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									FUNDAMENTALS OF CONTRACT
      NEGOTIATION


            NCURA
  Region VI/VII Spring Meeting
          Park City, UT
          April 24, 2007
Today’s 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
        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
              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”
             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
             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”
  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
        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.
FUNDING MECHANISMS


       Fixed-Price

   Cost Reimbursement

   Time and Materials

   Incentive Contracts
CONTRACTING: SHIFTING ROLES
             Government

           Prime Contractor

              University

            Subcontractor

 Second Tier Sub      Second Tier Sub
           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
          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
         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 RFP’s may be converted into a contract
    with only the buyers signature.
     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
  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
      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
   PROPOSAL PREPARATION

The Exceptions Letter:

  • The exceptions letter documents the
    University’s 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.
TROUBLESOME CLAUSES

      FINANCIAL

       LEGAL

     MANAGEMENT

      ACADEMIC
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
              Intellectual Property/Work for Hire/Rights in Data
               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 . . .
                PUBLICATION

• Know your Institution’s 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.
  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 . . .
               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
             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
               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 . . .
             TERMINATION
• Mutual Termination

• Termination for Convenience

• Termination for Default/Cause (cure
  notice)

• University Non-Cancelable Obligations
               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.
            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 state’s
  statutes?
• Your experience . . .
      STATE STATUTES
            Nondiscrimination
            Conflict of Interest
     Arbitration/Dispute Resolution
          Contractor’s Records
Failure of the Legislature to Appropriate
          Confidentiality
       Indemnification/Insurance
             Governing Law
             Public Records
            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 . . .
               KEY PERSONNEL

Ensure that:

• Only Principal Investigators are named as Key
  Personnel.

• The Sponsor cannot approve or veto other staff
  members.
      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 . . .
        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.
           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 . . .
                   Changes

• Be careful of the Changes clause in federal
  contracts.
  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 . . .
         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.
       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 . . .
         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).
             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
  University’s rights to data?
• Your experience . . .
             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.
     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.
 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 . . .
 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.
        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 . . .
         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 University’s fundamental research
  exclusion by:
  – Not accepting restrictions on publication or disclosure
  – Not accepting restrictions on personnel
     NEGOTIATION OBJECTIVES
1. To achieve a framework that facilitates
   the work.
2. To arrive at a mutually-acceptable
   agreement.
3. To set a positive tone for the on-going
   institution/sponsor relationship.
4. To negotiate a contract that is consistent
   with the institution’s policies and
   procedures.
Remember: a contract is a
“binding” agreement and your
institution has a legal obligation
to perform.

								
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