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Contracting Challenges andContracting Challenges and Negotiation Principles Negotiation Principles

Presented by: Dana L. HollingsworthThe University of Texas SystemOffice of General CounselSeptember 29, 2005

Contracting ChallengesContracting Challenges

Indemnity ProvisionsIndemnity Provisions Confidentiality ProvisionsConfidentiality Provisions Social Security NumbersSocial Security Numbers Limitation of Liability ProvisionLimitation of Liability Provision Choice of Law/Venue ProvisionChoice of Law/Venue Provision Criminal Background ChecksCriminal Background Checks Delegation of Authority to Execute ContractsDelegation of Authority to Execute Contracts

Indemnity ProvisionsIndemnity Provisions

Definition: insurance or other security against Definition: insurance or other security against possible loss or damagepossible loss or damage

Provides Breach-of-Contract Claim in addition to Provides Breach-of-Contract Claim in addition to Common Law Cause of ActionCommon Law Cause of Action

May Cover Claims that are Excluded by Insurance May Cover Claims that are Excluded by Insurance Policy or are otherwise Not Covered by InsurancePolicy or are otherwise Not Covered by Insurance

May Expand Scope of Indemnifying Party’s Liability May Expand Scope of Indemnifying Party’s Liability (i.e., liability for acts of unrelated third parties)(i.e., liability for acts of unrelated third parties)

Indemnity ProvisionsIndemnity Provisions

Who?Who? Limit indemnity to losses caused by indemnifying party, its Limit indemnity to losses caused by indemnifying party, its

agents, or its employeesagents, or its employees What?What?

Limit indemnity to losses caused by negligence and willful Limit indemnity to losses caused by negligence and willful misconduct of indemnifying party, its agents, or its misconduct of indemnifying party, its agents, or its employeesemployees

When?When? Limit indemnity to losses incurred during performance of Limit indemnity to losses incurred during performance of

indemnifying party’s contractual dutiesindemnifying party’s contractual duties

When UT Gives an Indemnity:When UT Gives an Indemnity:

AlwaysAlways qualify the indemnity with the phrase qualify the indemnity with the phrase “to the extent authorized by the laws and “to the extent authorized by the laws and Constitution of the State of Texas” (ref. AG Constitution of the State of Texas” (ref. AG Opinion MW-475)Opinion MW-475)

NeverNever indemnify Contractor for its own indemnify Contractor for its own negligence or the negligence of its employees, negligence or the negligence of its employees, agents, or subcontractorsagents, or subcontractors

Confidentiality ProvisionsConfidentiality Provisions

UT Institutions must comply with the Texas UT Institutions must comply with the Texas Public Information Act (Ch. 552, Gov. Code)Public Information Act (Ch. 552, Gov. Code)

AlwaysAlways qualify confidentiality provisions with qualify confidentiality provisions with the phrase “subject to the Texas Public the phrase “subject to the Texas Public Information Act and other applicable law”Information Act and other applicable law”


General Rule = All Information is PublicGeneral Rule = All Information is Public Exceptions to the General RuleExceptions to the General Rule

Information Confidential by LawInformation Confidential by Law Information Confidential by Judicial DecisionInformation Confidential by Judicial Decision Certain Personal InformationCertain Personal Information Information Relating to Competition or BiddingInformation Relating to Competition or Bidding Certain Law Enforcement RecordsCertain Law Enforcement Records Information within Attorney-Client PrivilegeInformation within Attorney-Client Privilege


Determination regarding whether an exception Determination regarding whether an exception applies is applies is fact specificfact specific

Texas Attorney General’s Office (not the UT Texas Attorney General’s Office (not the UT institution) makes the determination regarding institution) makes the determination regarding whether an exception applieswhether an exception applies

Social Security NumbersSocial Security Numbers

Business Procedures Memorandum (BPM) 66: Business Procedures Memorandum (BPM) 66: Protecting the Confidentiality of Social Security Protecting the Confidentiality of Social Security NumbersNumbers Provides requirements and guidelines for the protection of Provides requirements and guidelines for the protection of

the confidentiality of social security numbersthe confidentiality of social security numbers Does not prohibit or restrict the collection, use, and Does not prohibit or restrict the collection, use, and

maintenance of social security numbers as required by maintenance of social security numbers as required by applicable lawapplicable law

