Contracts:

Processes and Procedures

Initiating, Processing, & Establishing Vendor Contracts
Robert Lee Dickens - Contracts Manager Richard Rancher Wollney Jr. - Contracts Specialist

Agenda
What is a Contract? Categorizing University Contracts Initial Development and Submission Formal Review of Contract Terms Time Lines, High-Risks Agreements, and Special Procedure Contracts Finalizing 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 that we can squeeze into 30 minutes.
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What is a Contract?
A contract is an agreement between two parties that creates an obligation to perform (or not perform) a particular duty. A legally enforceable contract requires:
1. An Offer (Ill mow your lawn this weekend, if you pay me $30) 2. An Acceptance (Youve got a deal)
3. Consideration (The value received and given the money and the lawn mowed)

Establishing Offer and Acceptance: A Meeting of the Minds

A legally recognized offer and an acceptance creates a meeting of the minds, or mutual assent, between the parties. Mutual Assent requires the presence of the following factors:
1. Both parties must exhibit a contractual intent [words spoken in jest or frustration will lack the requisite 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 and Definite Terms

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

Four primary areas in determining definite terms:

1. the parties; 2. time for performance (term or service schedule); 3. the price; and 4. the subject matter or scope of service.
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Consideration:
The Importance of the Bargained Exchange.

Consideration must be mutual. Both parties must receive something of value. Involvement of money is not required. Contracts vs. Gifts

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 tangible goods and secured transactions (not services). http://tlo2.tlc.state.tx.us/status.bc.toc.htm

Specific Statutes http://www.capitol.state.tx.us

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Categorizing University Contracts

Types of University Contracts

Affiliation and Prof. Service Agreements

International Program Agreements Athletic-Specific, or Student-Specific Contracts (nonprocurement in nature). Interagency Cooperation Agreements (IAC) & Inter-local Agreements Museum and Exhibit Agreements

(for individuals not organized as a business) Procurement Contracts; Vendor Services Sponsored Research Contracts and Sponsored Projects University-Provided Services See Categorizing Contracts
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Classifying a Procurement Contract

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

Generally defined as: A formal agreement with a

business entity to secure a particular service that is subject to compliance with competitive purchasing requirements or purchasing policies.

Competitive requirements can be dictated by:

1. 2. 3. 4. Statutory provisions; UT System polices; Best Value Procedures; and Appropriate business relations.
See Procurement Contracts Defined.
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Initial Evaluation, Development, and Submission

Initial Contract Evaluation and Development

Determining the Need for an Agreement:
1. Vendor-Originated 2. UT Determination: The risk of the project
may necessitate a formal agreement; or UT Policies may require it.

Using Sample Agreements

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Routing and Submission of Contractual Projects

Where to Route:
Regardless of value or cost, route Procurement 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 and services are the final stage of a proper procurement and must never precede the purchasing procedures.
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Required Submission Documentation

Appropriately weighing the risks of the project with the most efficient processing methods requires a clear understanding of the project. Upon submission, include the following information:
1. A clear description of the requested service; and 2. Details related to the purpose and benefit of the requested service;
Remember, an enforceable contract requires clear and definite terms!
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Required Submission Documentation

If it is already known that a vendor will be requesting 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 a vendors contract; and 2. An electronic version of the agreement in modifiable Word format.

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Purchasing Office Assistance

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

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Purchasing Requirements
The Purchasing Office Buyer will work with the Contracts Office and your Department to: 1. Determine the most efficient methods for
project completion; 2. Ensure compliance with UT purchasing Regulations and Best Value Polices; and 3. Accurately define the Statement of Services (SOW) or Scope of Work.
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Reviewing the Business Issues

Developing an Appropriate Statement of Services (SOS):
1. Does the SOS accurately define what you want? 2. Will the SOS allow for legitimate evaluation of the result? 3. Talk it through with an unaffected party.

See Crafting the Agreement for more information.

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Reviewing the Business Issues

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

Service limitations: [i.e. A network license limited

to UTSA-controlled computers, when what is really required is a network license that allows remote access.]

