Mary Al Balber

Assistant General Counsel

Office of General Counsel

Board Procedures

Procurement and Sole Source

Worker Classification

Using System Template Agreements and Forms

-- Where to find them & how to appropriately modify them

MnSCU Standard Contract Provisions

Drafting Contractor’s Duties and Responsibilities

Compensation and Prepayment

Delegation of Authority, Governing Law and Venue

Intellectual Property

Data Practices

Ethics and Conflicts of Interests

Non-template Contracts and Review

Resources

There will be a question and answer session at end of the presentation.

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A contract is: a legally binding

document that defines the rights

and obligations of the parties and

sets “ground rules.”

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Contracts must be prepared on forms approved by the

Office of the Chancellor to assure that they include all state

required contract language. Any modification of forms

approved by the Office of the Chancellor or the use of a

non-Office of the Chancellor form requires review by the

system legal counsel and approval of the vice chancellor-

chief financial officer. System legal counsel includes either

the Minnesota State Colleges and Universities General

Counsel or the Minnesota Attorney General’s Office.

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Intellectual in character and result in the completion of a

task or a specific report or deliverable.

Services - Contractors are utilized for consultation, analysis,

evaluation, prediction, planning, programming, and/or

recommendations.

Contractor is an “Independent Contractor” not employee

per IRS worker classification

If individual, must not be current State employee or have

received an early separation incentive under Minnesota

State Colleges and Universities Board Policy 4.11, Board

Early Separation Incentive Program (BESI), during the one

year period prior to the effective date of this contract.

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Board Policy 5.14 Procurement and Contracts

Board Approval required for contracts including amendments with values greater than $3 million.

Procedure 5.14.2 Consultant, Professional or Technical Services

Procedure 5.14.5 Purchasing

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Grants college/university authority to enter into contracts

up to $100,000

A 2-week public notice of Request for Proposals shall be given for contracts greater than $50,000

Vice Chancellor/CFO approval required for contracts greater than $100,000 or longer than 5-year term

Vice Chancellor/CFO approval required for inter-agency, intra-agency, joint powers agreements, and master contracts in excess of $1 million

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Purchases $25,000 or less require quotation or open market

Purchases from $25,000 to $50,000 require sealed bids or two or

more quotations

Purchases greater than $50,000 require sealed bids by public

notice

Purchases greater than $100,000 require Vice Chancellor/CFO

approval

Funds must be encumbered prior to making an obligation to pay

Sealed bid solicitation is not required for purchases from:

Dept. of Admin., OET, MnSCU master contracts, and approved

cooperative purchasing agreements

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The State Single Source Policy can be found at:

› http://www.mmd.admin.state.mn.us/pdf/SingleSourcePolicy.pdf

Minn. Stat. 16C.02, Subd. 18: “Single source” means an acquisition

where, after a search, only one supplier is determined to be reasonably

available for the required product, service, or construction item.

Single source justification is not required for interagency agreements.

The burden of proof is on the agency to justify single source

procurements.

RESOURCE CONTACT: Mike Nordby, Office of the Chancellor

Finance Division

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Documentation of the basis for a single source

determination shall be retained in the contract file.

The documentation is public information.

An agency may be required to justify its single source

procurement in cases of audits, vendor protests,

media or legislative inquiries and litigation.

(cont.)

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Examples: Likely to be approved with minimal documentation

› Legislative or an appropriation dictating who must perform a service or

provide a product.

› Specific expert witnesses required in writing by the Office of the Attorney

General for litigation purposes.

› Warranties voided if others provide service.

Examples: Likely to be approved with thorough documentation

› Software license renewals/additions and software upgrades when

available from only one source;

› Equipment that legitimately requires brand compatibility with existing

equipment when available from only one manufacturer or sole authorized

distributor;

› All other situations where a search fails to identify viable alternatives.

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Examples: Unlikely to be approved

› Agency or Campus perception that the vendor is the

best qualified (this should be determined through a

competitive process);

› Lack of planning by the Campus resulting in limited

time available for a competitive solicitation;

› Special incentives or deals offered by one vendor;

› Past or existing relationship with the proposed vendor

or past performance by the vendor.

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General Rule is that an individual is an independent

contractor if you, the person for whom the services are

performed, have the right to control or direct only

the result of the work and not the means and

methods of accomplishing the result.

