Vendor Agreements State Purchasing & Contracts Office 2019 Spring PAC Meeting Modernization

Objectives Review the Law Review the Policy Review Best Practices Answer Questions Welcome to remedies. Introductions. Are their people here who deal with Vendor Agreements, (show of hands)? Why do we hate them? State has less leverage Provided by sales people at the very end Low dollar amount, but important services Not cost effective for Vendor’s to negotiate terms Very time consuming Often have to work off .pdf documents Struggle to get all the documents linked in the main document It’s not my job. You have to be prepared to walk away.

The Law Colorado Open Records Act Terms and Conditions in Contracts C.R.S. 24-72-201 to 24-72-309 Terms and Conditions in Contracts C.R.S 24-106-109 Fiscal Rule 3-1 CORA Disclosure To the extent not prohibited by federal law, this Contract and the performance measures and standards required under §24-106-107, C.R.S., if any, are subject to public release through the CORA.

Void Terms under 24-106-109 Indemnification Binding Arbitration LoL for death or bodily injury LoL for damage to tangible property Law other than Colorado 24-106-109. Terms and conditions in contracts Any term or condition in any contract entered into by the state that requires the state to indemnify or hold harmless another person, except as otherwise authorized by law, or by which the state agrees to binding arbitration or any other binding extra-judicial dispute resolution process in which the final resolution is not determined by the state, or by which the state agrees to limit liability of another person for bodily injury, death, or damage to tangible property of the state caused by the negligence or willful misconduct of such person or such person's employees or agents shall be void ab initio; except that the contract containing that term or condition shall otherwise be enforceable as if it did not contain such term or condition. All contracts entered into by the state, except for contracts with another government, shall be governed by Colorado law notwithstanding any term or condition to the contrary. Colo Const. Art V Section 33 Disbursement of Public Money Art. XI, Section 1 Pledging credit of State, County, City, Town or School District Forbidden Art XI, Section 2, No aid to Corporations 24-30-1510(3)(e) – indemnification for landlords

Fiscal Rule 3-1 Commitment Vouchers Definition 2.22 Any form of agreement provided by a vendor Including an online or “click-through” agreement 2.22 Vendor Agreement – Any form of agreement provided by a contractor or vendor, including an online or “click-through” agreement, containing contractual provisions relating to the goods and/or services to be provided by such contractor or vendor. Fiscal Rules are brought to us by 24-30-202. External Terms and Conditions Notwithstanding anything to the contrary herein, the State shall not be subject to any provision included in any terms, conditions, or agreements appearing on Contractor’s or a Subcontractor’s website or any provision incorporated into any click-through or online agreements related to the Work unless that provision is specifically referenced in this Contract.

Limitations of Liability Fiscal Rule 3-1, Section 6.3 Limitations of Liability

Bodily injury, death, damage to property Other liability may be limited if: Determination in writing that benefits outweigh the risk Insurance not included OSC approves Limitations of Liability – A State Agency or Institution of Higher Education may not limit another Party’s liability for claims or damages arising out of bodily injury, death, or damage to tangible property of the State. Any term or provision of any Commitment Voucher or any other agreement that limits the liability of a Party for bodily injury, death or damage to tangible property of the State is void as described in §24-106-109, C.R.S. Other liability may be limited if the State Agency or Institution of Higher Education determines in writing that the benefits outweigh the risks, the limitation of liability does not apply to any insurance required under the Commitment Voucher, if any, and the Office of the State Controller has approved the limitation.

Limitations of Liability If you permit a vendor to limit its liability, you may be limiting the State’s ability to obtain a complete remedy for the vendor’s default. If a vendor’s liability is limited to gross negligence and intentional misconduct, and the vendor’s breach is due to ordinary negligence, the State has no remedies. If a vendor’s liability is limited to direct damages only (damages that are the close result of the breach, flow naturally from it, and are presumed to have been foreseen), and the loss to the State is in the form of consequential damages (damages that flow directly from the breach, but are not obvious without communication by the nonbreaching party of its special circumstances), the State has no recovery for the “less than obvious” losses.

Types of Damages Compensatory Direct Indirect (Consequential) Incidental Special Punitive Delete?