Length of contract terms: [Changing technology

may make a two-year agreement for database services with three option years more preferable than a five-year agreement with less monetary costs.]
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Finalizing the Needs

Assistance from Purchasing and Distribution Services

Defining Business Risks

Minimizing the Risks Departmental Ownership
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Understanding the Commitment

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

Ensuring Enforceability:
1. Establish objective measures of performance (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 Additional Expertise and Approvals

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

Departmental Ownership: As The owner of

the contract, the department should take reasonable steps to secure all departmental approvals.
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Formal Review of the Contract Terms

Legal Office Review

Guidelines for review by UTSAs Legal Office
Requirements for Review by the UT System Office of General Counsel

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Utilizing Alternate Contract Methods

Purchase Order vs. Formal Contract Incorporating Contractual Terms into POs, Bids, and RFPs
See Alternate Contract Methods

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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 any required negotiations with the vendors legal office or contract officers. The Contracts Office will maintain continuous consultation with the department, specifically in the area of business issues.
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Major Areas within Every Contract

Parties Effective Date and Terms Statement of Service (SOS) Pricing Performance Standards Warranties Remedies Risk Allocation Boilerplate Signatures
See: contract components

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Common Contractual Terms

Three commonly negotiated/contentious provisions:
1. Warranties 2. Indemnification [protection against loss or liability 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-Ordered Limitations & 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 Resolution Electronic and Information Resources Accessibility (EIR Provision) Standard Addendum
See Standard Clauses
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Use of Template Agreements

Both UTSA and UT System have developed template agreements that can be utilized for various services.
Use of Template Agreements:
1. provides vendors with up-front notification of the terms required for the project; and 2. 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

General Time Lines

Standard or Template Agreements with no Substantive Changes:
typically reviewed (redrafted, if necessary) and comments relayed to the department and/or vendor within 7-10 days.

Minor Contracts (approx. 1-5 pages with relatively high clarity and minor risk):
typically analyzed, redrafted, and relayed to the department and/or vendor for review within 7-10 days.
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High-Risk Agreements
Determining the Risk:
Certain agreements, because of value, policies, or subject matter, can signify potential high risk to the University.

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

Special Procedure Contracts
Requires review by the UT System Office of General Counsel (OGC). The Contracts Office will 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 those contracts designated by UT System as Standard Contracts.
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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 value exceeding $1M must be approved by the Board. A summary of contracts requiring Board approval can be found at
http://www.utsystem.edu/policy/policies/uts145.html
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Finalizing and Executing the Agreement

Finalizing the Agreement

Final Negotiations with the Vendor Departmental Approval Required Additional Necessary Approvals

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Executing the Agreement Who can Sign?

Upon completion of negotiation, the Contracts Office will:
route the Agreement to obtain appropriate signatures; and 2. distribute signed copies accordingly.
1.

President-Delegated Authority:
1. 2. 3. V.P. for Business Affairs Associate V.P. for Administration Associate V.P. for Financial Affairs
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Departmental Contract Administration

Cost Benefit Analysis Required for State Funded Contracts

If state appropriated funds (14 Accounts) are used, the department must maintain on file the following documentation: 1. A cost-benefit analysis for the services, or a
justification of the need for the services; and

2. The relationship of the services to the

staffing plan.
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Final Stage: Departmental Contract Administration

Upon completion of the procurement process and contract negotiations, the final phase of contracting is administration.
Critical Nature of Administration:
Regardless of how well a contract is drafted, the contract will be ineffective if proper contract administration is not performed.

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Ensuring Compliance: Departmental Administration

A Departments Contract Administration responsibilities include:
1. Verifying the contractor complies with the
terms and conditions of the agreement;

2. Ensuring all services have been received to

your specification prior to authorizing payment (or all revenue received); and 3. Ensuring the collection of renewal documentation (i.e. insurance, bonds).
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Guide for Contract Administration

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

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Contacts and References

Robert Lee Dickens
Contracts Manager 458-4067

Richard Rancher Wollney Jr.

Contracts Specialist 458-4069

Nora Evans
Business Law Attorney - Legal Affairs 458-4703

Yolanda Miller
Director, Purchasing and Distribution Services 458-4975

Lane Brinson
Purchasing Manager 458-4066 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 of

Contractual Project Overview of Contract Terms Time Lines, High-Risks Agreements, and Special Procedure Contracts How to finalize and execute an agreement Contract Administration Resource information
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Questions

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