Cannot hire state employees as independent contractors

› Includes ALL MnSCU faculty, staff, full-time and part-time employees

› Pay attention to “BESI” – “…he/she has not received an early separation incentive under Minnesota State Colleges and Universities Board Policy 4.11, Board Early Separation Incentive Program (BESI), during the one year period prior to the effective date of this contract.”

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Link to further information on worker classification:

http://www.finance.mnscu.edu/taxinformation/other/worker_clas

sificatio.html

New Checklist Form coming soon!

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Plan accordingly– expect the best and

plan for the worst.

Use System templates and forms.

Allow time for negotiation.

Answer questions, WHO, WHAT, WHEN,

WHERE, HOW MUCH.

Not every contract can be an

emergency.

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Has work begun prior to contract’s full execution? That is not allowed, per Minnesota Statute MS16.A.15.

Process an MS16A.15 Form, found at: http://www.finance.mnscu.edu/contracts-purchasing/contracts/forms/index.html #1

No signed contract without encumbrance.

Payment made in violation of statute is illegal.

Statute says: Employee authorizing payment is liable to the State for amount paid.

Statutes says: If an employee knowingly incurs an obligation or authorizes or makes an expenditure or payment in violation of statute, the violation is just cause for removal.

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Clarity, completeness, and common understanding is essential;

Supersedes previous oral discussions or “how we’ve always done it;”

After contract signed, if wish to change it, conversations or e-mails to change the contract are not sufficient. Changes to contracts (amendments) must be in writing and signed by the parties;

Contract must be signed before (!) the parties begin performing duties under the contract -

› Good practice and state law requires

Good Contracts are Preventative Care:

Easier to work out issues before signing contract than to leave things unaddressed or “silent” and risk breaching the contract and/or litigation later.

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Letters of intent;

Verbal and “hand shake” agreements;

Unauthorized deals or unauthorized signers;

Jumping the gun or taking action before a written agreement;

Gifts.

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When parties want to modify terms of Existing Contracts:

•A superseding Amendment or Addendum is drafted -

May modify, add, or supplement existing contract;

• Signature and date by authorized representatives of

both parties needed for validity;

• Amendments/Addenda reference existing contract,

and state how it is changed;

(cont.)

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Proposed Contract - before signing, one party proposes contract and one party wants to change terms.

Parties can agree to modify proposed contract and then sign;

OR

Both parties agree to additional language and terms of an Amendment or Addendum, but both parties sign the contract AND the Addendum or Amendment simultaneously (may need legal review or assistance).

OGC or AGO can help!

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Sometimes parties refer to Exhibits and incorporate

them by reference so that the exhibit is part of the

contract, e.g.:

“Exhibit A, attached herein, and is incorporated by

reference in its entirety as part of this Agreement.”

Frequently used to describe details of responsibilities

or other matters too lengthy or complex for the

contract.

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• Have a fixed time period with beginning (effective)

and end (termination) dates;

• No longer than five years per MnSCU Board policy;

• Avoid automatic renewal provisions, seek OGC or

AGO review.

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Answer who, what, when, and think about how much.

Provide a specific description of the performance measures or other

tools, including accessibility measures if applicable, that will be used to

monitor, enforce, and evaluate performance. List precisely what you

expect to obtain; e.g. list the time of performance, the final product

quality. Write duties in a manner that allows contractor accountability

and clearly shows who does what so that an uninvolved person can

understand what needs to be done, by whom, and when.

Be specific enough to be able to know if the contractor delivered the

services pursuant to the written duties and what was agreed upon in

the contract.

Determine how you know when you got what you wanted; determine

how you will enforce the provisions of the contract; develop specific

requirements to deal with anticipated problems.

Opportunity to negotiate cost of service for each deliverable.

(cont

.)

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› Avoid jargon and terms of art.

› List precisely what you expect to obtain from the services; e.g. list the time of performance, the final product quality.

› Omit language that isn’t a duty if using a proposal.

The contractor’s proposal is not written in an acceptable duty format.

List duties because proposals are not specific and are not drafted in legally enforceable language.

› Avoid vague language, such as listing out goals of a project.

› Do not include MnSCU duties under Contractor duties.

› Do not include language in duties, including attachments, which conflicts with the template provisions.

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Compensation

› By deliverable or task, when possible.

› Include rate of pay, how much for the services

listed in the duties.