Best Practice = Do not include Social Security Best Practice = Do not include Social Security Numbers in UT contractsNumbers in UT contracts


Section 3.2 of BPM 66 requires compliance with Section 3.2 of BPM 66 requires compliance with the following:the following: Each time a UT institution requests that an individual Each time a UT institution requests that an individual

disclose his or her social security number, the institution disclose his or her social security number, the institution shall provide the notice required by Section 7 of the shall provide the notice required by Section 7 of the Federal Privacy Act of 1974 (5 U.S.C. § 552a), that Federal Privacy Act of 1974 (5 U.S.C. § 552a), that requires the institution to inform the individual whether the requires the institution to inform the individual whether the disclosure is mandatory or voluntary, by what statutory or disclosure is mandatory or voluntary, by what statutory or other authority the number is solicited, and what uses will other authority the number is solicited, and what uses will be made of the numberbe made of the number

The notice shall use the applicable text fromThe notice shall use the applicable text from Appendix 3 Appendix 3 of BPM 66 or such other text as may be approved by the of BPM 66 or such other text as may be approved by the SSN Coordinator or the Office of General Counsel SSN Coordinator or the Office of General Counsel


Appendix 3 of BPM 66 includes:Appendix 3 of BPM 66 includes: Disclosure for the employment processDisclosure for the employment process Disclosure for the student application processDisclosure for the student application process General mandatory disclosureGeneral mandatory disclosure General voluntary disclosureGeneral voluntary disclosure


General mandatory disclosure:General mandatory disclosure:

Disclosure of your Social Security Number (“SSN”) is Disclosure of your Social Security Number (“SSN”) is required of you in order for The University of Texas at required of you in order for The University of Texas at _________ to ___________ to __[state intended use of SSN][state intended use of SSN]_________, _________, as mandated by [Federal] [State] law. Further as mandated by [Federal] [State] law. Further disclosure of your SSN is governed by the Public disclosure of your SSN is governed by the Public Information Act (Chapter 552 of the Texas Government Information Act (Chapter 552 of the Texas Government Code) and other applicable law.Code) and other applicable law.

Limitation of Liability ProvisionLimitation of Liability Provision

Typical Limitation of Liability provision:Typical Limitation of Liability provision:

Contractor shall not be liable under any Contractor shall not be liable under any circumstances for any special, indirect, circumstances for any special, indirect, incidental, consequential or other damages incidental, consequential or other damages resulting from any loss of use of the Software or resulting from any loss of use of the Software or any loss of revenues or profits related to the any loss of revenues or profits related to the Software. Software.

Limitation of Liability ProvisionLimitation of Liability Provision

Make every effort to delete limitation of Make every effort to delete limitation of liability provisionsliability provisions

If the provision is not deletedIf the provision is not deleted Qualify the limitation with the phrase “to the Qualify the limitation with the phrase “to the

extent authorized by the laws and Constitution of extent authorized by the laws and Constitution of the State of Texas”the State of Texas”

Make the limitation mutualMake the limitation mutual

Limitations of Liability ProvisionLimitations of Liability Provision

Example of properly qualified, mutual Example of properly qualified, mutual limitation of liability provisionlimitation of liability provision

To the extent authorized by the laws and Constitution of the State To the extent authorized by the laws and Constitution of the State of Texas, Contractor shall not be liable under any circumstances of Texas, Contractor shall not be liable under any circumstances for any special, indirect, incidental, consequential or other for any special, indirect, incidental, consequential or other damages resulting from either any loss of use of the Software or damages resulting from either any loss of use of the Software or any loss of revenues or profits related to the Software. Customer any loss of revenues or profits related to the Software. Customer shall not be liable under any circumstances for any special, shall not be liable under any circumstances for any special, indirect, incidental, consequential or other damages resulting indirect, incidental, consequential or other damages resulting from Customer’s performance under this Agreement or any from Customer’s performance under this Agreement or any related agreements. related agreements.

