Vendor Service Vendor Service ContractsContracts: :

Processes and ProceduresProcesses and Procedures((AM 541AM 541))

Initiating, Processing, & Initiating, Processing, & Establishing Vendor Establishing Vendor

ContractsContractsRobert Lee Dickens - Contracts Manager

Richard “Rancher” Wollney Jr. - Contracts Specialist

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AgendaAgenda

What What isis a Contract? a Contract?

Categorizing University ContractsCategorizing University Contracts

Initial Development and SubmissionInitial Development and Submission

Formal Review of Contract TermsFormal Review of Contract Terms

Time Lines, High-Risks Agreements, and Time Lines, High-Risks Agreements, and Special Procedure ContractsSpecial Procedure Contracts

Finalizing and Executing the AgreementFinalizing and Executing the Agreement

Contract AdministrationContract Administration

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What What isis a Contract? a Contract?Contract Law 101Contract Law 101

Determining the Initial StepDetermining the Initial Step

Everything you wanted to know about contract law that Everything you wanted to know about contract law that we can squeeze into 30 minutes.we can squeeze into 30 minutes.

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What What isis a Contract? a Contract? AA contract contract is an agreement between two parties is an agreement between two parties

that creates an obligation to perform (or not that creates an obligation to perform (or not perform) a particular duty. A legally perform) a particular duty. A legally enforceable contract requires:enforceable contract requires:

1.1. An OfferAn Offer (I’ll mow your lawn this weekend, if (I’ll mow your lawn this weekend, if you you pay me $30)pay me $30)

2.2. An AcceptanceAn Acceptance (You’ve got a deal)(You’ve got a deal)

3.3. ConsiderationConsideration (The value received and given (The value received and given – – the money and the lawn mowed) the money and the lawn mowed)

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Establishing Offer and Establishing Offer and Acceptance: “A Meeting of the Acceptance: “A Meeting of the

Minds”Minds”A legally recognized offer and an acceptance A legally recognized offer and an acceptance creates a “meeting of the minds’, or mutual assent, creates a “meeting of the minds’, or mutual assent, between the parties. between the parties.

Mutual Assent requires the presence of the Mutual Assent requires the presence of the following factors:following factors:1.1. Both parties must exhibit a “contractual intent” Both parties must exhibit a “contractual intent” [words [words

spoken in jest or frustration will lack the spoken in jest or frustration will lack the requisite intent];requisite intent];

2.2. The terms of the offer must be clear and definite;The terms of the offer must be clear and definite;

3.3. The acceptance must be clearly communicated.The acceptance must be clearly communicated.

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The Requirement for Clear and The Requirement for Clear and Definite TermsDefinite Terms

Required Clarity:Required Clarity: For terms to be legally For terms to be legally valid, a reasonable person must be capable of valid, a reasonable person must be capable of readily understanding them.readily understanding them.

Four primary areas in determining Four primary areas in determining definite terms:definite terms:1.1. the parties;the parties;2.2. time for performance (term or service time for performance (term or service schedule);schedule);3.3. the price; and the price; and4. the subject matter or scope of service.4. the subject matter or scope of service.

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Consideration: Consideration: The Importance of the “Bargained Exchange.”The Importance of the “Bargained Exchange.”

Consideration must be mutual. Both Consideration must be mutual. Both parties parties mustmust receive something of value. receive something of value.

Involvement of money is not required.Involvement of money is not required.

Contracts vs. GiftsContracts vs. Gifts

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What Authority Defines a Contract?What Authority Defines a Contract?

Sources of Contract LawSources of Contract Law

Common LawCommon Law – Court made case law governing – Court made case law governing contracts (primary law for service contracts)contracts (primary law for service contracts)

Uniform Commercial Code (UCC)Uniform Commercial Code (UCC) – – [Tex. Bus.& Comm.Code] – governs sales of tangible [Tex. Bus.& Comm.Code] – governs sales of tangible goods and secured transactions (goods and secured transactions (notnot services). services).

http://tlo2http://tlo2.tl.tlc.state.tx.us/status.bc.toc.htmc.state.tx.us/status.bc.toc.htm

Specific StatutesSpecific Statutes – – http://http://www.capitol.state.tx.uswww.capitol.state.tx.us

Categorizing University Categorizing University ContractsContracts

UTSA

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Types of University ContractsTypes of University Contracts

Affiliation and Affiliation and International Program International Program AgreementsAgreements

Athletic-Specific, or Athletic-Specific, or Student-Specific Student-Specific Contracts (non- Contracts (non- procurement in nature).procurement in nature).

