Seminar on Drafting of Outsourcing Contracts

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Seminar on Drafting of Outsourcing Contracts
Yung Lap-yan 22 November 2006
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Topics to be covered Today

• Part 1
• What is a contract?
• What is a tender?
• Structure of a Government Tender Document

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• Part 2
• What is outsourcing?
• Key terms of a service agreement

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• Part 3
• Essential characteristics of computer contracts
• Monitoring the contractors performance
• Cases for illustration

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What is a legally binding Contract?

• oral or in writing?

• s.3(1) Conveyancing and Property Ordinance

Essential Elements of a Contract

• Offer

• Acceptance

• Consideration

• Intention to create legal relations

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Offer

• what is an Offer?

• e.g. I offer to sell my Honda Civic (2004) to
  you for 100,000

• distinction between offer and invitation to
  treat

• advertisement in newspaper?

• Pharmaceutical Society of Great Britain v Boots
  Cash Chemists (Southern) Ltd. (1952)

• Supermarket/bookshop

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Acceptance

• what is an acceptance?

• e.g. I offer to sell my Honda Civic (2004) to
  you for 100,000. You say I accept.

• acceptance can be oral, in writing or inferred
  from conduct

• e.g. Wanted notice

• effect of silence

• Carlill v Carbolic Smoke Ball Co (1892)

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Consideration

• a promise is not enforceable unless it is
  supported by consideration given by the
  promisee or made under seal

• what is consideration?

• promise given by one party as the price for the
  promise given by the other party exchange of
  promises

• sufficiency v adequacy of consideration

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Intention to Create Legal Relations

• do the parties intend to invoke the assistance of
  the Courts?

• express provision that the document is not
  binding

• e.g. Memorandum of understanding

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Terms of a Contract

• Express Terms

• Implied Terms

• implied by custom

• implied by statutes, e.g. Sale of Goods Ordinance

• implied by the Courts officious bystander test

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What is a Tender?

• 2 Stages

• offer, acceptance, consideration, intention to
  create legal relations

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What is a Tender? (contd)

• Offer and Acceptance

• 2 Stages

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What is a Tender? (contd)

• Consideration

• Govt promise to pay the price of goods or
  service fee for services

• Supplier/
• Contractor promise to supply goods or
• services

• an exchange of promises

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What is a Tender? (contd)

• Intention to create legal relations

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Structure of a Govt Tender Document

• GF 230 / GF 231 / tailor-made

• Typical Tender Document

• Lodging of Tender

• Part 1 Terms of Tender

• Part 2 Conditions of Contract

• Part 3 Specifications

• Part 4 Contract Schedules

• Part 5 Offer to be Bound

• Part 6 Articles of Agreement

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Lodging of Tender
To be acceptable as a tender, the tender must
be properly completed (in ? hardcopies and ?
softcopies), addressed to the Chairman, Central
Tender Board, and deposited in the Government
Secretariat Tender Box situated in the lift lobby
on the Lower Ground Floor of Central Government
Offices East Wing, Lower Albert Road, Hong Kong
before 1200 noon (Hong Kong time) on Date
(Tender Closing Date) in a sealed envelope
(technical proposal and price proposal should be
placed in separate envelopes) marked Tender for
the provision of ?, Tender Ref. ? (but
should not bear any indication which may relate
the tender to the tenderer). Late tenders and
tenders not submitted in the aforesaid manner,
including electronic tender submission, will not
be considered.
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Lodging of Tender (contd)

• late tender will not be considered

• timely tender will be considered?

• Blackpool and Fylde Aero Club Ltd v Blackpool
  Borough Council (1990)

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Terms of Tender

• 2 Stages

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Terms of Tender (contd)

• Terms of Tender deals with Stage 1

• i.e. no contract on the subject matter of the
  tender

• Terms of Tender is not part of the Contract
  as defined in the Conditions of Contract

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Terms of Tender (Contd)

• Contents page
• 1. Notes to Tenderers
• 2. Invitation to Tender
• 3. Submission of Tenders
• 4. Tender Prices
• 5. Alternative Proposals
• 6. Change or Withdrawal of Proposal
• 7. Cost of Tender
• 8. Tender to Remain Open
• 9. Cancellation of Tender
• 10. Site Visit

