Contract 101

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Vendor Service

Contracts:Processes and Procedures

(AM 541)

Initiating, Processing, &

Establishing VendorContractsRobert Lee Dickens - Contracts Manager

Richard Rancher Wollney Jr. - Contracts Specialist

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Agenda

What is a Contract?

Categorizing University Contracts

Initial Development and SubmissionFormal Review of Contract Terms

Time Lines, High-Risks Agreements, and

Special Procedure ContractsFinalizing 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 thatwe can squeeze into 30 minutes.

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What is a Contract?

Acontract is an agreement between two partiesthat creates an obligation to perform (or notperform) a particular duty. A legallyenforceable contract requires:

1.An Offer(Ill mow your lawn this weekend, if youpay me $30)

2.An Acceptance(Youve got a deal)

3. Consideration(The value received and giventhe money and the lawn mowed)
http://www.utsa.edu/purchasing/definition.cfmhttp://www.utsa.edu/purchasing/contracts/definition.cfmhttp://www.utsa.edu/purchasing/contracts/definition.cfmhttp://www.utsa.edu/purchasing/definition.cfm

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Establishing Offer andAcceptance: A Meeting of the

MindsA legally recognized offer and an acceptancecreates a meeting of the minds, or mutual

assent, between the parties.Mutual Assent requires the presence of thefollowing factors:

1. Both parties must exhibit a contractual intent

[words spoken in jest or frustration will lack therequisite 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 andDefinite Terms

Required Clarity: For terms to be legallyvalid, a reasonable person must be capable ofreadily understanding them.

Four primary areas in determiningdefinite terms:1. the parties;2. time for performance (term or service

schedule);3. the price; and4. the subject matter or scope of service.

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Consideration:The Importance of the Bargained Exchange.

Consideration must be mutual. Bothparties 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 tangiblegoods and secured transactions (notservices).

http://tlo2.tlc.state.tx.us/status.bc.toc.htm

Specific Statuteshttp://www.capitol.state.tx.us
http://tlo2.tlc.state.tx.us/status.bc.toc.htmhttp://www.capitol.state.tx.us/http://www.capitol.state.tx.us/http://tlo2.tlc.state.tx.us/status.bc.toc.htmhttp://tlo2.tlc.state.tx.us/status.bc.toc.htmhttp://tlo2.tlc.state.tx.us/status.bc.toc.htm

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Categorizing UniversityContracts

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Types of University Contracts

Affiliation andInternational Program

Agreements

Athletic-Specific, orStudent-SpecificContracts (non-procurement in nature).

Interagency Cooperation

Agreements (IAC) &Inter-local Agreements

Museum and ExhibitAgreements

Prof. Service Agreements(for individuals notorganized as a business)

Procurement Contracts;Vendor Services

Sponsored ResearchContracts and SponsoredProjects

University-ProvidedServices

See Categorizing Contracts
http://www.utsa.edu/purchasing/contracts/categorize.cfmhttp://www.utsa.edu/purchasing/contracts/categorize.cfm

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Classifying a Procurement Contract

University payment is not a defining factor. [Manyprocurement contracts actually involve a vendorpayment to UTSA.]

Generally defined as: A formal agreement with abusiness entity to secure a particular service that issubject to compliance with competitive purchasingrequirements or purchasing policies.

Competitive requirements can be dictated by:1. Statutory provisions;2. UT System polices;3. Best Value Procedures; and4. Appropriate business relations.

See Procurement Contracts Defined.
http://www.utsa.edu/purchasing/contracts/categorize.cfmhttp://www.utsa.edu/purchasing/contracts/categorize.cfm

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Initial Evaluation,Development, andSubmission

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Initial Contract Evaluation andDevelopment

Determining the Need for an Agreement:

1. Vendor-Originated

2. UT Determination: The risk of the projectmay necessitate a formal agreement; or UT

Policies may require it.

Using Sample Agreements
http://www.utsa.edu/purchasing/contracts/initial_eval.cfmhttp://www.utsa.edu/purchasing/contracts/initial_eval.cfm

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Routing and Submission ofContractual Projects

Where to Route: Regardless of value or cost, routeProcurement 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 andservices are the final stage of a proper procurement andmust never precede the purchasing procedures.
http://www.utsa.edu/purchasing/contracts/routing.cfmhttp://www.utsa.edu/purchasing/contracts/routing.cfm

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Required SubmissionDocumentation

Appropriately weighing the risks of the projectwith the most efficient processing methodsrequires a clear understanding of the project.

