Vendor Service Contracts : Processes and Procedures

Vendor Service
Contracts:
Processes and Procedures
(AM 541)
Initiating, Processing, &
Establishing Vendor
Contracts
Robert Lee Dickens - Contracts Manager
Richard “Rancher” Wollney Jr. - Contracts Specialist
Agenda
What is a Contract?
Categorizing University Contracts
Initial Development and Submission
Formal Review of Contract Terms
Time Lines, High-Risks Agreements, and
Special Procedure Contracts
Finalizing 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 that
we can squeeze into 30 minutes.
3
What is a Contract?
A contract is an agreement between two parties
that creates an obligation to perform (or not
perform) a particular duty. A legally enforceable
contract requires:
1. An Offer (I’ll mow your lawn this weekend, if you
pay me $30)
2. An Acceptance (You’ve got a deal)
3. Consideration (The value received and given –
the money and the lawn mowed)
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Establishing Offer and
Acceptance: “A Meeting of the
Minds”
A legally recognized offer and an acceptance
creates a “meeting of the minds’, or mutual
assent, between the parties.
Mutual Assent requires the presence of the
following factors:
1. Both parties must exhibit a “contractual intent”
[words spoken in jest or frustration will lack the
requisite 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 and
Definite Terms
Required Clarity: For terms to be legally
valid, a reasonable person must be capable of
readily understanding them.
Four primary areas in determining
definite terms:
1. the parties;
2. time for performance (term or service
schedule);
3. the price; and
4. the subject matter or scope of service.
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Consideration:
The Importance of the “Bargained Exchange.”
Consideration must be mutual. Both
parties 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 tangible
goods and secured transactions (not services).
http://tlo2.tlc.state.tx.us/status.bc.toc.htm
Specific Statutes – http://www.capitol.state.tx.us
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Categorizing University
Contracts
Types of University Contracts
 Affiliation and
 Prof. Service Agreements
International Program
Agreements
 Athletic-Specific, or
Student-Specific
Contracts (nonprocurement in nature).
 Interagency Cooperation
Agreements (IAC) &
Inter-local Agreements
 Museum and Exhibit
Agreements
(for individuals not
organized as a business)
 Procurement Contracts;
Vendor Services
 Sponsored Research
Contracts and Sponsored
Projects
 University-Provided
Services
See Categorizing Contracts
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Classifying a Procurement Contract
University payment is not a defining factor. [Many
procurement contracts actually involve a vendor
payment to UTSA.]
Generally defined as: A formal agreement with a
business entity to secure a particular service that is
subject to compliance with competitive purchasing
requirements or purchasing policies.
Competitive requirements can be dictated by:
1.
2.
3.
4.
Statutory provisions;
UT System polices;
Best Value Procedures; and
Appropriate business relations.
See “Procurement Contracts Defined”.
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Initial Evaluation,
Development, and
Submission
Initial Contract Evaluation and
Development
Determining the Need for an Agreement:
1. Vendor-Originated
2. UT Determination: The risk of the project
may necessitate a formal agreement; or UT
Policies may require it.
Using Sample Agreements
13
Routing and Submission of
Contractual Projects
Where to Route:
Regardless of value or cost, route
Procurement 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 and
services are the final stage of a proper procurement and
must never precede the purchasing procedures.
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Required Submission
Documentation
Appropriately weighing the risks of the project
with the most efficient processing methods
requires a clear understanding of the project.
Upon submission, include the following
information:
1. A clear description of the requested service; and
2. Details related to the purpose and benefit of the
requested service;
Remember, an enforceable contract requires clear and definite terms!
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Required Submission
Documentation
If it is already known that a vendor will be
requesting 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 a
vendor’s contract; and
2. An electronic version of the agreement in
modifiable Word format.
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Purchasing Office Assistance
Routing to Assigned Buyer: The electronic
purchase request (PB4) will automatically
route to your department’s assigned buyer
in the Purchasing Office.
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Purchasing Requirements
The Purchasing Office Buyer will work with
the Contracts Office and your Department
to:
1. Determine the most efficient methods for
project completion;
2. Ensure compliance with UT purchasing
Regulations and Best Value Polices; and
3. Accurately define the Statement of Services
(SOW) or Scope of Work.
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Reviewing the Business Issues
Developing an Appropriate Statement of
Services (SOS):
1. Does the SOS accurately define what you
want?
2. Will the SOS allow for legitimate evaluation
of the result?
3. Talk it through with an unaffected party.
See Crafting the Agreement for more information.
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Reviewing the Business Issues
Payment schedules: [Ensure terms are
acceptable and that the department has the ability to
comply.]
Service limitations: [i.e. A network license limited
to UTSA-controlled computers, when what is really
required is a network license that allows remote access.]
Length of contract terms: [Changing technology
may make a two-year agreement for database services
with three option years more preferable than a five-year
agreement with less monetary costs.]
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Finalizing the Needs
Assistance from
Purchasing and
Distribution Services
Defining Business
Risks
Minimizing the Risks
Departmental
Ownership
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Understanding the Commitment
The Principle Issue: Ensure there is a clear
understanding of the two parties’ commitment.