Reimbursement of travel and subsistence expenses

› Contractor’s expenses need to be identified before

the contract is written and included in the total

cost.

› Per diem defined by Commissioner’s Plan.

Terms of Payment

› Use “every other week” or “twice a week” or

“monthly” after each specific task is completed.

› Agree to pay 30 days after invoice is received.

› Ensure we are not prepaying for services.

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IF NOT LISTED BELOW, PREPAYMENT IS NOT ALLOWED.

MN Statute 16A.065

Board Policy 5.14.5 Part 6 allows prepayment: 1) Software or software maintenance contracts;

2) Sole source maintenance agreements;

3) Exhibit space;

4) Subscription fees for newspapers or magazines;

5) Registration fees where advance payment is required or there is a discount for advance payment;

6) Payment for materials from the Library of Congress.

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a. Be alert for sections in other parties’ contracts headed: Hold Harmless; Indemnification; Limitations on Liability; or Liabilities.

Indemnification: a provision in the contract in which one party agrees to pay damages or claims that the other party may be required to pay to another.

Hold Harmless: a type of indemnity provision or clause that would require one party to fully protect the other party from a claim asserted by another. This may also include payment of costs and/or attorneys fees.

b. Colleges and universities prohibited by law from agreeing to indemnify the other party to a contract (reference: Minnesota Constitution article XI, section 1 and Minnesota Statutes section 16A.138). Minnesota Statutes prohibit insurance of an obligation without an encumbrance and the Minnesota Constitution provides that no money is to be paid out without an appropriation. (cont.)

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c. It is permissible for other party to a contract to agree to indemnify MnSCU, and the college/university. Be alert for attempts by other party to change MnSCU contract template language to limit their liability to “negligence” or “willful negligence.”

d. MnSCU Office of General Counsel and Attorney General’s Office may offer “compromise language” to substitute for prohibited provisions to clearly state that college/university liability is governed by Minnesota law:

“Each party will be responsible for its own acts and behavior and the results thereof. The State’s liability is governed by the Minnesota Tort Claims Act, Minn. Stat. Sec. 3.736 and other applicable law.”

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“The CONTRACTOR and MnSCU must comply with the Minnesota

Government Data Practices Act, Minnesota Statutes Chapter 13, as it

applies to all data provided by MnSCU in accordance with this contract,

and as it applies to all data, created, collected, received, stored, used,

maintained, or disseminated by the CONTRACTOR in accordance with

this contract. The civil remedies of Minnesota Statute §13.08 apply to

the release of the data referred to in this clause by either the

CONTRACTOR or MnSCU.

“In the event the CONTRACTOR receives a request to release the data

referred to in this clause, the CONTRACTOR must immediately notify

MnSCU. MnSCU will give the CONTRACTOR instructions concerning

the release of the data to the requesting party before the data is

released."

-- Don't delete or revise data practices language included in the

template. If you have questions, please seek guidance from OGC

or AG Office.

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MnSCU owns IP

Contractor warrants no infringement

Consult with Gary Hunter, MnSCU System

Director of Intellectual Property

gary.hunter@so.mnscu.edu

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May be overbroad:

› Can’t agree to keep everything

confidential

› Alternative language available if needed

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Often, a CONTRACTOR will ask that MnSCU promise to maintain the confidentiality of CONTRACTOR’s materials or even the terms of the contract itself.

We can’t do that unless the materials in question are classified as private, confidential or protected nonpublic under the Data Practices Act.

“Trade Secret Information” may also be withheld from disclosure. It is defined in Minn. Stat. § 13.37, subd. 1 (b):

(cont.)

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(cont.)

(b) "Trade secret information" means government data, including a formula, pattern, compilation, program, device, method, technique or process (1) that was supplied by the affected individual or organization, (2) that is the subject of efforts by the individual or organization that are reasonable under the circumstances to maintain its secrecy, and (3) that derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use.”

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• MnSCU contracts provide that Minnesota law governs

the contract and interpretation.

*If other party is outside Minnesota or is another state,

tribal or federal entity and wants its law to apply, OGC

and AG’s Office can assist in negotiating or providing

additional contract language.

• Venue for litigation of a contract (preferred):

“Venue for all legal proceedings arising out of this

contract, or breach thereof, shall be in the state or

federal court with competent jurisdiction in Ramsey

County, Minnesota.”

