1. Purchasing Supplies at CERN
Legal aspects Contract execution and follow-up (who does what)
Florence Jacobs DG-LS Cristina Lara Arnaud FP-PI

2. Outline Legal aspects CERN contracts
General Conditions of CERN Contracts (GCC)
Contract follow up
When? Why? How? Who?
Case study no. 3

3. 1
CERN contracts

4. Legal aspects: CERN contracts
Purchasing process
Selection of contractor
Formalization of commercial arrangement
Arrangement is understanding between the parties up to the point of concluding the contract – loose term to cover everything understood between CERN and selected bidder

5. Legal aspects: CERN contracts
Specific clauses
General terms
CERN and contractor
between
Contract
Assuming that GCC apply
Contract usually come in po’s and contracts: in these two scenarios the GCC are declared applicable to the c.
Exception: tailor made contract without application of GCC, exhaustive

6. Legal aspects: CERN contracts
Specific clauses
purchase order (≤ 200k CHF) or standard contract (> 200k CHF)
General terms
General Conditions of CERN Contracts (GCC)
“Tailor-made” contract
-No national law directly applicable to the specific terms
Give example: contract with company incorporated in CH

7. General Conditions of CERN Contracts (GCC)2
General Conditions of CERN Contracts (GCC)

8. Why GCC?
composed of Member States
Intergovernmental Organization
Independent functioning
(as opposed to the application of national law)
as necessary for its functioning
Right to issue its own rules
(also immunity of jurisdiction, inviolability and financial privileges)

9. CERN’s own rules Labour: Safety: Staff Rules and Regulations
Procurement: tendering process and GCC
Labour:
Staff Rules and Regulations
Safety:
CERN Safety rules
Domains: - labour relations (Staff Rules and Regulations), Safety and Procurement (including contracting)
Procurement:
You buy something, also general conditions but CERN’s GCC have independent value
Autonomy to edict them, contrary to company, not tested against national law

10. Utility of the GCC Only apply if stipulated in po or contract
Pre-approved, autonomous language (E and F)
Address standard situations
Reflect long procurement experience at CERN
Cover supplies as well as services
Only apply if stipulated in po or contract
If apply, except if varied by contract (complement contract)
Based on 10 years worth of LHC procurement – x billion CHF (Anders)

11. Application of the GCC For now on I only refer to contract
Stipulate applicability in purchase order/ contract
Default provisions, apply where pertinent
Complement or modify by contract-specific clauses
For now on I only refer to contract

12. Documents comprising the contract
All relevant documents
Hierarchy between documents established
Avoid contractor’s own general conditions to maximum extent
List is indicative, must be specified if necessary
Priority shown in GCC must be respected, first CERN’s documents, the more specific to the more general, then contractor’s documents
- hierarchy is important to avoid contradictions/conflicts
Exclude is sometimes difficult , bit avoid as much as possible (eg licenses)

13. Priority between documents
terms of the contract
service level agreement
delivery schedule
technical specification
other annexes of the contract, excl. invitation to tender and GCC
invitation to tender, excl. GCC
GCC
contractor’s bid
Purchasing Supplies — Legal Aspects & Contract Follow-up

14. Confidential information
GCC: contractor as recipient
Modification: mutual disclosure
Mark as confidential!
eg: information regarding new technique by contractor
eg: contractor uses technique developed by a third party to perform the contract

15. Intellectual property: GCC
CERN discloses IP to contractor
License for contractor to use CERN IP, without warranty by CERN
License for CERN to use contractor IP for the use of supplies/services, with warranty by contractor
IP freshly generated belongs to CERN

16. Intellectual Property: reasonable modifications possible
CERN
Owns generated IP
Provides warranty
No disclosure of IP
contractor
Owns generated IP
Provides no warranty
Disclosure of IP
Prototype ordered by CERN, based on CERN’s spec
Order of special product of contractor, with protected IP

17. Delivery As set out in contract Responsibility of contractor
DATE
PLACE
As set out in contract
Responsibility of contractor
Good shape
Modification by CERN
compensation
Receipt ≠ acceptance
- Date and place foreseen in contract

