Contract Formulation and Administration MODULE V

Contract Terms and Conditions Chapter 9 Contract Terms and Conditions

Contract terms and conditions Terms and conditions are: Provisions that describe the rights and responsibilities of all parties to the contract. Essential to the contract document to protect the interests of the agency. Term: The term states the beginning and ending date of the contract. It can also state provisions for price escalation. Termination for default: The contract can be terminated for default in the event that the contractor breaches any contract provision or if a stated conflict of interest existed when the contract is discovered.

Contract terms and conditions Force majeure: A list of reasons that excuse either party for failure to complete their responsibilities on time. Liquidated damages: Refers to the reimbursement of costs incurred by the agency in the event of completion delay due to a breach of contract. Termination for convenience: Termination of the contract without cause. Termination transition: Contractor is required to cooperate with the replacement contractor during the transition.

Contract terms and conditions Contractor reimbursement: This provision provides clarification of the variable information that relates to payment, the type of contract and authorized expenses. Payment terms: Depicts the number of days following receipt of the services and receipt of a correct invoice. Set-off: This provision allows agencies to withhold funding from the contract(s) to recover any excess payments made out to the contractor under this or any other contract. Agency project manager: This clause names, and describes the role and responsibilities of the agency’s project manager.

Contract terms and conditions Key personnel: This provision gives the contracting agency some control over substitution of contractor personnel assigned to a project. Independent contractor: This clause establishes the fact that the contractor is an independent contractor as opposed to an employee. Confidentiality and ownership: This clause ensures that the contracting agency is not paying the contractor to develop products, inventions, and confidential information that would be known to be owned by the contractor but rightfully belong to the agency. Indemnification: Also known as “hold harmless”. This clause states that one party should not be held accountable for the negligent acts, omissions, or willful misconduct of the other party.

Contract terms and conditions Insurance: Provides a detailed description of the contractor’s requirement to maintain the specified insurance coverage. Amendments: The purpose of this clause is to prevent unwritten changes to the contract. (Courts oftentimes permit unwritten changes if the person making the verbal change has "apparent authority." When this is done, "apparent authority" is broadly defined”). Waiver of rights: Permits either party to waive one or more rights. (Contract clauses oftentimes state that waiver of one or more rights does not waive any other rights). Compliance with laws: Contractor must comply with all applicable laws, rules, and regulations.

Contract terms and conditions Americans with disabilities act: This law prevents discrimination against persons with disabilities. Health insurance portability and accountability act: Contractors shall comply with all terms and conditions of those of the HIPAA. Nondiscrimination: Main purpose is to prevent discrimination of any sort (e.g. religion, color, gender, disability, ethnic, etc.). Drug free workplace: Contractor must comply with the law of providing a drug free workplace. Workers’ compensation: Contractors and subcontractors must comply with workers’ compensation laws and maintain workers' compensation insurance

Contract terms and conditions Contractor’s standard of care: The purpose of this law is for the contractor to preform professionally and in compliance with professional practices, standards, and applicable laws. Care of property: Contractor must be responsible for any agency property they obtain custody for. Advertising: This clause ensures that contractor does not include agency in any advertisement unless permitted. Performance evaluation: The right for the agency to evaluate contractor performance following contract completion and sharing evaluations with other government agencies.

Contract terms and conditions Inspection of work at project site: This clause permits the agency to inspect all work being performed by the contractors. Applicable law and forum: Only applicable laws (in jurisdiction) should be implemented in the contract. Successors and assigns: This clause prevents the contractor from transferring or reassigning the contract to another contractor, unless approved in writing by agency. Subcontracting: Restricts contractor from making changes to list of subcontractors presented in the proposal without written approval by the government.

Contract terms and conditions Unallowable cost: This provision prevents contractors from claiming reimbursement(s) for any costs that were not disclosed on the purpose. Audit, employee interviews and document retention: Contractors/subcontractors are required to maintain records relating to the performance of the contract and interview employees for a specific time period and are also subject to be audited by the agency. Remedies not exclusive: The use of one remedy to enforce the provisions of the contract does not prevent that party from using another remedy. Conflict of interest: This clause prohibits employees & officers from participating in any activity that results in compensation (that involves a conflict of interest).