Choice of Law/VenueChoice of Law/Venue

Best Practice = include a choice of law/venue Best Practice = include a choice of law/venue provision in every contract that: provision in every contract that: Specifies Texas law as the law that will govern the Specifies Texas law as the law that will govern the

contractcontract Specifies the Texas county in which the UT Specifies the Texas county in which the UT

institution is located or Travis County as the institution is located or Travis County as the proper location for venueproper location for venue


Venue; Governing LawVenue; Governing Law.. Travis County, Texas, Travis County, Texas, shall be the proper place of venue for suit on or shall be the proper place of venue for suit on or in respect of the Agreement. The Agreement and in respect of the Agreement. The Agreement and all of the rights and obligations of the parties all of the rights and obligations of the parties hereto and all of the terms and conditions hereof hereto and all of the terms and conditions hereof shall be construed, interpreted and applied in shall be construed, interpreted and applied in accordance with and governed by and enforced accordance with and governed by and enforced under the laws of the State of Texas.under the laws of the State of Texas.

Choice of Law/Venue Choice of Law/Venue

OGC does not recommend expressly agreeing OGC does not recommend expressly agreeing to the law of another state or nation as the law to the law of another state or nation as the law that will govern the contractthat will govern the contract

Likewise, OGC does not recommend expressly Likewise, OGC does not recommend expressly agreeing to venue in a another county, state, or agreeing to venue in a another county, state, or nationnation


If a UT institution excludes the choice of law/venue If a UT institution excludes the choice of law/venue provision from the contract (“going silent”) then:provision from the contract (“going silent”) then: a court will decide which law applies to a dispute a court will decide which law applies to a dispute under the contractunder the contract the UT institution may incur additional costs, delay, the UT institution may incur additional costs, delay, and other difficultiesand other difficulties the UT institution may need to hire local counselthe UT institution may need to hire local counsel in the event the court finds that Texas law does not in the event the court finds that Texas law does not apply, the outcome of the dispute may not be the same apply, the outcome of the dispute may not be the same as the result would have been under Texas lawas the result would have been under Texas law


If a contract is governed by laws of a If a contract is governed by laws of a jurisdiction outside the United States, local jurisdiction outside the United States, local counsel should be consultedcounsel should be consulted

Beware: Some foreign countries retain Beware: Some foreign countries retain formalistic contract requirementsformalistic contract requirements Contract must be read aloud from beginning to Contract must be read aloud from beginning to

end by a notaryend by a notary Contract must be bound by a ribbon which is Contract must be bound by a ribbon which is

affixed to both the cover page and the back page affixed to both the cover page and the back page with a wax sealwith a wax seal

Criminal Background ChecksCriminal Background Checks

BPM 29 Criminal Background Checks for BPM 29 Criminal Background Checks for Security-Sensitive Positions Security-Sensitive Positions


According to Section 3.2.2 of BPM 29, a UT institutionAccording to Section 3.2.2 of BPM 29, a UT institution should not should not automatically disqualify from employment all individuals with conviction automatically disqualify from employment all individuals with conviction records. The institution’s procedures should provide that, in the event the records. The institution’s procedures should provide that, in the event the investigation reveals criminal convictions or other relevant information, investigation reveals criminal convictions or other relevant information, the hiring official will determine on a case-by-case basis whether the the hiring official will determine on a case-by-case basis whether the individual is qualified based on factors such as:individual is qualified based on factors such as: Specific duties of the position; Specific duties of the position; Number of offenses; Number of offenses; Nature of each offense; Nature of each offense; Length of time intervening between the offense and the employment Length of time intervening between the offense and the employment

decision; decision; Employment history; Employment history; Efforts at rehabilitation; and Efforts at rehabilitation; and Accuracy of the information that the individual provided on the Accuracy of the information that the individual provided on the

employment applicationemployment application. .