18. Delivery: when it goes wrong…
Late delivery
Foreseen: refusal and termination of contract if it has lost purpose (wedding cake clause)
Penalties / termination if maximum penalties reached
Notify FP
Damage or incorrect delivery
Foreseen: refusal and termination of contract if it has lost purpose
Refusal on the basis of actual damage or incorrect delivery
Delivery at date and place set out in contract
Penalties for late delivery
- mention consequence of refusal of delivery

19. After delivery: acceptance procedure
Written notification of acceptance within 3 months
Payment in full
Title to the supplies transferred to CERN upon acceptance

20. What to do within 3 months of delivery?
Carry out detailed inspection
Notify non-conformity in writing;
=> remedial measures by contractor
No payment of non-conforming deliveries
Penalties
Termination of contract if loss of purpose of goods/services due to delay for remedial measures

21. Warranty: Duration
GCC: 2 years after acceptance
Modifications possible
GCC exception: longer legal warranty
Contractor warrants conformity of the goods or services with the contract
Exception: garantie décennale

22. Warranty: purpose Remedy of existing non-conformities by contractor
Remedy to supplies likely to suffer same non-conformity
No remedy measures by CERN or 3p at contractor’s expense
Extension or renewal of warranty

23. Termination: when it goes really wrong…
Gross negligence or willful misconduct
Bankruptcy
insolvency
Bankruptcy insolvency
Notify FP!

24. Termination: what to do?
Notify FP before taking any termination measure!
Avoid serious financial and legal consequences

25. Contract follow-up Who does what3
Contract follow-up Who does what

26. Contract follow-up
Procurement process
Selection of contractor
Formalization of commercial arrangement
Contract follow-up
Arrangement is understanding between the parties up to the point of concluding the contract – loose term to cover everything understood between CERN and selected bidder

27. When? Technical aspects are discussed during “clarification” phase
Planning established
Equipment to be used defined
Raw material to be purchased
Etc.
Purchasing Supplies — Legal Aspects & Contract Follow-up

28. Why? Power in the Purchasing Process
Purchasing Supplies — Legal Aspects & Contract Follow-up

29. How? Purchasing Supplies — Legal Aspects & Contract Follow-up
Follow-up meetings with contractor
Periodicity
Participants
To be defined
Establish minutes of meetings
draft by CERN technical responsible
review by procurement officer
approval by contractor
If no comments within 8 days minutes are approved
Purchasing Supplies — Legal Aspects & Contract Follow-up

30. Use contractual tools in case of problems with contract execution
How?
Use contractual tools in case of problems with contract execution
Purchasing Supplies — Legal Aspects & Contract Follow-up

31. Execution by third party Termination, bank guarantee
Penalties
Late delivery, failure to deliver
No acceptance
Non-conforming supplies
Execution by third party
Failure to deliver or late delivery (weeding cake clause) Other breaches (delivery of docs, non compliance with laws.. )
Termination, bank guarantee
Problems with warranty
Purchasing Supplies — Legal Aspects & Contract Follow-up

32. The technical officer shall:
How ?
The technical officer shall:
Communicate in writing with the contractor
Involve the procurement officer asap in case of problems
Keep track of any relevant correspondence or communication with contractor (minutes, s, technical reports, etc.)
NEVER commit CERN without the approval of the procurement officer.
Purchasing Supplies — Legal Aspects & Contract Follow-up

33. How? The procurement officer will:
Draft correspondence with contractual consequences, i.e.: application of penalties, notice + request for remedial measures, non acceptance of supplies, drawing on bank guarantees, termination of contract
Interact with the Legal Service and other services (invoice office), if necessary
Purchasing Supplies — Legal Aspects & Contract Follow-up

34. Joker
Case Study No. 3
“ Contract follow-up for the Supply of 15 Tons of Magic Powder ”

35. Case study 3 Your task Case analysis (30 minutes):
Make three groups: two CERN technical officers and two CERN commercial officers
Read the background
Answer to the questions
Group presentation and case synthesis (30 minutes):
Each group makes its presentation
Contract Procurement Management Training Supplies– 20 September 2011