FUNDAMENTALS OF CONTRACT NEGOTIATION

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FUNDAMENTALS OF CONTRACT NEGOTIATION
NCURA Region VI/VII Spring Meeting Park City,
UT April 24, 2007
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• Todays session will address the basic issues
  affecting contract negotiation types of
  agreements, terms and conditions, and negotiation
  strategies. The focus, however, will be on
  troublesome clauses, the remedies acceptable to
  most universities and the different issues posed
  by federal and non-federal contracts.
• Brent Brown, J.D., University of Utah
• Randy Draper, University of Colorado at Boulder
• Winnie Ennenga, Northern Arizona University

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LEARNING OUTCOMES

• To understand the difference between a grant and
  a contract types of contracts funding
  mechanisms
• To understand the basic contracting process
• To be able to identify the key parts of federal
  and non-federal contracts
• To be able to identify and offer alternatives for
  troublesome clauses

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DEFINITIONS

• Grant
• Purpose is to transfer money, property,
• services, or anything of value to recipient in
• order to accomplish a public purpose
• No substantial involvement is anticipated
• between sponsor and recipient during
• performance of activity
• Often called an assistance mechanism

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DEFINITIONS

• Cooperative Agreement
• principal purpose is to transfer funds to
  recipient to accomplish a public purpose
• substantial involvement is anticipated between
  sponsor and recipient during performance of
  activity

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DEFINITIONS

• Contract
• principal purpose is to acquire property or
  services for direct benefit or use of the sponsor
• sponsor determines that procurement contract is
  appropriate
• often called a procurement mechanism

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SO . . . What is a Contract?

• A document that describes a relationship between
  two parties, such as a buyer and seller, that is
  defined by an agreement about their respective
  rights and responsibilities
• BEWARE, contracts are
• More difficult to negotiate
• More difficult to administer
• Have more rules and are less flexible

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TYPES OF CONTRACTS

• The Contract Masquerade
• Memorandum of Understanding
• Teaming Agreement
• Agreements with funds e.g. grants with terms and
  conditions, contracts, purchase orders,
  Intergovernmental Agreements
• Other agreements e.g. Material Transfer
  Agreement, non-disclosure agreements, data
  transfer agreements.

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FUNDING MECHANISMS

• Fixed-Price
• Cost Reimbursement
• Time and Materials
• Incentive Contracts

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CONTRACTING SHIFTING ROLES

• Government
• Prime Contractor
• University
• Subcontractor
• Second Tier Sub Second Tier Sub

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PLAYERS, ROLES, RESPONSIBILITIES

• Proposal Negotiation Award
  Mgt.
• PI PI Post-Award PI
• Dept Staff Dept Staff SPA OCG
• Pre-Award Post-Award President SPA
• TTO TTO
• Legal

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CONTRACTS PROCESS

• Solicitation and Amendments (RFP)
• Pre-Bid Conference
• Prime Proposal
• Subcontract Proposal
• Exceptions Letter
• Proposal Review (Technical and Cost Proposals)
• Verification/Negotiation
• Best and Final Offer
• More Negotiation???
• Acceptance

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FEDERAL CONTRACTS

• Request for Proposal
• Specific instructions for technical and cost
  proposals
• Includes a sample contract or schedule with
  expected terms and conditions
• Institutional endorsement of the proposal is
  considered an official offer, which may not be
  able to be changed once the proposal is
  submitted.
• Some RFPs may be converted into a contract with
  only the buyers signature.

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FEDERAL CONTRACTS RFP

• Part I
• Section A Cover Page
• Section B Supplies/Services Prices/Costs
• Section C Descriptions, Specifications, Scope of
  Work
• Section D Packaging and Marking
• Section E Inspection and Acceptance
• Section F Deliveries or Performance
• Section G Contract Administration Data
• Section H Special Contract Requirements

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FEDERAL CONTRACTS RFP

• Part II
• Section I Contract Clauses
• Part III
• Section J List of Attachments
• PART IV
• Section K Representations/Certifications
• Section L Instructions, Attachments
• Section M Evaluation Factors for Award

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PROPOSAL PREPARATION

• Dissect the Solicitation Document
• Attend to Amendments
• Assign Responsibilities Technical, Cost,
  Management
• Coordinate with Subcontractors
• Write to the Evaluation Criteria
• Meet Regularly During Proposal Development
• Arrange for a Pre-submission Review
• Do Not Lose Your Focus
• Prepare the Terms and Conditions Letter

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PROPOSAL PREPARATION

• The Exceptions Letter
• The exceptions letter documents the Universitys
  concerns with the proposed terms and conditions.
  If these issues are not specified when submitting
  the proposal, then they may not be eligible for
  negotiation after the award is made.

