1. FUNDAMENTALS OF CONTRACT NEGOTIATION
NCURA
Region VI/VII Spring Meeting
Park City, UT
April 24, 2007

2. Brent Brown, J.D., University of Utah
Today’s session will address the basic issues affecting contract negotiation: types of agreements, terms and conditions, and negotiation strategies. The focus, however, will be on troublesome clauses, the remedies acceptable to most universities and the different issues posed by federal and non-federal contracts.
Brent Brown, J.D., University of Utah
Randy Draper, University of Colorado at Boulder
Winnie Ennenga, Northern Arizona University

3. LEARNING OUTCOMES
To understand the difference between a grant and a contract; types of contracts; funding mechanisms
To understand the basic contracting process
To be able to identify the key parts of federal and non-federal contracts
To be able to identify and offer alternatives for troublesome clauses

4. DEFINITIONS Grant Purpose is to transfer money, property,
services, or anything of value to recipient in
order to accomplish a public purpose
No substantial involvement is anticipated
between sponsor and recipient during
performance of activity
Often called an “assistance mechanism”

5. DEFINITIONS Cooperative Agreement
principal purpose is to transfer funds to recipient to accomplish a public purpose
substantial involvement is anticipated between sponsor and recipient during performance of activity

6. DEFINITIONS
Contract
principal purpose is to acquire property or services for direct benefit or use of the sponsor
sponsor determines that procurement contract is appropriate
often called a “procurement mechanism”

7. SO What is a Contract?
A document that describes a relationship between two parties, such as a buyer and seller, that is defined by an agreement about their respective rights and responsibilities
BEWARE, contracts are:
More difficult to negotiate
More difficult to administer
Have more rules and are less flexible

8. TYPES OF CONTRACTS The Contract Masquerade Memorandum of Understanding
Teaming Agreement
Agreements with funds: e.g. grants with terms and conditions, contracts, purchase orders, Intergovernmental Agreements
Other agreements: e.g. Material Transfer Agreement, non-disclosure agreements, data transfer agreements.

9. FUNDING MECHANISMS Fixed-Price Cost Reimbursement Time and Materials
Incentive Contracts

10. CONTRACTING: SHIFTING ROLES
Government
Prime Contractor
University
Subcontractor
Second Tier Sub Second Tier Sub

11. PLAYERS, ROLES, RESPONSIBILITIES
Proposal Negotiation Award Mgt.
PI PI Post-Award PI
Dept Staff Dept Staff SPA OCG
Pre-Award Post-Award President SPA
TTO TTO
Legal

12. CONTRACTS: PROCESS Solicitation and Amendments (RFP)
Pre-Bid Conference
Prime Proposal
Subcontract Proposal
Exceptions Letter
Proposal Review (Technical and Cost Proposals)
Verification/Negotiation
Best and Final Offer
More Negotiation???
Acceptance

13. FEDERAL CONTRACTS Request for Proposal
Specific instructions for technical and cost proposals
Includes a sample contract or “schedule” with expected terms and conditions
Institutional endorsement of the proposal is considered an official offer, which may not be able to be changed once the proposal is submitted.
Some RFP’s may be converted into a contract with only the buyers signature.

14. FEDERAL CONTRACTS: RFP
Part I
Section A: Cover Page
Section B: Supplies/Services & Prices/Costs
Section C: Descriptions, Specifications, Scope of Work
Section D: Packaging and Marking
Section E: Inspection and Acceptance
Section F: Deliveries or Performance
Section G: Contract Administration Data
Section H: Special Contract Requirements

15. FEDERAL CONTRACTS: RFP
Part II
Section I: Contract Clauses
Part III
Section J: List of Attachments
PART IV
Section K: Representations/Certifications
Section L: Instructions, Attachments
Section M: Evaluation Factors for Award

16. PROPOSAL PREPARATION Dissect the Solicitation Document
Attend to Amendments
Assign Responsibilities: Technical, Cost, Management
Coordinate with Subcontractors
Write to the Evaluation Criteria
Meet Regularly During Proposal Development
Arrange for a Pre-submission Review
Do Not Lose Your Focus
Prepare the Terms and Conditions Letter

17. PROPOSAL PREPARATION The Exceptions Letter:
The exceptions letter documents the University’s concerns with the proposed terms and conditions. If these issues are not specified when submitting the proposal, then they may not be eligible for negotiation after the award is made.

