Contracting 101 Introduces basic elements, potential pitfalls and essential contract drafting techniques Presenters: Greg Shabram, Contracts Manager Kristen Jackson, Contracts Technician 2

Goal and Objectives Goal: Provide departments information necessary to support expanded contracting responsibilities Present key concepts and learning activities that will help demonstrate contracting best practices.

Scenario 1 A UO Department meets with the owner of a large plot of land. They agree that UO Department can place research instruments on the land and in exchange UO will build a fence. UO Department and the land owner shake hands.

Scenario 2 UO Department sends a letter to Bethel School District containing the terms of a proposed arrangement. UO Department signs the letter and requests that the School District also sign the letter if the terms are acceptable. Bethel School District signs the letter and returns it to the Department

Scenario 3 UO Dept creates a PO with the standard terms and conditions for ten hand radios What is the agreement if they call in the order and file the PO in their file cabinet? What is the agreement if send PO to the vendor?

Scenario Similarities What were the common factors that made all 3 scenarios contracts?

A Contract Is… An agreement by each party to undertake certain responsibilities Offer

A Contract Is… An agreement by each party to undertake certain responsibilities Offer Acceptance

A Contract Is… An agreement by each party to undertake certain responsibilities Offer Acceptance Payment or Something Gained

Scenario 4 Automation Software Purchase Written agreement to customize software to automate paperwork processing. Statement of work contains no specific deliverables. Agreement does not include a maximum not to exceed dollar amount. Agreement does not list milestones for work progress. The only remedy for breach is termination.

The Purpose of Contracts… Help you assure agreement is reached Are both sides on the same page?

The Purpose of Contracts… Help you assure agreement is reached Are both sides on the same page? Help you manage risk Who is at risk? Are we at risk? Are we able to absorb the risk?

The Purpose of Contracts… Help you assure agreement is reached Are both sides on the same page? Help you manage risk Who is at risk? Are we at risk? Are we able to absorb the risk? Help you ensure fiscal responsibility Is the action fiscally appropriate? Is the money available?

Real Life Example Missing a Key Purpose Oregon DMV Software Purchase Contract A five year project took eight years Budget grew from $50M to $123M (146% increase) Public outcry killed project No provisions for remedies Resulted in DOJ legal sufficiency review

Fraud Triangle

Factors Contributing to Fraud Occurring (2010 ACFE Report) Lack of internal controls Override of existing controls Lack of management review

Segregation of Duties Department Purchasing Profile Examples of Duties: Commit Funds Approve Purchases Receive Goods/Services Process Invoice Payment Approve Invoices Management Review

Authority to Commit Department Funds Contracting Authority (to allow for the use budget funds) vs. Contracting Authority (enter into a written or oral contract)

Level 1 vs. Level 2 Contracting Authority

Contracts Included in Delegated Level 1 Authority Direct purchases of goods & trade services up to $5000 Online / phone order No written contract/signature Pay invoice Purchase Orders up to $5000 Banquet Event Orders pursuant to a PCS-approved Hotel/Catering Agreement which do not modify any of the terms of the underlying agreement.

Contracts Not Included in Delegated Level 1 Authority All purchases greater than $5000 (requires written contract or PO). All purchases of personal services All rental of space (hotel, hostel, office space, etc). BEO with additional terms & conditions or changes in total dollar amounts

Contracts Included in Delegated Level 2 Authority Approved UO contract templates Purchase Orders Facility Use Agreements Personal Services Contracts Banquet Event Orders under existing agreements approved by PCS

Contracts Excluded from Delegated Level 2 Authority Purchases or Contracts in excess of $25,000 Contract templates with any change to approved template terms and conditions UO Custom Contracts Vendor Contracts BEO with additional terms & conditions

University Purchasing & Contracting Responsibilities Programmatic Review Does purchase relate to business purpose or meet the objectives of university’s and department’s mission? Budgetary Review Are funds available for purchase? Compliance Review Purchase meets all applicable laws, regulations, policies, and procedural requirements and that the purchase or contract is completed using good business practices.

Responsibilities of Contracting Authority Act within OUS Code of Ethics Apply best value principles Obtain all relevant approvals Establish and apply internal controls Collect documentation to support purchases and contract awards Ensure reconciliations are performed and documented

Compliance Approvals Sponsored Projects Services Information Technology (CIO Approval) Business Affairs Office Printing & Mailing Design & Editing Services Marketing and Brand Management (See Approvals List)

Legal Review As of January 1, 2012: Performed by UO General Counsel Custom Software Contracts > $250,000 Settlement or Release Agreements Faculty or Student Exchange Agreements Technology Transfer Agreements involving UO obtaining an equity interest Purchase or sale of real property Employments Contracts >$300,000/yr Any solicitation resulting in one of the above agreements Any document submitted to the State Bd Performed by UO General Counsel

Example Dept XYZ wants to hire a developer to customize software package to be used campus-wide for $400,000 ($200K for software; $200K for services). What does the department need to do the complete this purchase and ensure compliance with UO policies?