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TROUBLESOME CLAUSES

• FINANCIAL
• LEGAL
• MANAGEMENT
• ACADEMIC

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• Financial Payment Provisions
• Documentation and Reporting
• Ownership of Equipment
• Audit
• Legal Indemnification/Insurance
• Choice of Law
• Arbitration
• Termination
• Management Key Personnel/Approval of Staff
• Technical Direction Changes
• Deliverables Inspection and Acceptance
• Academic Publication
• Confidentiality and Non-Disclosure
• Publicity/Disclosure of Sponsorship
• Restricted, Proprietary, and Classified
  Research
• Rights in Data

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PUBLICATION

• Why is Publication a potential issue?
• How is a Publication problem identified in a
  contract?
• Compromises? Alternative language?
• Are Publication restrictions ever acceptable?
• Your experience . . .

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PUBLICATION

• Know your Institutions policies inside and
  out.
• Understand why the right to publish is a legal,
  practical, and philosophical requirement of
  academic research.
• Understand what types of limitations are
  appropriate and may be accepted by your
  institution.

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INSURANCE/INDEMNIFICATION

• Why are insurance and indemnification potential
  issues?
• How is an insurance or indemnification problem
  identified in a contract?
• Compromises? Alternative language?
• Is it ever OK to indemnify or to agree to insure
  another party?
• Your experience . . .

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INSURANCE

• Ensure that
• the insurance requirements are consistent with
  standard university insurance coverage (Self
  Insurance)
• the nature of coverage required is appropriate
• the sponsor is not named as a co-insured on the
  institution's policy (Additional Insured)
• warranties/guarantees

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INDEMNIFICATION (Hold Harmless/Who is
responsible for paying?)

• Contract language must be avoided that causes a
  university to be liable for the wrongful acts or
  failures of another party.
• Many State institutions are prohibited by statute
  from providing indemnification for the acts of
  third parties.
• The University is still responsible for the
  actions of agents, employees, and students.
• Read the entire contract

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TERMINATION

• Why is Termination a potential issue?
• How is a Termination problem identified in a
  contract?
• Compromises? Alternative language?
• Is it ever OK to agree to a Termination clause?
• Your experience . . .

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TERMINATION

• Mutual Termination
• Termination for Convenience
• Termination for Default/Cause (cure notice)
• University Non-Cancelable Obligations

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TERMINATION

• Ensure that
• the notification period for termination is
  adequate
• the institution's costs are adequately covered in
  the event of termination
• the parties agree how disputes are to be handled,
  particularly in the case of termination for
  cause.

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STATE STATUTES

• Why are State Statutes potential problems?
• How are State Statutes identified in a contract?
• Compromises? Alternative language?
• Is it ever OK to agree to another states
  statutes?
• Your experience . . .

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STATE STATUTES

• Nondiscrimination
• Conflict of Interest
• Arbitration/Dispute Resolution
• Contractors Records
• Failure of the Legislature to Appropriate
• Confidentiality
• Indemnification/Insurance
• Governing Law
• Public Records

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KEY PERSONNEL

• Why is Key Personnel a potential issue?
• How is a Key Personnel problem identified in a
  contract?
• Compromises? Alternative language?
• Is it ever OK to allow the sponsor to choose the
  project personnel?
• Your experience . . .

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KEY PERSONNEL

• Ensure that
• Only Principal Investigators are named as Key
  Personnel.
• The Sponsor cannot approve or veto other staff
  members.

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TECHNICAL DIRECTION

• Why are Technical Direction and Changes potential
  issues?
• How are Technical Direction and Changes problems
  identified in a contract?
• Compromises? Alternative language?
• Is it ever OK to agree to Technical Directions or
  Changes?
• Your experience . . .

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TECHNICAL DIRECTION

• Ensure that
• The Principal Investigator and his/her team are
  not under the direction or supervision of the
  sponsor.
• The Principal Investigator is solely responsible
  for the direction and management of the project
  and its outcomes.