Upon submission, include the followinginformation:1. A clear description of the requested service; and

2. Details related to the purpose and benefit of therequested service;

Remember, an enforceable contract requires clear and definite terms!
http://www.utsa.edu/purchasing/contracts/routing.cfmhttp://www.utsa.edu/purchasing/contracts/routing.cfm

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Required SubmissionDocumentation

If it is already known that a vendor will berequesting 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 avendors contract; and

2. An electronic version of the agreement inmodifiable Word format.

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Purchasing Office Assistance

Routing to Assigned Buyer: The electronicpurchase request (PB4) will automaticallyroute to your departments assigned buyer

in the Purchasing Office.
http://www.utsa.edu/purchasing/http://www.utsa.edu/purchasing/

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Purchasing Requirements

The Purchasing Office Buyer will work withthe Contracts Office and your Departmentto:

1. Determine the most efficient methods forproject completion;

2. Ensure compliance with UT purchasing

Regulations and Best Value Polices; and3. Accurately define the Statement of Services

(SOW) or Scope of Work.
http://www.utsa.edu/purchasing/handbook.cfmhttp://www.utsa.edu/purchasing/handbook.cfm

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Reviewing the Business Issues

Developing an Appropriate Statement ofServices (SOS):

1. Does the SOS accurately define what youwant?

2. Will the SOS allow for legitimate evaluationof the result?

3. Talk it through with an unaffected party.

See Crafting the Agreement for more information.
http://www.utsa.edu/purchasing/contracts/craft_agrmt.cfmhttp://www.utsa.edu/purchasing/contracts/craft_agrmt.cfmhttp://www.utsa.edu/purchasing/contracts/craft_agrmt.cfm

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Reviewing the Business Issues

Payment schedules: [Ensure terms areacceptable and that the department has the ability tocomply.]

Service limitations: [i.e. A network license limitedto UTSA-controlled computers, when what is reallyrequired is a network license that allows remote access.]

Length of contract terms: [Changing technologymay make a two-year agreement for database serviceswith three option years more preferable than a five-yearagreement with less monetary costs.]

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Finalizing the Needs

Assistance fromPurchasing andDistribution Services

Defining BusinessRisks

Minimizing the Risks

DepartmentalOwnership

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Understanding the Commitment

The Principle Issue: Ensure there is a clearunderstanding of the two parties commitment.

Ensuring Enforceability:

1. Establish objective measures ofperformance (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 AdditionalExpertise and Approvals

Review from other departments: TheContracts Office may request a review and/or

approval from other affected departments andadditional University experts.

Departmental Ownership: As The owner ofthe contract, the department should takereasonable steps to secure all departmentalapprovals.

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Formal Review of theContract Terms

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Legal Office Review

Guidelines for review by UTSAs Legal

Office

Requirements for Review by the UTSystem Office of General Counsel
http://www.utsystem.edu/ogc/Homepage.htmhttp://www.utsystem.edu/ogc/Homepage.htm

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Utilizing Alternate ContractMethods

Purchase Order vs. Formal Contract

Incorporating Contractual Terms into POs,Bids, and RFPs

SeeAlternate Contract Methods
http://www.utsa.edu/purchasing/contracts/craft_agrmt.cfmhttp://www.utsa.edu/purchasing/contracts/craft_agrmt.cfm

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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 anyrequired negotiations with the vendors legal

office or contract officers.

The Contracts Office will maintain continuousconsultation with the department, specificallyin the area of business issues.
http://www.utsa.edu/purchasing/contracts/formal_review.cfmhttp://www.utsa.edu/purchasing/contracts/formal_review.cfm

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Major Areas within Every Contract

Parties

Effective Date and Terms

Statement of Service (SOS)Pricing

Performance Standards

Warranties

Remedies

Risk AllocationBoilerplate

Signatures

See:

contract components

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Common Contractual Terms

Three commonly negotiated/contentiousprovisions:

1.Warranties

2.Indemnification [protection against loss orliability 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-OrderedLimitations & Authority

Sovereign Immunity

Prohibition Against Agency Debt

Right to Suit

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Statutorily Required Clauses

Governing Law (Jurisdiction) and Venue

Financial Standing

Dispute ResolutionElectronic and Information Resources

Accessibility (EIR Provision)

Standard Addendum

See Standard Clauses

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Use of Template Agreements

Both UTSA and UT System havedeveloped template agreements that canbe utilized for various services.

Use ofTemplate Agreements:1. provides vendors with up-front notification of

the terms required for the project; and2. assists in protecting the University through

the use of standardized terms & conditions.

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Time Lines:Minor Contracts,High-Risk Agreements, and

UT System Requirements

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General Time Lines

Standard or Template Agreements with noSubstantive Changes: typically reviewed (redrafted, if necessary) and

comments relayed to the department and/or vendorwithin 7-10days.