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11. Intended Timetable 12. Supplementary
Information 13. No Warranties or Representations
on information provided 14. Written Instruction
Procedure 15. Tenderers Enquiries 16. Tenderers
Response to Government Inquiries 17. Tender
Evaluation 18. Negotiation 19. Tenderers
Commitment 20. Award of Contract
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21. Performance Bond and Guarantee and Other
Conditions 22. Formation of Contract 23. Destruc
tion of Tender Document 24. Consent to
Disclosure 25. Contractors Performance
Monitoring 26. Improper Assistance 27. Review
Body on Bid Challenges 28. Personal Data
Provided Appendix 1 Registration Form for
Site Visit Appendix 2 Tender Evaluation and
Marking Scheme
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Terms of Tender (Contd)
(i) Invitation to Tender sets out briefly
the subject matter of the tender
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Terms of Tender (Contd)
(ii) Submission of Tender sets out how
tenders should be submitted e.g. submission
of Technical Proposal and Price Proposal in 2
separate envelopes and what should be contained
in the Technical Proposal and Price Proposal
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Terms of Tender (Contd)
(iii) Tender Prices Tenderers should make
certain that prices quoted are accurate before
submitting their tenders. Under no circumstances
will the Government accept any request for price
adjustment on the ground that a mistake has been
made in the tender prices. no adjustment of
price quoted
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Terms of Tender (Contd)
(iv) Tender to Remain Open/Change or withdrawal
of Proposal (1) Tenders shall remain valid
and open for not less than two hundred and ten
(210) days after the Tender Closing Date.
(2) If an offer is withdrawn before expiry of the
agreed validity period, it may prejudice the
tenderers future standing as a Government
contractor. (3) A tenderer must not withdraw,
change or otherwise do anything which affects its
tender after it has been lodged. (4) The
tenderer will be liable for and must indemnify
the Government against any losses and liabilities
suffered or incurred by the Government as a
result of any change or the withdrawal of a
tender.
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Terms of Tender (Contd)
(iv) Tender to Remain Offer/Change or Withdrawal
of Proposal (contd) Validity Period
Can the tenderer withdraw its tender within the
Validity Period? Is it a breach of
contract? Are the Terms of Tender binding on
the parties? Blackpool case
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Terms of Tender (Contd)
(v) Tender Evaluation All tenders will
be evaluated in accordance with the tender
evaluation procedures and marking scheme as shown
in Appendix 2 Govt must adhere to the
evaluation procedures and marking scheme
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Terms of Tender (Contd)
(vi) Award of Contract The Government is
not bound to accept the lowest price tender. The
Government will award the Contract to the
tenderer who has been determined to be fully
capable of undertaking the Contract and whose
tender is the tender which in terms of the
specific evaluation criteria set forth in this
tender documentation is determined to be the most
advantageous to the Government.
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Terms of Tender (Contd)
Terms of Tender contains detailed terms
regarding the submission of tender Are these
terms binding on the tenderers and the Govt?
Is there a contract between the tenderers and
the Govt to comply with these terms?
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Terms of Tender (contd)

• 2 Stages

• Is there a contract between the Govt and the
  suppliers/contractors at Stage 1?
• Blackpool case

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Conditions of Contract
sets out the general terms of the underlying
contract
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Specifications
sets out the services, requirements and
specifications of the contract specific to
the particular contract tailor-made 3Ws
Who, When, What 3Cs Comprehensive,
Consistent, Clear
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Contract Schedules
sets out a number of schedules for the
tenderer to fill in
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Contract Schedules (contd)

• Information required
• (i) basic information of tenderer
• name/address/contact person/accounts etc.
• (ii) service delivery approach
• methodology/equipment to be used/human
  resources plan/performance monitoring
  approach etc.
• (iii) relevant experience of tenderer and
  sub-contractor
• (iv) relevant qualifications and experience of
  key staff
• (v) price proposal

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Offer to be Bound
to be signed by tenderer, submitted with its
tender the tenderer (i) offers to provide
the relevant services on the terms set out in
the Contract (ii) agrees to be bound by all the
terms set out in the Tender Document (including
therefore the Terms of Tender and Validity
Period) (iii) agrees that if any information
given by the tenderer is untrue, it is liable to
be disqualified
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Articles of Agreement
contract between the Govt and the Contractor
on the subject matter of the tender refers
back to the terms in the Conditions of
Contract, Specifications and the Contract
Schedules in the Tender Document
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