Contract Formulation and Administration MODULE IV

Contract Negotiations, Ethics, and Conflicts of Interest Chapter 7 Contract Negotiations, Ethics, and Conflicts of Interest

Introduction to negotiations The right to negotiate should be included in the list of agency rights in the RFP. Negotiations are considered to be undertaken when the contracting agency attempts to modify the: Price. Schedule. Terms and conditions. Or any other element of the contractors’ proposal or resultant contract.

Ethics for government negotiators Government negotiators are held to higher ethical standards in that they: Are required to treat all prospective contractors equally. Are prohibited from revealing any features of one contractor’s proposal to competitors. Should avoid requesting multiple best and final offers (BAFOs). Should seriously consider the avoidance of engaging in auctioneering techniques. (Some government agencies are permitted to use reverse auctioneering techniques).

Requesting a best and final offer (Bafo) A BAFO is often requested once contractors have been selected as finalists. All final contractors must have a clear understanding of the contracting agencies needs and objectives to start negotiation. It is recommended to provide a format for BAFO submittals to ensure equal treatment. Contracting agencies should NOT request BAFOs until there has been a meeting of the minds regarding expectations for the content and format of the resultant contract.

Assigning roles to negotiation team members in interactive negotiations During the pre-negotiation meeting: The negotiation team leader should determine the elements of the contract proposal or provisions that need to be negotiated. Desired negotiation outcomes and goals should be identified. Negotiation responsibilities should be assigned to each negotiation team member. A lead negotiator needs to be designated.

Preparing for negotiations Negotiators must: Evaluate the contractor’s proposal. Identify any features that are entirely unacceptable, objectionable, or merely undesirable. The evaluation should be multidisciplinary to ensure that all aspects of the contract are included in the negotiation plan.

Objectionable or unacceptable contract provisions Applicable law and forum other than agency’s jurisdiction. Exorbitant late fee. Nondiscrimination provisions that restrict government from contractor premises or other unacceptable clauses. Onerous indemnity provisions favoring contractor. Termination provisions that limit government from terminating for default or for convenience. Insurance provisions that do not adequately protect the government. Reimbursement provisions that require payment more often than monthly or other objectionable provisions. Cost-plus-a-percentage-of-cost contracts that may be made verbally or by unauthorized personnel. Data rights that do not permit government ownership of data or computer programs prepared in conjunction with contract. Contact changes that do not shield protected classes. Inspection provisions to might permit certain conflicts of interest. Provisions that might permit conflicts of interest. Automatic renewal or evergreen clauses.

Develop the negotiating plan The negotiation strategy or plan can be drafted once all elements have been evaluated and identified. A typical strategy for a negotiation plan includes: The development of an initial negotiation position that can be negotiated. The desired outcome/objectives. A fallback position that represents the worst-case, yet acceptable, position. It is recommended for the negotiation plan to be in writing.

Conducting negotiations The negotiation begins with a verbal presentation and a written summary. There must be a clear understanding of the initial offer. The opposing negotiating team may accept the offer, make a counter-offer, or reject the offer.

Dealing with difficult situations during negotiations It is of great interest to establish trust and rapport to conduct successful negotiations. However, if it is becoming difficult to negotiate, the agency’s negotiating team may: Agree to address the issue that caused the impasse. Select a new team member to conduct the negotiation. Take a break from negotiations. Or agree to negotiate some less contentious issues.

Concluding and documenting the negotiations Once the negotiation has concluded, it is likely to: Generate the negotiated contract (have new contract signed by all). Initiate agency staff review. Plan for contract execution.

Introduction to ethics and conflicts of interest The United States Constitution (e.g. Article I, Sections 6 & 9), government statutes, laws, and codes include prohibitions against profiting unfairly. Despite prohibitions against unlawful profiting, there is a growing concern regarding the occurrence of unethical practices.

Organizational ethical standards The development of organizational polices with respect to ethical behavior and conflict of interest are essential to provide guidance to agency employees and to ensure that such abuse is not tolerated. To some degree, organizational ethical standards help discourage certain employees form accepting gratuities. There are two types of approaches to determining whether or not a behavior is acceptable or unacceptable: 1. Threshold for unacceptable gratuities. 2. Zero tolerance policy.

Personal ethical standards Often times it is not sufficient for agencies to provide ethical training programs or promulgate policies and regulations regarding ethical standards. It is encouraged for employees to establish their personal ethical standards (such as their own personal zero tolerance policy). Public servants who do not accept anything of value from contractors absolutely avoid any conflict of interrest.

Chapter 8 Contract Document

Essential elements of contracts and types of contracts Essential elements of a contract include: Offer. Acceptance. Consideration. Competent parties. Awarded for a legal purpose.

Essential elements of contracts and types of contracts Firm Fixed Price. Fixed Price/Model Service Contract (MSC). Fixed Price Incentive. Not-to-exceed (NTE). Cost Reimbursement. Cost Plus Fixed Fee (CPFF). Cost Plus Incentive Fee (CPIF). Cost Plus Award Fee (CPAF). Cost-Plus-A-Percentage-Of-Cost (CPPC). (CPPC contracts are illegal in federal contracting, discouraged by the American Bar Association, and not permitted by numerous state and local government agencies. Despite these restrictions, state and local government agencies are still sometimes awarding CPPC contracts).

Best-practices services contract One or two-page format for variable data for variable information. Preamble. Recitals. Incorporation of documents. Execution. Contract attachments.

Format for variable data for variable information Best-practices contracts contain the following information on the first page of the contract: All variable information. Attached documents. The agency’s contract execution. It is essential to have all contract information on the same page as the executing signatures, such as: Identifying all parties. Specifying price. Stating terms and conditions. Stating the scope of work. Identifying insurance requirements.

Preamble The preamble identifies: All parties in the contract. Their addresses. The word or phrase to be used throughout the contract to identify each party ("Agency" for the government and "Contractor" for the contractor). The effective date of the contract.

Recitals This section describes the rationale for entering into a contract. The recitals indicate: The agency’s defined need for entering into a contract. The contractor’s qualification to meet the needs.

Incorporation of documents Incorporation of documents is essential to ensure that all accompanying/attached or referenced documents are enforceable (attachments incorporated by reference documents must be readily available to prospective contractors). To ensure that all provisions are enforceable, the attachments should be incorporated by identifying the attachment by: Attachment number. Title. Date. Identifying other information. Adding a description with phraseology.

Execution Signatures of authorized representatives constitutes execution. Full execution is considered when all authorized representatives (from both parties) execute the contract.

Contract attachments There are three attachments that must be attached and incorporated in a contract: Insurance provisions – which describe the types of insurance coverage and limits of liability that must be maintained by the contractor. Scope of work – describes the work to be preformed by the contractor. Terms and conditions – describe the rights and responsibilities of all parties.