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What to do when vendors don’t do what they said they’d do… Second Annual Statewide Contract...
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![Page 1: What to do when vendors don’t do what they said they’d do… Second Annual Statewide Contract Manager’s Conference October 5, 2011 – Texas Capitol Extension.](https://reader035.fdocuments.in/reader035/viewer/2022080917/56649ec55503460f94bd00ed/html5/thumbnails/1.jpg)
What to do when vendors don’t do what they said they’d do…
Second Annual
Statewide Contract Manager’s Conference
October 5, 2011 – Texas Capitol Extension Auditorium
![Page 2: What to do when vendors don’t do what they said they’d do… Second Annual Statewide Contract Manager’s Conference October 5, 2011 – Texas Capitol Extension.](https://reader035.fdocuments.in/reader035/viewer/2022080917/56649ec55503460f94bd00ed/html5/thumbnails/2.jpg)
Presenter
Wes Ogilvie, Assistant General Counsel, Texas Procurement and Support Services, Texas Comptroller of Public Accounts
![Page 3: What to do when vendors don’t do what they said they’d do… Second Annual Statewide Contract Manager’s Conference October 5, 2011 – Texas Capitol Extension.](https://reader035.fdocuments.in/reader035/viewer/2022080917/56649ec55503460f94bd00ed/html5/thumbnails/3.jpg)
The first two steps
• Review the contract and supporting documents.
“What does the contract say?”• Documentation, documentation,
documentation.
“If you don’t write it down, it never happened.”
![Page 4: What to do when vendors don’t do what they said they’d do… Second Annual Statewide Contract Manager’s Conference October 5, 2011 – Texas Capitol Extension.](https://reader035.fdocuments.in/reader035/viewer/2022080917/56649ec55503460f94bd00ed/html5/thumbnails/4.jpg)
Next step…
• Talk to the vendor. • Equally important, talk to the right
person! Does the contract identify key personnel on both sides?
• If you don’t hear what you want, escalate the problem to someone else…with the authority to resolve the problem.
• The vendor also needs the appropriate contacts at the agency
![Page 5: What to do when vendors don’t do what they said they’d do… Second Annual Statewide Contract Manager’s Conference October 5, 2011 – Texas Capitol Extension.](https://reader035.fdocuments.in/reader035/viewer/2022080917/56649ec55503460f94bd00ed/html5/thumbnails/5.jpg)
Vendor Performance
• Why?– Required by rule– Documentation of the problem– Vendor is supposed to respond to
Vendor Performance Report– Provides rationale for awarding/not
awarding future contracts– Shares information with other
agencies
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Contract Management Office
• TPASS Contract Management Office– Provides management of all TPASS
contracts– Investigate vendor performance reports– Serve as an intermediary between the
agency and the contractor
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Referral to Counsel
• Consider involving agency counsel
• Shows the vendor that the problem has been escalated internally
• Allows agency counsel to provide advice on options
• Involve counsel early
![Page 8: What to do when vendors don’t do what they said they’d do… Second Annual Statewide Contract Manager’s Conference October 5, 2011 – Texas Capitol Extension.](https://reader035.fdocuments.in/reader035/viewer/2022080917/56649ec55503460f94bd00ed/html5/thumbnails/8.jpg)
Corrective Action Plan
• “Probation” for your contractor/vendor
• Should provide for specific steps to remedy defects or non-performance
• Consider incorporating the plan as a contract amendment
• Ensure the plan has measurable, enforceable goals
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Liquidated Damages
• Must be specified in the solicitation/contract
• Only allowed when ordinary damages are difficult to calculate
• Cannot be used as fines or penalties
• Requires significant attorney involvement in drafting liquidated damages provisions
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Cure Notice
• Newsworthy cure notice
• Provides a set period of time for the vendor to fix the problem before termination of the contract
• Actually, a cure notice may be considered “pro-vendor”
• If you’re at this point, it may be time to think about lead time to get an alternate vendor
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Paying the Bill
• Disputing the invoice
• Partial payment– Must be an actual dispute
• Set-off– Rarely used, not favored in state
contracts
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Termination
• Cause
– Usually immediate
– Must have a reason
– Cost of cover
• Convenience
– Usually, but not always 30 days in state contracts
– No reason required
• Funding
– Funding out clause
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Non-Renewal
• When to consider?
• Neutral on its face
• Negative – need to be thinking about re-procurement well in advance
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Uncommon Remedies
• Audit– Performance or financial audit of the
vendor– State Auditor’s Office
• Calling the bond– Performance bonds– Payment bonds
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Debarment
• Severe remedy
• Provided for by statute and rule
• Investigation by TPASS
• Decision made by TPASS Director with appeal to Deputy Comptroller
• Agencies may request a debarment investigation
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Calling the Cavalry
• Attorney General referral– Requires significant management and
legal buy-in– Uncertain process– Ordinarily requires significant damages
to make it worthwhile
• Criminal investigation– Rarely used, most commonly for fraud,
particularly in invoicing
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An Additional Caution
• Offers to remedy almost always require involvement from program staff, procurement staff, and legal counsel
• Danger of waiving remedies for breach