Examples Department XYZ wants to hire a speaker for an open lecture for $900. Department XYZ wants to pay the University of Florida for some research materials they are selling.

Statement of Work Basic Components: Work elements of tasks Milestones (tasks that support the deliverables, and when they are due) Timeline/timeframe for performance of services Detailed description of services (requirements, assumptions, purpose, benefits) Clearly defined UO responsibilities and contractor roles Fees for services and expense reimbursements Payment Schedule (fixed, time and material, per unit rate, rate schedule)

Statement of Work Additional items to consider: Write in a way that one can easily understand the transaction and know what is expected to happen Clearly define the tasks, specifications for deliverables, key dates and deadline expectations (both from the Contractor and University) Use active voice and consistent terms Do not include contractor qualifications Do not use words that are by their nature uncertain (e.g. should, expect, anticipate, assist, contribute) Do not include details about the competitive process

Statement of Work Applies to all contracts including: Personal Service Contracts (PSC) Purchase Orders Equipment Leases Real Property Leases Facility Use Agreements

SOW Scenario Hiring a consultant to provide a 3 day team building workshop. Topics to be covered include motivation, trust, stress management and communication. Workshop includes participation in activities and games that promise to be fun and to unite the group. Training materials provided. Consultant fees are $300/day for 4 hour sessions. 50% deposit with remainder due at workshop completion. Paying consultant travel & expenses up to set amount. Consultant fees include a follow up meeting in 6 months to evaluate team progress.

Ready to Award a Contract…Now What? Due Diligence: READ THE CONTRACT Crucial Contractual Items Money – amount of the contract and payment terms Term and termination Statement of Work Other document references Use official legal names Insurance

Ready to Award a Contract…Now What? Due Diligence: READ THE CONTRACT Crucial Contractual Items Money – amount of the contract and payment terms Term and termination Statement of Work Other document references Use official legal names Insurance Common Issues Indemnity Attorney Fees Governing law Control of defense Late fees Confidentiality

Example A faculty member within Dept. XYZ wants to hire a consultant to provide a series of one-hour lectures. Please identify what you need to make sure this contract meets its purposes and responsibilities are met.

Executed Contract Now What?

Contract Administration Delivering the fully signed copy of the contract to the Contractor.

Contract Administration Delivering the fully signed copy of the contract to the Contractor. Maintain a contract file which includes all pertinent information regarding the purchase.

Contract Administration Delivering the fully signed copy of the contract to the Contractor. Maintain a contract file which includes all pertinent information regarding the purchase. Ensuring that services/goods received under contract conform with language of the contract.

Contract Administration Delivering the fully signed copy of the contract to the Contractor. Maintain a contract file which includes all pertinent information regarding the purchase. Ensuring that services/goods received under contract conform with language of the contract. Track Important Dates – e.g. deliverables, expiration, amendments

Contract Administration Delivering the fully signed copy of the contract to the Contractor. Maintain a contract file which includes all pertinent information regarding the purchase. Ensuring that services/goods received under contract conform with language of the contract. Track Important Dates – e.g. deliverables, expiration, amendments Payment is within contract terms PCS is always available for questions or concerns.

Contract Administration Examples PSC for design, editing and printing of a catalog for parents (assume printing waiver completed) SOW includes all work to be completed in vendor’s studio Four months later, for same project, vendor submits invoice for printer rental used to print the parent catalog What are the issues?

Expired Contracts & Amendments Contract Renewals Must be done before end of contract term and according to the renewal terms laid out in the contract.

Expired Contracts & Amendments Contract Renewals Must be done before end of contract term and according to the renewal terms laid out in the contract. End of contract term Contract ceases to exist… it is DEAD Contract cannot be reinstated by amendment alone

Expired Contracts & Amendments Contract Renewals Must be done before end of contract term and according to the renewal terms laid out in the contract. End of contract term Contract ceases to exist… it is DEAD Contract cannot be reinstated by amendment alone Contract amendments Explanation of how the contract is being revised Implementation instructions Useful only if you have a complete copy of the contract Party’s name change does not require an amendment

Additional Tasks Matching invoices to deliverables Notes on purchase results/vendor satisfaction

What remaining questions do you have? Wrapping it Up What remaining questions do you have? Evaluations