Drafting the Request for Tender Offers: Important Terms and Conditions – Charles Rumbaugh Guest Lecturer Naval Postgraduate School IDARM International Defense Acquisition Resource Management Program

Goal(s) of the Request for Offers Meet end user requirements Specifies proposed conditions of the sale Requests that prospective contractors submit an offer Other goals could include… –Maximize competition –Seek (alternative) solutions to a mission requirement –Quick response –Minimize price to be paid –Other? May be multiple/ conflicting purposes

Long Term Goal(s) May be negatively impacted in achieving the immediate goal. For example: –Limiting competition can have a serious consequence related to life cycle/ownership costs –Using commercial/“off-the-shelf” items –Others?

Maximize Competition Clearly, accurately, and completely describe requirement(s) –Exclude unnecessary restrictive specifications –SOW Provisions that are generally acceptable to the industry –Role of Market Research –Benchmarking Reasonable time for submission of tender offers Clear evaluation methodology that will result in fair evaluation and selection of the best offer.

Quick Response Adequate Market Knowledge of Potential Sources Existing Contractual “vehicle?” –Past Performance a factor? Predefined Bidding Limitations –Specification/SOW issues Legal Right to Exclude Sources Problems with this Goal –Pricing issues –Lack of competition –May affect quality –Influences contract type –Other approaches available? “Alpha Contracting” –And others…..

“Must Haves” Price Period for Validity of Offer Responsive Offer from Responsible Offeror Compliant with Request except for… Certifications Representations/Warranties—What are they? Identification of Authorized Negotiators Others?

“Nice to Haves” Alternative Offers Negotiable Items –You may be willing to eliminate these items –Relationship to Price Options “Nice to have” and “must have” provisions can impact price

Functions of the Contract Record of “the” agreement Document which frames and facilitates contract administration activities Risk allocation among the parties Defines Payment Terms Performance Incentive to Contractor Request for Tender Forms the Foundation For the contract

First Steps—RFT Identify the approved requirement Ensure specification and SOW is clear What is the estimate? Ensure that funds are/will be available –The contract will create a legal obligation to pay Funding over the near and long term

Next…Organization of Information Uniform assembly of information that permit interested suppliers ease of access to information necessary to submit an acceptable tender offer. –Web/electronic posting Systemic approach is preferred

Pricing Information What information is necessary to determine a fair price? What information may be available to determine a fair price? –Market Research –Reverse Engineering To what extent does the request for tender provide you the flexibility to obtain the necessary pricing information?

Next Steps Selection of the contract type –Consideration of Risk Payment mechanism Maturity of requirement Clarity of requirement Urgency Cost Typ e Fixed price Hour s Unprice d

Next Steps How to conduct the procurement…. Competitive.. Restricted..

Next Steps How to Identify and Solicit Potential Sources –Trade Associations Market Research Advertisements Other Customers Embassies

Next Steps The Team….who is on the team Who does not belong on the team?

Dealing with Interested Parties What are the ground rules for communication?

Terms & Conditions Tender/proposal submission requirements Provisions that must be included in the subsequent contract How capabilities will be evaluated Changes that are required after release impact schedule/price

Provisions……. Inspection Data Quality Security Delivery Warranty Modifications Terminations Ethics Insurance Disputes Notifications Record Keeping Record Keeping Payments Options

Provisions……. Inspection Acceptance Criteria Intellectual Property Rights Software Quality Terms/Processes Payment Provisions Security Warranties- Expressed/Implied Evergreen Changes/Modifications Delivery Terms INCOTERMS Bill of Ladings Indemnification Insurance Limitation of Liability Terminations— Default/Convenience Delays/Force Majeure Liquidated Damages Dispute Resolution Arbitration New York Convention on Enforcement of Awards

More Provisions……. Recordkeeping and Reports Notifications Countertrade and Offset agreements In-Country sources of supply Key Personnel Language Taxes Subcontractors Import/Export law— Licenses ITAR Applicable Law Foreign Corrupt Practices Act Ethics/Bribery UN Convention on Contracts for the International Sale of Goods (CISG)/Treaties Uniform Commercial Code (UCC)

And Even More Provisions……. Additional Terms Assignment Environmental Nondisclosure/Publicity Severability Integration clause Other…

RFT Summary/Best Practices Conduct Market Research/Benchmark State with clarity, accuracy, & completeness the desired goods/services Identify Risks & Select Right Contract/Pricing Approach Develop Quality Request for Tenders Plan Selection and Negotiation Strategy Use (appropriate) consultants Create Contract Provisions “Favorable” to Buyer!