Ensuring Enforceability:
1. Establish objective measures of
performance (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 Additional
Expertise and Approvals
Review from other departments: The
Contracts Office may request a review and/or
approval from other affected departments and
additional University experts.
Departmental Ownership: As The ‘owner’ of
the contract, the department should take
reasonable steps to secure all departmental
approvals.
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Formal Review of the
Contract Terms
Legal Office Review
Guidelines for review by UTSA’s Legal
Office
Requirements for Review by the UT
System Office of General Counsel
25
Utilizing Alternate Contract
Methods
Purchase Order vs. Formal Contract
Incorporating Contractual Terms into POs,
Bids, and RFPs
See Alternate 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 any
required negotiations with the vendor’s legal
office or contract officers.
– The Contracts Office will maintain continuous
consultation with the department, specifically
in 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 Allocation
Boilerplate
Signatures
See:
contract components
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Common Contractual Terms
Three commonly negotiated/contentious
provisions:
1. Warranties
2. Indemnification [protection against loss or
liability 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-Ordered
Limitations & Authority
Sovereign Immunity
Prohibition Against Agency Debt
Right to Suit
31
Statutorily Required Clauses
Governing Law (Jurisdiction) and Venue
Financial Standing
Dispute Resolution
Electronic and Information Resources
Accessibility (EIR Provision)
Standard Addendum
See Standard Clauses
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Use of Template Agreements
Both UTSA and UT System have
developed template agreements that can
be utilized for various services.
Use of Template Agreements:
1. provides vendors with up-front notification of
the terms required for the project; and
2. assists in protecting the University through
the use of standardized terms & conditions.
33
Time Lines:
Minor Contracts,
High-Risk Agreements, and
UT System Requirements
General Time Lines
Standard or Template Agreements with no
Substantive Changes:
– typically reviewed (redrafted, if necessary) and
comments relayed to the department and/or vendor
within 7-10 days.
Minor Contracts (approx. 1-5 pages with
relatively high clarity and minor risk):
– typically analyzed, redrafted, and relayed to the
department and/or vendor for review within 7-10
days.
35
High-Risk Agreements
Determining the Risk:
Certain agreements, because of value, policies,
or subject matter, can signify potential high risk
to the University.
Timeline:
The time required to analyze, redraft, and
coordinate issues (and departments) may be
significant, but an initial review will generally be
provided to the department and/or vendor within
3-4 weeks.
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Required UT System Review
Special Procedure Contracts
– Requires review by the UT System Office of
General Counsel (OGC). The Contracts Office
will 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 those
contracts designated by UT System as
Standard Contracts.
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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 value
exceeding $1M must be approved by the
Board. A summary of contracts requiring
Board approval can be found at
http://www.utsystem.edu/policy/policies/uts145.html
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Finalizing and Executing
the Agreement
Finalizing the Agreement
Final Negotiations
with the Vendor
Departmental
Approval Required
Additional Necessary
Approvals
40
Executing the Agreement Who can Sign?
Upon completion of negotiation, the
Contracts Office will:
route the Agreement to obtain appropriate
signatures; and
2. distribute signed copies accordingly.
1.
President-Delegated Authority:
1.
2.
3.
V.P. for Business Affairs
Associate V.P. for Administration
Associate V.P. for Financial Affairs
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Departmental Contract
Administration
Cost Benefit Analysis Required for
State Funded Contracts
If state appropriated funds (14 Accounts)
are used, the department must maintain
on file the following documentation:
1. A cost-benefit analysis for the services, or a
justification of the need for the services; and
2. The relationship of the services to the
staffing plan.
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Final Stage: Departmental Contract
Administration
Upon completion of the procurement
process and contract negotiations, the
final phase of contracting is administration.
Critical Nature of Administration:
– Regardless of how well a contract is drafted,
the contract will be ineffective if proper
contract administration is not performed.
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Ensuring Compliance:
Departmental Administration
A Department’s Contract Administration
responsibilities include:
1. Verifying the contractor complies with the
terms and conditions of the agreement;
2. Ensuring all services have been received to
your specification prior to authorizing
payment (or all revenue received); and
3. Ensuring the collection of renewal
documentation (i.e. insurance, bonds).
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Guide for Contract Administration
Departmental Guide for Contract
Administration:
– To ensure compliance, departmental
administrators are strongly encouraged to
review the guidelines found in the Department
Guide for Administration of Major Service
Contracts.
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Contacts and References
Robert Lee Dickens
Contracts Manager
458-4067
Richard “Rancher” Wollney Jr.
Contracts Specialist
458-4069
Nora Evans
Business Law Attorney - Legal Affairs
458-4703
Yolanda Miller
Director, Purchasing and Distribution Services
458-4975
Lane Brinson
Purchasing Manager
458-4066
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 of
Contractual Project
 Overview of Contract Terms
 Time Lines, High-Risks Agreements, and
Special Procedure Contracts
 How to finalize and execute an agreement
 Contract Administration
 Resource information
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Questions
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