Minor Contracts (approx. 1-5 pages with

relatively high clarity and minor risk): typically analyzed, redrafted, and relayed to thedepartment and/or vendor for review within 7-10days.

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High-Risk Agreements

Determining the Risk:Certain agreements, because of value, policies,or subject matter, can signify potential high riskto the University.

Timeline:The time required to analyze, redraft, and

coordinate issues (and departments) may besignificant, but an initial review will generally beprovided to the department and/or vendor within3-4 weeks.
http://www.utsa.edu/purchasing/contracts/time_lines.cfmhttp://www.utsa.edu/purchasing/contracts/time_lines.cfmhttp://www.utsa.edu/purchasing/contracts/time_lines.cfm

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Required UT System Review

Special Procedure Contracts Requires review by the UT System Office of

General Counsel (OGC). The Contracts Officewill 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 thosecontracts designated by UT System asStandard Contracts.
http://www.utsystem.edu/ogchttp://www.utsystem.edu/ogchttp://utsystem.edu/ogc/smallcontracts/specialcontract.cfmhttp://www.utsystem.edu/ogc/contract/standard.htmhttp://www.utsystem.edu/ogc/contract/standard.htmhttp://utsystem.edu/ogc/smallcontracts/specialcontract.cfmhttp://www.utsystem.edu/ogchttp://www.utsystem.edu/ogc

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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 valueexceeding $1M must be approved by theBoard. A summary of contracts requiringBoard approval can be found athttp://www.utsystem.edu/policy/policies/uts145.html
http://www.utsystem.edu/policy/policies/uts145.htmlhttp://www.utsystem.edu/policy/policies/uts145.html

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Finalizing and Executingthe Agreement

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Finalizing the Agreement

Final Negotiationswith the Vendor

DepartmentalApproval Required

Additional NecessaryApprovals

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Executing the Agreement -Who can Sign?

Upon completion of negotiation, theContracts Office will:

1. route the Agreement to obtain appropriatesignatures; and2. distribute signed copies accordingly.

President-Delegated Authority:1. V.P. for Business Affairs2. Associate V.P. for Administration3. Associate V.P. for Financial Affairs

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Departmental ContractAdministration

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Cost Benefit Analysis Required forState Funded Contracts

If state appropriated funds (14 Accounts)are used, the department must maintainon file the following documentation:

1.A cost-benefit analysis for the services, or ajustification of the need for the services; and

2. The relationship of the services to thestaffing plan.
http://www.utsa.edu/purchasing/contracts/administration.cfmhttp://www.utsa.edu/purchasing/contracts/administration.cfmhttp://www.utsa.edu/purchasing/contracts/administration.cfmhttp://www.utsa.edu/purchasing/contracts/administration.cfm

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Final Stage: Departmental ContractAdministration

Upon completion of the procurementprocess and contract negotiations, thefinal phase of contracting is administration.

Critical Nature of Administration: Regardless of how well a contract is drafted,

the contract will be ineffective if propercontract administration is not performed.

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Ensuring Compliance:Departmental Administration

A Departments Contract Administrationresponsibilities include:

1. Verifying the contractor complies with theterms and conditions of the agreement;

2. Ensuring all services have been received to

your specification prior to authorizingpayment (or all revenue received); and

3. Ensuring the collection of renewaldocumentation (i.e. insurance, bonds).

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Guide for Contract Administration

Departmental Guide for ContractAdministration:

To ensure compliance, departmentaladministrators are strongly encouraged toreview the guidelines found in the Department

Guide for Administration of Major ServiceContracts.
http://www.utsa.edu/purchasing/contracts/administration.cfmhttp://www.utsa.edu/purchasing/contracts/administration.cfmhttp://www.utsa.edu/purchasing/contracts/administration.cfmhttp://www.utsa.edu/purchasing/contracts/administration.cfm

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Contacts and ReferencesRobert Lee DickensContracts Manager

458-4067Richard Rancher Wollney Jr.

Contracts Specialist458-4069

Nora Evans

Business Law Attorney - Legal Affairs458-4703

Yolanda MillerDirector, Purchasing and Distribution Services458-4975

Lane Brinson

Purchasing Manager458-4066

http://www.utsa.edu/purchasing/contracts/
http://www.utsa.edu/purchasing/contracts/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 ofContractual Project

Overview of Contract Terms

Time Lines, High-Risks Agreements, andSpecial Procedure Contracts

How to finalize and execute an agreement

Contract Administration

Resource information

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Questions

Documents

Contract 101