schedules: [Ensure terms areacceptable and that the department has the ability tocomply.]
Service limitations: [i.e. A network license limitedto UTSA-controlled computers, when what is reallyrequired is a network license that allows remote access.]
Length of contract terms: [Changing technologymay make a two-year agreement for database serviceswith three option years more preferable than a five-yearagreement with less monetary costs.]
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Finalizing the Needs
Assistance fromPurchasing andDistribution Services
Defining BusinessRisks
Minimizing the Risks
DepartmentalOwnership
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Understanding the Commitment
The Principle Issue: Ensure there is a clearunderstanding of the two parties commitment.
Ensuring Enforceability:
1. Establish objective measures ofperformance (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.
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Requirements for AdditionalExpertise and Approvals
Review from other departments: TheContracts Office may request a review and/or
approval from other affected departments andadditional University experts.
Departmental Ownership: As The owner ofthe contract, the department should takereasonable steps to secure all departmentalapprovals.
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Formal Review of theContract Terms
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Legal Office Review
Guidelines for review by UTSAs Legal
Office
Requirements for Review by the UTSystem Office of General Counsel
http://www.utsystem.edu/ogc/Homepage.htmhttp://www.utsystem.edu/ogc/Homepage.htm -
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Utilizing Alternate ContractMethods
Purchase Order vs. Formal Contract
Incorporating Contractual Terms into POs,Bids, and RFPs
SeeAlternate Contract Methods
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Formal Review and Analysis
Refining the SOS, if necessary
Matching the Terms to the SOS
Negotiation The Contracts Office will facilitate anyrequired negotiations with the vendors legal
office or contract officers.
The Contracts Office will maintain continuousconsultation with the department, specificallyin the area of business issues.
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Major Areas within Every Contract
Parties
Effective Date and Terms
Statement of Service (SOS)Pricing
Performance Standards
Warranties
Remedies
Risk AllocationBoilerplate
Signatures
See:
contract components
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Common Contractual Terms
Three commonly negotiated/contentiousprovisions:
1.Warranties
2.Indemnification [protection against loss orliability from 3rd party claims]
3.Liability & Damages [legal responsibilities]
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Common Contractual Terms
Two common provisions specific to UTSA:
1. Confidentiality
2. University Marks
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Constitutional & Court-OrderedLimitations & Authority
Sovereign Immunity
Prohibition Against Agency Debt
Right to Suit
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Statutorily Required Clauses
Governing Law (Jurisdiction) and Venue
Financial Standing
Dispute ResolutionElectronic and Information Resources
Accessibility (EIR Provision)
Standard Addendum
See Standard Clauses
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Use of Template Agreements
Both UTSA and UT System havedeveloped template agreements that canbe utilized for various services.
Use ofTemplate Agreements:1. provides vendors with up-front notification of
the terms required for the project; and2. assists in protecting the University through
the use of standardized terms & conditions.
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Time Lines:Minor Contracts,High-Risk Agreements, and
UT System Requirements
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General Time Lines
Standard or Template Agreements with noSubstantive Changes: typically reviewed (redrafted, if necessary) and
comments relayed to the department and/or vendorwithin 7-10days.
Minor Contracts (approx. 1-5 pages with
relatively high clarity and minor risk): typically analyzed, redrafted, and relayed to thedepartment and/or vendor for review within 7-10days.
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High-Risk Agreements
Determining the Risk:Certain agreements, because of value, policies,or subject matter, can signify potential high riskto the University.
Timeline:The time required to analyze, redraft, and
coordinate issues (and departments) may besignificant, but an initial review will generally beprovided to the department and/or vendor within3-4 weeks.
http://www.utsa.edu/purchasing/contracts/time_lines.cfmhttp://www.utsa.edu/purchasing/contracts/time_lines.cfmhttp://www.utsa.edu/purchasing/contracts/time_lines.cfm -
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Required UT System Review
Special Procedure Contracts Requires review by the UT System Office of
General Counsel (OGC). The Contracts Officewill 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 thosecontracts designated by UT System asStandard Contracts.
http://www.utsystem.edu/ogchttp://www.utsystem.edu/ogchttp://utsystem.edu/ogc/smallcontracts/specialcontract.cfmhttp://www.utsystem.edu/ogc/contract/standard.htmhttp://www.utsystem.edu/ogc/contract/standard.htmhttp://utsystem.edu/ogc/smallcontracts/specialcontract.cfmhttp://www.utsystem.edu/ogchttp://www.utsystem.edu/ogc -
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Required UT System Review
Timelines Special Procedure Contracts and OGC review
will require additional processing time (add an
estimated 60-90 days to the normal process).
Board of Regents Approval
Generally speaking, all contracts with a valueexceeding $1M must be approved by theBoard. A summary of contracts requiringBoard approval can be found athttp://www.utsystem.edu/policy/policies/uts145.html
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Finalizing and Executingthe Agreement
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Finalizing the Agreement
Final Negotiationswith the Vendor
DepartmentalApproval Required
Additional NecessaryApprovals
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Executing the Agreement -Who can Sign?
Upon completion of negotiation, theContracts Office will:
1. route the Agreement to obtain appropriatesignatures; and2. distribute signed copies accordingly.
President-Delegated Authority:1. V.P. for Business Affairs2. Associate V.P. for Administration3. Associate V.P. for Financial Affairs
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Departmental ContractAdministration
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Cost Benefit Analysis Required forState Funded Contracts
If state appropriated funds (14 Accounts)are used, the department must maintainon file the following documentation:
1.A cost-benefit analysis for the services, or ajustification of the need for the services; and
2. The relationship of the services to thestaffing plan.
http://www.utsa.edu/purchasing/contracts/administration.cfmhttp://www.utsa.edu/purchasing/contracts/administration.cfmhttp://www.utsa.edu/purchasing/contracts/administration.cfmhttp://www.utsa.edu/purchasing/contracts/administration.cfm -
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Final Stage: Departmental ContractAdministration
Upon completion of the procurementprocess and contract negotiations, thefinal phase of contracting is administration.
Critical Nature of Administration: Regardless of how well a contract is drafted,
the contract will be ineffective if propercontract administration is not performed.
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Ensuring Compliance:Departmental Administration
A Departments Contract Administrationresponsibilities include:
1. Verifying the contractor complies with theterms and conditions of the agreement;
2. Ensuring all services have been received to
your specification prior to authorizingpayment (or all revenue received); and
3. Ensuring the collection of renewaldocumentation (i.e. insurance, bonds).
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Guide for Contract Administration
Departmental Guide for ContractAdministration:
To ensure compliance, departmentaladministrators are strongly encouraged toreview the guidelines found in the Department
Guide for Administration of Major ServiceContracts.
http://www.utsa.edu/purchasing/contracts/administration.cfmhttp://www.utsa.edu/purchasing/contracts/administration.cfmhttp://www.utsa.edu/purchasing/contracts/administration.cfmhttp://www.utsa.edu/purchasing/contracts/administration.cfm -
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Contacts and ReferencesRobert Lee DickensContracts Manager
458-4067Richard Rancher Wollney Jr.
Contracts Specialist458-4069
Nora Evans
Business Law Attorney - Legal Affairs458-4703
Yolanda MillerDirector, Purchasing and Distribution Services458-4975
Lane Brinson
Purchasing Manager458-4066
http://www.utsa.edu/purchasing/contracts/
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What have we discussed
Definition of a Contract Types of University Contracts
Initial Development and Submission ofContractual Project
Overview of Contract Terms
Time Lines, High-Risks Agreements, andSpecial Procedure Contracts
How to finalize and execute an agreement
Contract Administration
Resource information
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Questions