Interagency Cooperation Interagency Cooperation Agreements (IAC) & Agreements (IAC) & Inter-local AgreementsInter-local Agreements

Museum and Exhibit Museum and Exhibit AgreementsAgreements

Prof. Service Agreements Prof. Service Agreements (for individuals not (for individuals not organized as a business)organized as a business)

Procurement Contracts; Procurement Contracts; Vendor ServicesVendor Services

Sponsored Research Sponsored Research Contracts and Sponsored Contracts and Sponsored Projects Projects

University-Provided University-Provided ServicesServices

See Categorizing ContractsSee Categorizing Contracts

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Classifying a Procurement ContractClassifying a Procurement Contract

University payment is not a defining factor.University payment is not a defining factor. [Many [Many procurement contracts actually involve a vendor procurement contracts actually involve a vendor payment payment toto UTSA.] UTSA.]

Generally defined as:Generally defined as: A formal agreement with a A formal agreement with a business entity to secure a particular service that is business entity to secure a particular service that is subject to compliance with competitive purchasing subject to compliance with competitive purchasing requirements or purchasing policies.requirements or purchasing policies.

Competitive requirements can be dictated by:Competitive requirements can be dictated by: 1.1. Statutory provisions;Statutory provisions;2.2. UT System polices;UT System polices;3.3. Best Value Procedures; and Best Value Procedures; and 4.4. Appropriate business relations.Appropriate business relations.

See “Procurement Contracts Defined”.

Initial Evaluation, Initial Evaluation, Development, and Development, and

SubmissionSubmission

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Initial Contract Evaluation and Initial Contract Evaluation and DevelopmentDevelopment

Determining the Determining the Need for an AgreementNeed for an Agreement: :

1.1. Vendor-OriginatedVendor-Originated2.2. UT Determination: UT Determination: The risk of the The risk of the project project may necessitate a formal agreement; may necessitate a formal agreement; or UT or UT Policies may require itPolicies may require it..

Using Sample AgreementsUsing Sample Agreements

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Routing and Submission of Routing and Submission of Contractual ProjectsContractual Projects

Where to Where to RouteRoute: Regardless of value or cost, route : Regardless of value or cost, route Procurement Contracts through the Purchasing Office.Procurement Contracts through the Purchasing Office.

Electronic Purchase Requests Electronic Purchase Requests (PB4 – Point)(PB4 – Point)– Establishes approval authorities – Authorizes Establishes approval authorities – Authorizes

implementation – Approves fundingimplementation – Approves funding

Keep in mind that contracts for vendor goods and Keep in mind that contracts for vendor goods and services are the services are the final stage of a proper procurement and final stage of a proper procurement and must never precede the purchasing proceduresmust never precede the purchasing procedures..

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Required Submission Required Submission DocumentationDocumentation

Appropriately weighing the risks of the project Appropriately weighing the risks of the project with the most efficient processing methods with the most efficient processing methods requires a clear understanding of the project.requires a clear understanding of the project.

Upon Upon submissionsubmission, include the following , include the following informationinformation::

1.1. A clear description of the requested service; andA clear description of the requested service; and2.2. Details related to the purpose and benefit of the Details related to the purpose and benefit of the

requested servicerequested service;;

Remember, an enforceable contract requires clear and definite terms!Remember, an enforceable contract requires clear and definite terms!

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Required Submission Required Submission DocumentationDocumentation

If it is already known that a vendor will be If it is already known that a vendor will be requesting that its agreement be signed, requesting that its agreement be signed, the following information should also be the following information should also be included:included:

1.1. A short explanation (1-3 sentences) of the A short explanation (1-3 sentences) of the extenuating circumstances that require a extenuating circumstances that require a vendor’s contract; andvendor’s contract; and

2.2. An electronic version of the agreement in An electronic version of the agreement in modifiable Word format. modifiable Word format.

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Purchasing Office AssistancePurchasing Office Assistance

Routing to Assigned Buyer: The electronic Routing to Assigned Buyer: The electronic purchase request (PB4) will automatically purchase request (PB4) will automatically route to your department’s assigned buyer route to your department’s assigned buyer in the in the Purchasing OfficePurchasing Office..