Board Policy 1A.2.2

http://www.mnscu.edu/board/procedure/1a02

p2.html

Process and forms on Finance website

http://www.finance.mnscu.edu/about/delegati

onofauthority/index.html

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All required signatures from both parties for contract to be effective.

Contractor always signs first!

› Title required

› Authority to bind

› Signatures in Ink – Original Copies

Verified as to Encumbrance › Did you budget?

Authorized Signature › Delegated Authority to Sign.

Form and Execution › Did you have OGC or AGO review?

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The person responsible for…

› Knowing the duties and deliverable timelines;

› Developing a contract administration plan;

› Monitoring and reporting contract performance;

› Monitoring the contract budget;

› Negotiating contract changes and resolving

disputes;

› Closing the contract upon completion or

termination.

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Use most current template directly from Finance website each time you draft to avoid use of outdated forms.

Understand your campus contract process for reviews, approval, and contract management.

Follow the template instructions, proofread, check your math, and delete the instructions.

Never modify or omit required clauses without AGO or OGC review. Ensure no changes are made. If there are changes by the contractor, contact our office.

Don’t agree to jurisdiction in another state or country without further legal review and approval.

Avoid “we’ll sign yours if you sign ours.”

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College/university must review for essential elements, prohibited provisions, practicality and business decisions;

Don’t assume that a provision suggested by a party can’t be changed or modified;

If other party wants to use its contract form, consult with MnSCU Office of General Counsel or Attorney General’s Office for legal review and possible negotiation and recommended changes, or drafting addendum or amendment;

Avoid “We’ll sign yours, if you’ll sign ours.”

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WHY IS EMPLOYEE ETHICAL BEHAVIOR IMPORTANT?

We are obligated to comply with

law.

Violations can result in

criminal penalties;

employment sanctions-including termination.

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Our Code is a compilation of various

existing statutes and policies that

govern employee conduct.

Adopted as a system procedure http://www.mnscu.edu/board/procedure/1c0p1.html

Frequently Asked Questions are linked

on the above website.

Effective July 1, 2008.

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Obligation to Avoid

Conflicts of Interest

“When an employee

believes the potential for a

conflict of interest exists, it is

the employee’s duty to

avoid the situation.”

Minn. Stat. § 43A.38, subd. 6.

• Employees must report

potential conflicts of interest

to supervisors.

Elements of

Conflict of Interest

Use or attempted use of

the employee’s position

To secure benefits,

privileges, exemptions or

advantages

For the employee, family or

an organization the

employee is associated

with

Which are different than

those available to the

general public.

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Employees involved in college/university purchasing decisions may not:

› Have any personal financial interest in contracts or purchase orders (PO’s); or

› Accept directly or indirectly anything of value (other than nominal) from an entity to which a contract or PO is or may be awarded; or

› Accept a promise for benefit or reward in the future.

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MnSCU Request for Proposal Template

http://www.finance.mnscu.edu/contracts-

purchasing/contracts/forms/index.html

Near bottom of Contracts page:

Additional links and documents

Procurement dollar threshold table (.pdf) (52KB)

March 2010 – Office of General Counsel

Request for Proposal Template(.pdf) (155 KB)

Updated: 2009

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MnSCU Finance Contracts website:

http://www.finance.mnscu.edu/contracts-

purchasing/contracts/index.html

MnSCU Board Policies and

Contract Procedures:

http://www.mnscu.edu/board/policy/index.html

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Anticipating/planning

Negotiating

Drafting

Finalizing

Amending

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Office of the Chancellor, Office of General Counsel:

Mary Al Balber, Assistant General Counsel

maryal.balber@so.mnscu.edu, (651) 201-1752

Heidi Slegers, Legal Assistant heidi.slegers@so.mnscu.edu, (615) 201-1755

Attorney General’s Office:

Michele Owen, Assistant Attorney General

michele.owen@state.mn.us, (651) 757-1322

Patty Nolte, Paralegal

patricia.nolte@state.mn.us, (651) 757-1285

Assistance for RFP, Sole Source, Procurement and Tax:

Mike Nordby, Campus Assistance Supervisor michael.nordby@so.mnscu.edu, (651) 201-1723

Steven Gednalske, System Director - Tax & Financial Services steve.gednalske@so.mnscu.edu, (651) 201-1866 Gary Hunter, MnSCU System Director of Intellectual Property gary.hunter@so.mnscu.edu, (651) 201-1659

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