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The Changes Clause

• Why is inclusion of the Changes clause a
  potential issue?
• How is the Changes clause identified in a
  contract?
• Compromises? Alternative language?
• Is it ever OK to agree to the Changes clause?
• Your experience . . .

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Changes

• Be careful of the Changes clause in federal
  contracts.

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CONFIDENTIALITY/ DISCLOSURE

• Why are Confidentiality and Non-Disclosure
  potential problems?
• How are Confidentiality and Non-Disclosure
  clauses identified in a contract?
• Compromises? Alternative language?
• Is it ever OK to agree to Confidentiality or
  Non-Disclosure statutes?
• Your experience . . .

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CONFIDENTIALITY/ NON-DISCLOSURE

• Universities normally do not provide for the
  confidentiality of information beyond that
  necessary to protect the anonymity of research
  participants. If confidentiality is necessary to
  perform the research, provisions may be included
  in the agreement that identify the extent to
  which proprietary or confidential information may
  be protected. Separate agreements with the
  faculty are discouraged.

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CLASSIFIED RESEARCH

• Why is accepting Classified Research a potential
  issue?
• How is Classified Research or a Classified
  Research contract identified?
• Compromises? Alternative language?
• Is it ever OK to agree to perform Classified
  Research?
• Your experience . . .

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CLASSIFIED RESEARCH

• Many universities do not accept classified
  research. Understand the procedures for
  accepting classified research at your University.
• To the extent possible, ensure that the Principal
  Investigator is able to report research results,
  (although data that identify individuals, groups,
  or organizations may be kept confidential).

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RIGHTS IN DATA

• Why is ownership of data a potential problem?
• How are Rights in Data problems identified in a
  contract?
• Compromises? Alternative language?
• Is it ever OK to agree to a limitation on the
  Universitys rights to data?
• Your experience . . .

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RIGHTS IN DATA

• Clearly define ownership of data.
• Clearly identify proprietary or confidential
  data.
• Know what restrictions are acceptable to the
  institution.
• Identify the risk/liability for the disclosure of
  proprietary or confidential information?
• Beware of the Rights in Data clause in federal
  contracts.

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52.227-18 Rights in Data Special Works

• (d) Release and use restrictions. Except as
  otherwise specifically provided for in this
  contract, the Contractor shall not use for
  purposes other than the performance of this
  contract, nor shall the Contractor release,
  reproduce, distribute, or publish any data first
  produced in the performance of this contract, nor
  authorize others to do so, without written
  permission of the Contracting Officer.

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WORK FOR HIRE/OWNERSHIP OF INTELLECTUAL PROPERTY

• Why is agreeing to a Work for Hire a potential
  problem?
• How are Work for Hire problems identified in a
  contract?
• Compromises? Alternative language?
• Is it ever OK to agree to perform a Work for
  Hire?
• Your experience . . .

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WORK FOR HIRE/OWNERSHIP OF INTELLECTUAL PROPERTY

• Do not enter agreements as work for hire
  because such agreements cede ownership of
  intellectual property to the sponsor. Ownership
  of reports and other deliverables may be given to
  the sponsor if the University retains ownership
  of the background data and information contained
  in such documents.

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IMPORT/EXPORT LAWS

• Why are the Import/Export Laws potential
  problems?
• How are Import/Export problems identified in a
  contract?
• Compromises? Alternative language?
• Is it ever OK to accept the Import/Export Laws?
• Your experience . . .

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IMPORT/EXPORT LAWS

• The Import/Export Laws are the law and are in
  effect whether or not cited in the contract.
• The application of the law is determined by the
  technology and the nature of the research.
• ITAR, EAR, OFAC
• Maintain the Universitys fundamental research
  exclusion by
• Not accepting restrictions on publication or
  disclosure
• Not accepting restrictions on personnel

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NEGOTIATION OBJECTIVES

• To achieve a framework that facilitates
• the work.
• To arrive at a mutually-acceptable agreement.
• To set a positive tone for the on-going
  institution/sponsor relationship.
• To negotiate a contract that is consistent with
  the institutions policies and procedures.

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• Remember a contract is a
• binding agreement and your
• institution has a legal obligation
• to perform.