Data Loss Data loss needs to be a direct damage

Fiscal Rule 3-1, Section 6.5 Void under 24-106-109 - you should not… Inform the Vendor – unwilling/unable Entire provision… 6.5 Inclusion of Void Terms – A State Agency or Institution of Higher Education should not include a term or provision that would be void under this §6 or under §24-106-109, C.R.S., in any Commitment Voucher or a Vendor Agreement entered into by a State Agency or Institution of Higher Education with another Party. If another Party requires the inclusion of a void provision, the State Agency or Institution of Higher Education shall inform the Party that those terms or provisions will be void if they are included. If the Party is unwilling or unable to remove those terms or provisions after being notified but is unwilling to accept the Commitment Voucher, Small Purchase Documentation, or Vendor Agreement without the inclusion, the State Agency or Institution of Higher Education may enter into the Commitment Voucher or Vendor Agreement that includes the void provision if the State Controller, Chief Procurement Officer, authorized Procurement Official or delegate, or authorized State Controller delegate approves the inclusion of the void term or provision.

The Policy OIT Policy OSC updating Policy on Vendor Agreements OSC drafting Policy on Limitation of Liability

OIT Policy and Guidance on Acquisition of Information Technology (IT) Good/Products and/or Services https://docs.google.com/document/d/1oAwsYwCoBNcHLn6d2dKMyxLSuGQc0inu0h1bqxZiTHI/edit

OCS Policies https://www.colorado.gov/pacific/osc/contractpolicies

State Controller Policy/Best Practice Vendor Agreements

Void Terms under 24-106-109 Indemnification Binding Arbitration LoL for death or bodily injury LoL for damage to tangible property Law other than Colorado 24-106-109. Terms and conditions in contracts Any term or condition in any contract entered into by the state that requires the state to indemnify or hold harmless another person, except as otherwise authorized by law, or by which the state agrees to binding arbitration or any other binding extra-judicial dispute resolution process in which the final resolution is not determined by the state, or by which the state agrees to limit liability of another person for bodily injury, death, or damage to tangible property of the state caused by the negligence or willful misconduct of such person or such person's employees or agents shall be void ab initio; except that the contract containing that term or condition shall otherwise be enforceable as if it did not contain such term or condition. All contracts entered into by the state, except for contracts with another government, shall be governed by Colorado law notwithstanding any term or condition to the contrary. Colo Const. Art V Section 33 Disbursement of Public Money Art. XI, Section 1 Pledging credit of State, County, City, Town or School District Forbidden Art XI, Section 2, No aid to Corporations 24-30-1510(3)(e) – indemnification for landlords

Unacceptable Provisions Price Increases Automatic Renewals Vendor Right to Change Terms Unless the State can terminate

How to Use Vendor Agreement - Used Alone - Small Dollar Vendor Agreement - Used in Lieu of State Contracts or POs Vender Agreements - Used with State Contracts or POs

Used Alone – Small Purchase Documentation

All Policy and Fiscal Rules met Void and unacceptable terms nullified Proper Review/Approval/Signature All charges and incidentals included Agreement is complete with all attachments

2. Used in Lieu of Purchase Order or Contract OSC Approval in Writing All Policy and Fiscal Rules met

3.A Used with a Purchase Order Incorporated as an Exhibit All Policy and Fiscal Rules met Void and unacceptable terms nullified Integration clause is stricken All conflicts addressed between docs Entire Understanding This Contract represents the complete integration of all understandings between the Parties related to the Work, and all prior representations and understandings related to the Work, oral or written, are merged into this Contract. Prior or contemporaneous additions, deletions, or other changes to this Contract shall not have any force or effect whatsoever, unless embodied herein.

3.B Used with a Contract All Policy and Fiscal Rules met Incorporated as an Exhibit/order Void and unacceptable terms nullified Added in Body of Contract

Other Important Terms Disclaimers/Warranties Supersedes and Entire Agreement Unless Prohibited by Law Insurance Click-Thru 30 Day Payment

Negotiating Tips Ask for a template designed for governmental agencies Ask to set up a meeting with their attorneys Ask for a MS Word Version of their terms Ask if they have done business with another State Agency

Any Questions?