Contract terms and conditions Contractor integrity: This clause imposes standards to discourage contractors from rewarding agency employees. Political contribution disclosure: Contributions must comply with state election laws. Assignment of antitrust claims: This ensures that proceeds are assigned to the agency. Payment of taxes: Contractors must comply with tax laws.

Contract terms and conditions Officials not to prosper: This provision prohibits agency officials from benefiting from contract awards or contract changes. Copyrights: This provision requires contractors to comply with copyright laws. Budget contingency: The agency is allowed to terminate the contract if there are insufficient funds. Counterparts: The provisions in contracts for providing numerous original copies of each contract are essential if the agency and the contractor are both to be provided with original versions of the contract.

Contract terms and conditions Severability: This provision guards against invalid or unenforceable contracts due to one or a few improper provisions. Notices: This provision ensures that all contractual notices are sent to proper addresses. Titles, headings, or captions. Titles, headings, or captions shall not affect the contractual interpretation or meaning of the contract. Entire agreement and survival of provision beyond the contract term: This provision states that all agreements must be in writing to be part of the contract and that certain provisions survive completion of the contract term.

Chapter 10 Short Form Contracts, Short Form RFPs, Emergencies and Letter Contracts

Short form contracts and rfps Agencies must select a dollar-value threshold to determine which form is appropriate to use (standard or short form). Short form contracts and RFPs are used: For low-dollar-value/or low risk contracts. To simplify contracting efforts by simplifying documentation. Standard RFP and MSC are used for more complex high-dollar-value contracts.

Request for proposals simplification RFPs can be simplified by: Condensing the notice to prospective contractors. Shortening RFP introduction. Simplifying contractors selection process. Simplifying prospective contractor’s certification. Simplifying proposal preparation instructions. Removing table of contents.

Model service contract simplification Short form contract template should reflect: A signature block indicating name of delegated signer. Simplified contract provisions. Amount reduction for insurance coverage. Simplified scope of work.

Terms and conditions simplifications Remove provisions for continuation of contract and price escalation. Termination for default. Termination for default provisions are greatly simplified. Termination for convenience provisions are greatly simplified.

Short form contract amendments The amendment template should include spaces for information on variable information table plus spaces for: Meeting schedule. Project milestone schedule. Contract reports. Other deliverables.

Services to be provided during emergencies Agencies should award contracts in advance of an emergency to: Decrease the time required to employ private sector services. Ensure contractors are selected on the basis of fair and reasonable pricing. Lessen the pressure of soliciting contractors during disasters. Permit time to develop the scope of work before disaster strikes. Prepare a written solicitation. Select the best contractor(s) though full and open competition. Develop terms and conditions on a when not pressured during actual emergency.

Letter contracts Advantages of letter contracts during emergencies: Award of letter contracts due to unanticipated needs during an emergency - reduces associated risk. Competitive emergency contracting: Scope of work – mitigates risks and ensures contractors obligation to perform. Competitive contracting during emergencies may result in faster delivery of superior products at lower prices. Cost control – controls costs incurred during an emergency. Terms and conditions – protects the government rights and interests.

Authority to award letter contracts Who has the authority to award high-value contracts during non-emergency periods? An agency official. The board. The commission. Lower level government officials.

Definitization of letter contracts Letter contracts have a limited time period and must be replaced by a definitive contract. A letter contract must state expiration date and the need for replacement. Definitization must be through the award of a standard or short form contract and executed by an authorized official, board, or commission.

Contract Review, Execution, and Audit Chapter 11 Contract Review, Execution, and Audit

Contract execution by contractor Contractor should execute the contract prior to contract definitization to contracting agency, to allow government evaluation of exceptions to contract provisions to incorporate necessary corrections. The review and execution of the contractor takes less time to process. Electronic contracts should be sent in formats, such as pdf, to decrease the possibility of changes in contract.

Contract review by contracting agency The review objectives are to ensure that:: Contractors are selected in compliance with agency practices. Pricing is fair and reasonable. Funding is available. Contract is legally drafted and addresses the agency’s risk. Contractor’s responsibilities are clearly defined and not optional. There are no inconsistencies. The contract was prepared in conformance with the agency’s contracting practices.