UTSA Purchasing

Rules and

Regulation

s

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Purchasing RequirementsPurchasing Requirements

The Purchasing Office Buyer will work with The Purchasing Office Buyer will work with the Contracts Office and your Department the Contracts Office and your Department to:to:

1.1. Determine the most efficient Determine the most efficient methods methods for for project completion; project completion;

2.2. Ensure compliance with UT purchasing Ensure compliance with UT purchasing Regulations and Best Value Polices; and Regulations and Best Value Polices; and

3.3. Accurately define the Statement of Accurately define the Statement of Services Services (SOW) or Scope of Work.(SOW) or Scope of Work.

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Reviewing the Business IssuesReviewing the Business Issues

Developing an Appropriate Statement of Developing an Appropriate Statement of Services (SOS):Services (SOS):1.1. Does the SOS accurately define what you Does the SOS accurately define what you

want?want?

2.2. Will the SOS allow for legitimate Will the SOS allow for legitimate evaluation evaluation of the result?of the result?

3.3. Talk it through with an unaffected party.Talk it through with an unaffected party.

See Crafting the Agreement for more information.

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Reviewing the Business IssuesReviewing the Business Issues

Payment schedules:Payment schedules: [Ensure terms are [Ensure terms are acceptable and that the department has the ability to acceptable and that the department has the ability to comply.]comply.]

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

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

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Finalizing the NeedsFinalizing the Needs

Assistance from Assistance from Purchasing and Purchasing and Distribution ServicesDistribution Services

Defining Business RisksDefining Business Risks

Minimizing the RisksMinimizing the Risks

Departmental Departmental OwnershipOwnership

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Understanding the CommitmentUnderstanding the Commitment

The Principle IssueThe Principle Issue: Ensure there is a clear : Ensure there is a clear understanding of the two parties’ commitment.understanding of the two parties’ commitment.

Ensuring Enforceability:Ensuring Enforceability:1.1. Establish objective measures of Establish objective measures of

performance performance (did you get what you wanted?)(did you get what you wanted?)

2.2. Create methods to resolve disputes Create methods to resolve disputes without without affecting progress.affecting progress.

3.3. Determine means of recourse and Determine means of recourse and remedies, remedies, if all else fails. if all else fails.

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Requirements for Additional Requirements for Additional Expertise and ApprovalsExpertise and Approvals

Review from other departmentsReview from other departments: The : The Contracts Office may request a review and/or Contracts Office may request a review and/or approval from other affected departments and approval from other affected departments and additional University experts. additional University experts.

Departmental OwnershipDepartmental Ownership: As The ‘owner’ of : As The ‘owner’ of the contract, the department should take the contract, the department should take reasonable steps to secure all departmental reasonable steps to secure all departmental approvals.approvals.

Formal Review of the Formal Review of the Contract TermsContract Terms

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Legal Office ReviewLegal Office Review

Guidelines for review by UTSA’s Legal Guidelines for review by UTSA’s Legal OfficeOffice

Requirements for Review by the UT Requirements for Review by the UT System System Office of General CounselOffice of General Counsel

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Utilizing Alternate Contract Utilizing Alternate Contract MethodsMethods

Purchase Order vs. Formal ContractPurchase Order vs. Formal Contract

Incorporating Contractual Terms into POs, Incorporating Contractual Terms into POs, Bids, and RFPsBids, and RFPs

See Alternate Contract MethodsSee Alternate Contract Methods

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Formal Review and AnalysisFormal Review and Analysis

Refining the SOS, if necessaryRefining the SOS, if necessary

Matching the Terms to the SOSMatching the Terms to the SOS

NegotiationNegotiation– The Contracts Office will facilitate any The Contracts Office will facilitate any

required negotiations with the vendor’s legal required negotiations with the vendor’s legal office or contract officers.office or contract officers.

– The Contracts Office will maintain continuous The Contracts Office will maintain continuous consultation with the department, specifically consultation with the department, specifically in the area of business issues.in the area of business issues.