18. TROUBLESOME CLAUSES
FINANCIAL
LEGAL
MANAGEMENT
ACADEMIC

19. Financial: Payment Provisions
Documentation and Reporting
Ownership of Equipment
Audit
Legal: Indemnification/Insurance
Choice of Law
Arbitration
Termination
Management: Key Personnel/Approval of Staff
Technical Direction & Changes
Deliverables: Inspection and Acceptance
Academic: Publication
Confidentiality and Non-Disclosure
Publicity/Disclosure of Sponsorship
Restricted, Proprietary, and Classified Research
Rights in Data
Intellectual Property/Work for Hire/Rights in Data

20. PUBLICATION Why is Publication a potential issue?
How is a Publication problem identified in a contract?
Compromises? Alternative language?
Are Publication restrictions ever acceptable?
Your experience . . .

21. PUBLICATION Know your Institution’s policies “inside and out”.
Understand why the right to publish is a legal, practical, and philosophical requirement of academic research.
Understand what types of limitations are appropriate and may be accepted by your institution.

22. INSURANCE/INDEMNIFICATION
Why are insurance and indemnification potential issues?
How is an insurance or indemnification problem identified in a contract?
Compromises? Alternative language?
Is it ever OK to indemnify or to agree to insure another party?
Your experience . . .

23. INSURANCE Ensure that:
the insurance requirements are consistent with standard university insurance coverage (Self Insurance)
the nature of coverage required is appropriate
the sponsor is not named as a co-insured on the institution's policy (Additional Insured)
warranties/guarantees

24. INDEMNIFICATION (Hold Harmless/Who is responsible for paying?)
Contract language must be avoided that causes a university to be liable for the wrongful acts or failures of another party.
Many State institutions are prohibited by statute from providing indemnification for the acts of third parties.
The University is still responsible for the actions of agents, employees, and students.
Read the entire contract

25. TERMINATION Why is Termination a potential issue?
How is a Termination problem identified in a contract?
Compromises? Alternative language?
Is it ever OK to agree to a Termination clause?
Your experience . . .

26. TERMINATION Mutual Termination Termination for Convenience
Termination for Default/Cause (cure notice)
University Non-Cancelable Obligations

27. TERMINATION Ensure that:
the notification period for termination is adequate;
the institution's costs are adequately covered in the event of termination;
the parties agree how disputes are to be handled, particularly in the case of termination for cause.

28. STATE STATUTES Why are State Statutes potential problems?
How are State Statutes identified in a contract?
Compromises? Alternative language?
Is it ever OK to agree to another state’s statutes?
Your experience . . .

29. STATE STATUTES Nondiscrimination Conflict of Interest
Arbitration/Dispute Resolution
Contractor’s Records
Failure of the Legislature to Appropriate
Confidentiality
Indemnification/Insurance
Governing Law
Public Records

30. KEY PERSONNEL Why is Key Personnel a potential issue?
How is a Key Personnel problem identified in a contract?
Compromises? Alternative language?
Is it ever OK to allow the sponsor to choose the project personnel?
Your experience . . .

31. KEY PERSONNEL Ensure that:
Only Principal Investigators are named as Key Personnel.
The Sponsor cannot approve or veto other staff members.

32. TECHNICAL DIRECTION
Why are Technical Direction and Changes potential issues?
How are Technical Direction and Changes problems identified in a contract?
Compromises? Alternative language?
Is it ever OK to agree to Technical Directions or Changes?
Your experience . . .