When contracting for security-sensitive services, UT When contracting for security-sensitive services, UT institutions should consider requiring that institutions should consider requiring that the contractor perform background checks on its employees the contractor perform background checks on its employees

and agents, as well as the employees of subcontractorsand agents, as well as the employees of subcontractors the contractor notify the institution of felony convictionsthe contractor notify the institution of felony convictions

UT institutions should analyze convictions in UT institutions should analyze convictions in accordance with Section 3.2.2 of BPM 29 to accordance with Section 3.2.2 of BPM 29 to determine if the conviction poses an unacceptable determine if the conviction poses an unacceptable business riskbusiness risk

Delegation of Authority Delegation of Authority to Execute Contractsto Execute Contracts

Legal Authority for DelegationLegal Authority for Delegation Sections 65.31 and 65.34, Sections 65.31 and 65.34, Education CodeEducation Code Series 10501 of the Regents’ Series 10501 of the Regents’ Rules and Rules and

RegulationsRegulations


Two Types of DelegatesTwo Types of Delegates Primary DelegatesPrimary Delegates receive authority to sign receive authority to sign

contracts directly from the Boardcontracts directly from the Board Primary delegates may further delegate their authority to sign Primary delegates may further delegate their authority to sign

contracts in writing unless otherwise specified in the contracts in writing unless otherwise specified in the RulesRules Primary delegates must permanently maintain, or cause to be Primary delegates must permanently maintain, or cause to be

maintained, evidence of all such delegationsmaintained, evidence of all such delegations

Secondary DelegatesSecondary Delegates receive authority to sign receive authority to sign contracts from a primary delegate (not from the contracts from a primary delegate (not from the Board)Board)

Secondary delegatesSecondary delegates may may notnot further delegate their authority to further delegate their authority to sign contractssign contracts


Primary delegatesPrimary delegates must maintain, or cause to must maintain, or cause to be maintained, necessary and proper records of be maintained, necessary and proper records of all contracts, agreements and documents all contracts, agreements and documents executed and delivered pursuant to his or her executed and delivered pursuant to his or her delegated authority in accordance with any delegated authority in accordance with any applicable record retention schedule or policy applicable record retention schedule or policy adopted by the Board or the U.T. institutionadopted by the Board or the U.T. institution

(Section 6.1, Series 10501 of the Regents’ (Section 6.1, Series 10501 of the Regents’ RulesRules))


DelegatesDelegates executing documents on behalf of executing documents on behalf of the Board are responsible for assuring that the Board are responsible for assuring that they have authority to act on behalf of the they have authority to act on behalf of the Board and that such authority is exercised in Board and that such authority is exercised in compliance with applicable conditions and compliance with applicable conditions and restrictionsrestrictions

(Section 5.7, Series 10501 of the Regents’ (Section 5.7, Series 10501 of the Regents’ RulesRules))

Negotiation PrinciplesNegotiation Principles

Negotiation DefinitionNegotiation Definition Role of Negotiation in Texas Procurement ProcessRole of Negotiation in Texas Procurement Process Negotiator’s ChallengeNegotiator’s Challenge Roles Negotiators PlayRoles Negotiators Play Preparing for NegotiationPreparing for Negotiation Tools of PersuasionTools of Persuasion Negotiation TipsNegotiation Tips Negotiation ResourcesNegotiation Resources

Negotiation DefinitionNegotiation Definition

The exchange of information and ideas with the The exchange of information and ideas with the intent to change the relationship of the partiesintent to change the relationship of the parties

Role of Negotiation Role of Negotiation in Texas Procurementin Texas Procurement

Texas law permits negotiation in the following Texas law permits negotiation in the following procurement situations:procurement situations: Catalogue Purchase through an Information Catalogue Purchase through an Information

Systems VendorSystems Vendor Emergency PurchaseEmergency Purchase Sole Source PurchaseSole Source Purchase Competitive Sealed Proposal Purchase Competitive Sealed Proposal Purchase

Texas law does not permit negotiation when Texas law does not permit negotiation when the procurement is based on competitive bidsthe procurement is based on competitive bids

Negotiator’s ChallengeNegotiator’s Challenge

To create a process likely to produce a To create a process likely to produce a mutually acceptable balance of interestsmutually acceptable balance of interests

Roles Negotiators PlayRoles Negotiators Play

Competitive SportsmanCompetitive Sportsman Objective = WinningObjective = Winning

DefenderDefender Objective = Protecting Against LossObjective = Protecting Against Loss