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Major Areas within Every ContractMajor Areas within Every Contract

PartiesParties

Effective Date and TermsEffective Date and Terms

Statement of Service (SOS)Statement of Service (SOS)

PricingPricing

Performance StandardsPerformance Standards

WarrantiesWarranties

RemediesRemedies

Risk AllocationRisk Allocation

BoilerplateBoilerplate

Signatures Signatures See: See:

contract componentscontract components

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Common Contractual TermsCommon Contractual Terms

Three commonly negotiated/contentious Three commonly negotiated/contentious provisions:provisions:

1.1. WarrantiesWarranties

2.2. IndemnificationIndemnification [protection against loss or [protection against loss or liability from 3 liability from 3 rdrd party claims]party claims]

3.3. Liability & DamagesLiability & Damages [legal responsibilities] [legal responsibilities]

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Common Contractual TermsCommon Contractual Terms

Two common provisions specific to UTSA:Two common provisions specific to UTSA:

1.1. ConfidentialityConfidentiality

2.2. University MarksUniversity Marks

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Constitutional & Court-Ordered Constitutional & Court-Ordered Limitations & AuthorityLimitations & Authority

Sovereign ImmunitySovereign Immunity

Prohibition Against Agency Debt Prohibition Against Agency Debt

Right to Suit Right to Suit

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Statutorily Required ClausesStatutorily Required Clauses

Governing Law (Jurisdiction) and VenueGoverning Law (Jurisdiction) and Venue

Financial StandingFinancial Standing

Dispute ResolutionDispute Resolution

Electronic and Information Resources Electronic and Information Resources Accessibility (EIR Provision)Accessibility (EIR Provision)

Standard AddendumStandard Addendum

See Standard ClausesSee Standard Clauses

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Use of Template Agreements Use of Template Agreements

Both UTSA and UT System have Both UTSA and UT System have developed template agreements that can developed template agreements that can be utilized for various services.be utilized for various services.

Use of Template Agreements:Use of Template Agreements: 1.1. provides vendors with up-front notification provides vendors with up-front notification

of of the terms required for the project; andthe terms required for the project; and2.2. assists in protecting the University through assists in protecting the University through

the use of standardized terms & the use of standardized terms & conditions.conditions.

Time Lines:Time Lines:Minor Contracts, Minor Contracts,

High-Risk Agreements, and High-Risk Agreements, and UT System RequirementsUT System Requirements

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General Time LinesGeneral Time Lines

Standard or Template Agreements with no Standard or Template Agreements with no Substantive Changes:Substantive Changes:– typically reviewed (redrafted, if necessary) and typically reviewed (redrafted, if necessary) and

comments relayed to the department and/or vendor comments relayed to the department and/or vendor within within 7-107-10 daysdays..

Minor Contracts (approx. 1-5 pages with Minor Contracts (approx. 1-5 pages with relatively high clarity and minor risk): relatively high clarity and minor risk): – typically analyzed, redrafted, and relayed to the typically analyzed, redrafted, and relayed to the

department and/or vendor for review within department and/or vendor for review within 7-10 7-10 days.days.

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High-Risk Agreements High-Risk Agreements

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

TimelineTimeline: : The time required to analyze, redraft, and The time required to analyze, redraft, and coordinate issues (and departments) may be coordinate issues (and departments) may be significant, but an initial review will generally be significant, but an initial review will generally be provided to the department and/or vendor within provided to the department and/or vendor within 3-4 weeks3-4 weeks. .

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Required UT System ReviewRequired UT System Review

Special Procedure ContractsSpecial Procedure Contracts– Requires review by the UT System Requires review by the UT System

Office of General Counsel Office of General Counsel (OGC). The (OGC). The Contracts Office will review the agreement Contracts Office will review the agreement locally and then forward to OGC for approval locally and then forward to OGC for approval as to as to legal formlegal form. .

General Business Contracts > $500,000General Business Contracts > $500,000– Requires review and approval by OGC. The Requires review and approval by OGC. The

only exceptions to this requirement are those only exceptions to this requirement are those contracts designated by UT System as contracts designated by UT System as Standard ContractsStandard Contracts. .

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Required UT System ReviewRequired UT System Review

TimelinesTimelines– Special Procedure Contracts and OGC review Special Procedure Contracts and OGC review

will require additional processing time (add an will require additional processing time (add an estimated 60-90 days to the normal processestimated 60-90 days to the normal process).).