33. TECHNICAL DIRECTION Ensure that:
The Principal Investigator and his/her team are not under the direction or supervision of the sponsor.
The Principal Investigator is solely responsible for the direction and management of the project and its outcomes.

34. The Changes Clause
Why is inclusion of the Changes clause a potential issue?
How is the Changes clause identified in a contract?
Compromises? Alternative language?
Is it ever OK to agree to the Changes clause?
Your experience . . .

35. Changes
Be careful of the Changes clause in federal contracts.

36. CONFIDENTIALITY/ DISCLOSURE
Why are Confidentiality and Non-Disclosure potential problems?
How are Confidentiality and Non-Disclosure clauses identified in a contract?
Compromises? Alternative language?
Is it ever OK to agree to Confidentiality or Non-Disclosure statutes?
Your experience . . .

37. CONFIDENTIALITY/ NON-DISCLOSURE
Universities normally do not provide for the confidentiality of information beyond that necessary to protect the anonymity of research participants. If confidentiality is necessary to perform the research, provisions may be included in the agreement that identify the extent to which proprietary or confidential information may be protected. Separate agreements with the faculty are discouraged.

38. CLASSIFIED RESEARCH
Why is accepting Classified Research a potential issue?
How is Classified Research or a Classified Research contract identified?
Compromises? Alternative language?
Is it ever OK to agree to perform Classified Research?
Your experience . . .

39. CLASSIFIED RESEARCH
Many universities do not accept classified research. Understand the procedures for accepting classified research at your University.
To the extent possible, ensure that the Principal Investigator is able to report research results, (although data that identify individuals, groups, or organizations may be kept confidential).

40. RIGHTS IN DATA Why is ownership of data a potential problem?
How are Rights in Data problems identified in a contract?
Compromises? Alternative language?
Is it ever OK to agree to a limitation on the University’s rights to data?
Your experience . . .

41. RIGHTS IN DATA Clearly define ownership of data.
Clearly identify proprietary or confidential data.
Know what restrictions are acceptable to the institution.
Identify the risk/liability for the disclosure of proprietary or confidential information?
Beware of the Rights in Data clause in federal contracts.

42. 52.227-18 Rights in Data – Special Works
(d) Release and use restrictions. Except as otherwise specifically provided for in this contract, the Contractor shall not use for purposes other than the performance of this contract, nor shall the Contractor release, reproduce, distribute, or publish any data first produced in the performance of this contract, nor authorize others to do so, without written permission of the Contracting Officer.

43. WORK FOR HIRE/OWNERSHIP OF INTELLECTUAL PROPERTY
Why is agreeing to a Work for Hire a potential problem?
How are Work for Hire problems identified in a contract?
Compromises? Alternative language?
Is it ever OK to agree to perform a Work for Hire?
Your experience . . .

44. WORK FOR HIRE/OWNERSHIP OF INTELLECTUAL PROPERTY
Do not enter agreements as “work for hire” because such agreements cede ownership of intellectual property to the sponsor. Ownership of reports and other deliverables may be given to the sponsor if the University retains ownership of the background data and information contained in such documents.

45. IMPORT/EXPORT LAWS Why are the Import/Export Laws potential problems?
How are Import/Export problems identified in a contract?
Compromises? Alternative language?
Is it ever OK to accept the Import/Export Laws?
Your experience . . .

46. IMPORT/EXPORT LAWS
The Import/Export Laws are the law and are in effect whether or not cited in the contract.
The application of the law is determined by the technology and the nature of the research.
ITAR, EAR, OFAC
Maintain the University’s fundamental research exclusion by:
Not accepting restrictions on publication or disclosure
Not accepting restrictions on personnel

47. NEGOTIATION OBJECTIVES
To achieve a framework that facilitates
the work.
To arrive at a mutually-acceptable agreement.
To set a positive tone for the on-going institution/sponsor relationship.
To negotiate a contract that is consistent with the institution’s policies and procedures.

48. Remember: a contract is a
“binding” agreement and your
institution has a legal obligation
to perform.