Problem-SolverProblem-Solver Objective = Working Together to Find a SolutionObjective = Working Together to Find a Solution

Negotiation PreparationNegotiation Preparation

Rule of ThumbRule of Thumb: 4 hours of preparation for : 4 hours of preparation for every 1 hour of negotiation (4:1)every 1 hour of negotiation (4:1)

The party that is most prepared is typically the The party that is most prepared is typically the most successfulmost successful


Know the alternatives to negotiationKnow the alternatives to negotiation Your alternativesYour alternatives

Ways to improve your alternativesWays to improve your alternatives Their alternativesTheir alternatives

Ways to test and, if appropriate, worsen their Ways to test and, if appropriate, worsen their alternativesalternatives


Look beyond the “position” of a party to that Look beyond the “position” of a party to that party’s underlying interest or needparty’s underlying interest or need OursOurs TheirsTheirs OthersOthers

Learn to invent many options for mutual gain, Learn to invent many options for mutual gain, before committing to any one optionbefore committing to any one option


Search for standards of legitimacy by which to Search for standards of legitimacy by which to evaluate the optionsevaluate the options

Make clear, careful commitments at the end of Make clear, careful commitments at the end of the processthe process

Maintain clear, effective two-way Maintain clear, effective two-way communicationcommunication Focus on: What will they hear? Focus on: What will they hear? Not: What do we intend?Not: What do we intend?


Build a good working relationshipBuild a good working relationship Trusting Them: Trusting Them:

Assess risk/rewardAssess risk/reward Absent good reason, deal independently of trustAbsent good reason, deal independently of trust

Being Trustworthy Ourselves: Being Trustworthy Ourselves: Being trustworthy is an investment in our relationship Being trustworthy is an investment in our relationship

powerpower A reputation for reliability is powerfulA reputation for reliability is powerful Building trust is more difficult that losing itBuilding trust is more difficult that losing it Do not react in kind without thinkingDo not react in kind without thinking

Persuasion ToolsPersuasion Tools

Logic – use of facts and proof by reasoningLogic – use of facts and proof by reasoning Power – use of direct or implied threatPower – use of direct or implied threat Emotion – use of feelingsEmotion – use of feelings Bargaining – use of tradingBargaining – use of trading Compromise – acceptance of a different, often Compromise – acceptance of a different, often

lesser, positionlesser, position

Negotiation TipsNegotiation Tips

Before you start negotiating, understand why Before you start negotiating, understand why you are thereyou are there

Make sure you are negotiating with the Make sure you are negotiating with the decision makerdecision maker

If you want people to listen to you, you must If you want people to listen to you, you must listen to themlisten to them

Use confidence-building measures to get the Use confidence-building measures to get the negotiation going (resolve easy issues first)negotiation going (resolve easy issues first)

Negotiation TipsNegotiation Tips

Look at the situation from the other party’s Look at the situation from the other party’s point of viewpoint of view

Do not let a deadline force you into a bad Do not let a deadline force you into a bad decisiondecision

Don’t agree to something if it is not fairDon’t agree to something if it is not fair

Negotiation ResourcesNegotiation Resources

The Fine Art of Negotiating (1995) by Steven P. CohenThe Fine Art of Negotiating (1995) by Steven P. Cohen Texas Negotiations (2000), Texas Building and Procurement Texas Negotiations (2000), Texas Building and Procurement

Commission Training Presentation, William D. Agee & Commission Training Presentation, William D. Agee & Associates, Inc. and Lallatin & AssociatesAssociates, Inc. and Lallatin & Associates

Negotiation Workshop, Harvard Law School, Program of Negotiation Workshop, Harvard Law School, Program of Instruction for LawyersInstruction for Lawyers

Getting to YES: Negotiating Agreement Without Giving In Getting to YES: Negotiating Agreement Without Giving In [Second Edition], Roger Fisher, William Ury, and Bruce [Second Edition], Roger Fisher, William Ury, and Bruce Patton (1991)Patton (1991)

Getting Together: Building Relationships As We Negotiate, Getting Together: Building Relationships As We Negotiate, Roger Fisher and Scott Brown (1989)Roger Fisher and Scott Brown (1989)