Board of Regents ApprovalBoard of Regents Approval– Generally speaking, all contracts with a value Generally speaking, all contracts with a value

exceeding $1M must be approved by the Board. exceeding $1M must be approved by the Board. A summary of contracts requiring Board approval A summary of contracts requiring Board approval can be found atcan be found at http://www.utsystem.edu/policy/policies/uts145.html http://www.utsystem.edu/policy/policies/uts145.html

Finalizing and Executing Finalizing and Executing the Agreementthe Agreement

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Finalizing the AgreementFinalizing the Agreement

Final Negotiations Final Negotiations with the Vendorwith the Vendor

Departmental Departmental Approval RequiredApproval Required

Additional Necessary Additional Necessary ApprovalsApprovals

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Executing the Agreement -Executing the Agreement -Who can Sign?Who can Sign?

Upon completion of negotiation, the Upon completion of negotiation, the Contracts Office will: Contracts Office will:

1. 1. route the Agreement to obtain appropriate route the Agreement to obtain appropriate signatures; andsignatures; and2.2. distribute signed copies accordingly.distribute signed copies accordingly.

President-Delegated AuthorityPresident-Delegated Authority::

1.1. V.P. for Business AffairsV.P. for Business Affairs2.2. Associate V.P. for AdministrationAssociate V.P. for Administration3.3. Associate V.P. for Financial AffairsAssociate V.P. for Financial Affairs

Departmental Contract Departmental Contract AdministrationAdministration

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Cost Benefit Analysis Required for Cost Benefit Analysis Required for State Funded ContractsState Funded Contracts

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

1.1. A cost-benefit analysis for the services, or A cost-benefit analysis for the services, or a a justification of the need for the services; justification of the need for the services; andand

2.2. The relationship of the services to the The relationship of the services to the staffing plan.staffing plan.

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Final Stage: Departmental Contract Final Stage: Departmental Contract AdministrationAdministration

Upon completion of the procurement Upon completion of the procurement process and contract negotiations, the process and contract negotiations, the final phase of contracting is administration.final phase of contracting is administration.

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

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

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Ensuring Compliance: Ensuring Compliance: Departmental Administration Departmental Administration

A Department’s Contract Administration A Department’s Contract Administration responsibilities include:responsibilities include:

1.1. Verifying the contractor complies with the Verifying the contractor complies with the terms and conditions of the agreement;terms and conditions of the agreement;

2.2. Ensuring all services have been received Ensuring all services have been received to to your specification prior to authorizing your specification prior to authorizing payment (or all revenue received); andpayment (or all revenue received); and

3.3. Ensuring the collection of renewal Ensuring the collection of renewal documentation (i.e. insurance, bonds).documentation (i.e. insurance, bonds).

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Guide for Contract AdministrationGuide for Contract Administration

Departmental Guide for Contract Departmental Guide for Contract Administration:Administration:

– To ensure compliance, departmental To ensure compliance, departmental administrators are strongly encouraged to administrators are strongly encouraged to review the guidelines found in the Department review the guidelines found in the Department Guide for Administration of Major Service Guide for Administration of Major Service Contracts. Contracts.

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Contacts and ReferencesContacts and ReferencesRobert Lee DickensRobert Lee DickensContracts ManagerContracts Manager

458-4067458-4067Richard “Rancher” Wollney Jr. Richard “Rancher” Wollney Jr.

Contracts SpecialistContracts Specialist 458-4069458-4069

Nora Evans Nora Evans Business Law Attorney - Legal Affairs Business Law Attorney - Legal Affairs 458-4703458-4703

Yolanda MillerYolanda Miller Director, Purchasing and Distribution ServicesDirector, Purchasing and Distribution Services 458-4975 458-4975

Lane BrinsonLane Brinson Purchasing Manager Purchasing Manager 458-4066458-4066http://www.utsa.edu/purchasing/contracts/http://www.utsa.edu/purchasing/contracts/

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What have we discussed …What have we discussed … Definition of a Contract Definition of a Contract Types of University ContractsTypes of University Contracts Initial Development and Submission of Initial Development and Submission of

Contractual ProjectContractual Project Overview of Contract TermsOverview of Contract Terms Time Lines, High-Risks Agreements, and Time Lines, High-Risks Agreements, and

Special Procedure ContractsSpecial Procedure Contracts How to finalize and execute an agreementHow to finalize and execute an agreement Contract AdministrationContract Administration Resource informationResource information

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QuestionsQuestions