Contract review by contract management staff The management staff is responsible for reviewing: Solicitation. Source selection. Contract negotiation. Drafting contractual documents.

Contract review by financial management staff The financial management staff must: Verify account numbers. Verify available funds. Other verifications depend on agency policy and procedures.

Contract review by legal counsel The legal counsel reviews the contract to: Determine if it meets legal form. Review contract provisions (such as indemnification).

Online contract review Avoids delays associated with hard copy changes and changes made subsequent to completion by other officials. Online contract review makes it possible for all departments to review the contract at once, make necessary changes, and share all changes with all contract reviewers. This method allows all reviews to be documented.

Hard copy contract review Hard copy reviews can be time consuming. Reviews are conducted sequentially (from one department to another). Executing officials should initial each page after review to ensure that no pages have been substituted.

Contact execution by contracting agency The contracting agency must ensure that: Agency policies were considered during the selection process. Contract provisions make good business sense. All calculations are accurate. All wording is correct on contract. Scope of work is clearly specified. All terms and conditions are carefully reviewed. Grant requirements are followed.

Distribution of fully executed contracts Standard contract distribution should be accomplished after agreement (contract) is fully executed. Both parties should have a “wet signed” contract (contract with original signatures). (Many government agencies do permit electronic signatures as well). The agency should send a notice of contract award to the contractor’s project manager that includes: Contract number. Project name. Solicitation number. Contract price. Start date (if known). Other relevant information.

Contract Administration and Closeout Chapter 12 Contract Administration and Closeout

Contract administration Contract administration involves: Approval of contract billings. Managing contractor cost/schedule performance. Contract amendments. Managing completion of milestones and deliverables. Reacting to substandard contractor performance.

Approval of contractor billings Factors to consider when approving contractor payments: Ensure unit prices, price extensions, and subtotals are totaled correctly. Check schedule progress. Verify milestone completion. Confirm status of deliverables and acceptance. Verify other billable costs. Check for significant errors on invoices. Compare amount of contract funding available to the percentage of completed work. Review any changes made to the scope of work (e.g. amendments, modifications, or order changes).

Managing contractor cost/schedule performance To manage the contractor’s cost/performance, the contracting agency should consider the following : Include payment provisions and reporting requirements in the solicitation. Use the “earned value method” (e.g. make an estimate of expenditures). Compare the rate of expenditure to schedule progress. Have contractor report estimate at completion.

Contract amendments Contract amendments should include: A description of the changes made. Any change in price. Any impact on the schedule. Furthermore, it is required for all changes to be made in advance, in writing, and signed by all parties.

Managing completion of milestones and deliverables It is essential for agencies to have contract management software to improve the management of contracts. A tracking software can facilitate database population for milestones and deliverables. This allows a contractor’s performance problem to be discovered at an early stage.

Reacting to substandard contractor performance There are three alternative actions that a contracting agency may take when a contractor is performing poorly: Keep the contract in force and permit contractor to perform under the contract. Terminate the contract for default. Terminate the contract for convenience. Once a termination decision is made, the contracting agency should: Notify the contractor in writing of the decision made. Recited the record of the contractor’s failures to meet contractual obligations and verbal rebukes. Provide a show case notice.

Contract closeout Task to be performed during contract closeout: Prepare contract performance report. Relief of financial encumbrances. Records retention. After a period of time, it is advised to destruct all records of a contract to prevent excessive storage time period and associated costs.

Contractor performance report A report is recommended to document the contractor’s performance for future reference. There are three measure that must be recorded: Cost management. Quality of service provided. Adherence to the schedule.

Relief of financial encumbrances The contracting agency should consider the following to ensure the removal of excess funds: Develop a contract closeout checklist. Indicate in the performance report that excess funds have been returned to the general fund.

Contract audit Contract audits should consist of reviewing all aspects of a contract, such as the: Contractor selection process. Fairness and reasonableness of pricing. Contract administration phase.

Records retention It is important to maintain contract records for a period of time in the event of a: Question. Dispute. Litigation, etc. Typically contract files are retained for a total of seven years after completion. (Construction contracts (including as-built drawings) are normally maintained until the building is destroyed). Furthermore, it is recommended for contract files to have a destruction date.