OGC Purchasing Contract Basics and Best Practices Office

OGC Purchasing Contract Basics and Best Practices Office of the General Counsel – November 2017

Session Overview • Contract Basics & Best Practices – What contract to use, and what to do before sending a contract for review to the OGC. – What Units/Departments should be looking for in contracts. – Understanding of business terms vs. legal terms of a contract. • OGC Contracting Process – What information does OGC need from you to review a contract? – How do you submit a contract for review? – What to do after the first review. • Delegations of Authority • OGC tools, current and future, to help with contract review and process.

What Contract do I use? • ALWAYS try University Terms and Conditions first. – What are the University Terms and Conditions? Ex. – Copies of all University Terms and Conditions can be found in the Contracts Library. • If a vendor want to redline University Terms and Conditions email the OGC for a redlinable copy. • Most Frequently Used Agreements • Contract for Professional Services • Purchase Order (purchase of goods) • U Wide Agreements

What Contract do I use? • Exceptions to the requirement to use University templates: – Software – Unique service or good that would require extensive edits. – Some IT services • The Vendor says it is easier or faster to use their agreement. What do I do now? – Insist again that we use University Terms and Conditions. • Use long turnaround time and the size of University as leverage. – What if a vendor will absolutely not agree to use our Terms and Conditions? • OGC will need an editable Word version of the contract.

Contract Review Flow Chart

Before Sending Agreement to OGC • Finalize Business Terms – Pricing, Payment Terms, Deliverable, etc. • Read the contract – Are the business terms correct? – Understand what you and/or your department/unit are agreeing to. – Check business terms and highlight areas where you have concern. – Make notes to the OGC or to the vendor using comments tool – If editing text use the redlining tool.

Before Sending Agreement to OGC: Legal vs. Business Terms Legal Terms • • • Indemnification • Assignability • Termination Requirements • Confidentiality • Intellectual Property • Jurisdiction Term of Agreement Termination Price & Payment Deliverables Delivery Terms & Timeline for Delivery • Limitation on Liability • Warranty

Contract Business Terms Business Term Contract Considerations Term Best practice < 3 years, software: 1 year No auto renewals. Consider if your service is in a rapidly changing industry. Do you know this is a reputable company and quality of work product? Do you get better pricing if you take a longer term? Do you have a right to terminate? Termination Do you want a right to get out of the contract at any time? Is it ok if the supplier has the right to terminate at any time? What happens to you data, or information when the contract terminates? Price & Payment Does the agreement reflect the price and payment terms you agreed to? Best practice is not to pay up front, or at least not 100%. Intellectual Property Who will own what is being produced or any product of the services? Do you want the vendor to have any right to the IP or license?

Contract Business Terms cont. Business Term Contract Considerations Timeline, Milestones, Delivery Terms What is the date you want the work completed or product completed? Penalties if not completed on that day? Is this a long term or complex project, should there be milestones? How and where should the product or deliverable be sent or delivered? Deliverables What is the end product? Who will own it and/or the intellectual property rights? Be detailed. Warranty What is your expectation of what this product can do? How long or to what extent to you want the supplier to warrant their services or goods? Limitation on Liability If something goes wrong this amount would be the maximum the University could recover in the case where we had to sue the supplier

Submitting to the OGC for Review • How do I get my agreement in line in the legal queue? – Send the following items to the OGC: • Complete the Contract Review Form. – CRF • Redlined University Terms and Conditions or Vendor Agreement (in Word) reviewed by department or unit. • Any attachments (Statement of Work/Scope of Services, Invoice, PO, etc. ) – Send to: • akdownin@umn. edu, also copy Jean Schatz at schat 114@umn. edu • After Jan, 1, 2018 send all purchasing agreements under $50 K to ogcpurchasing@umn. edu, over $50 K to akdownin@umn. edu.

Contract Timing • Average turnaround is 2 weeks. – Plan accordingly • Use University templates and forms – If no changes do not need OGC review. • Allow time for negotiation and review on both sides. • Not every contract can be an emergency.

After the First Review by OGC • Send the agreement back to the vendor – Be certain all “internal” comments are removed. • What if the vendor makes additional redlines, or doesn’t accept the OGC proposed changes? – Review all redlines and any comments to see if you agree or disagree and/or have any comments or input. – Send back to the OGC for review. • OGC must review any ongoing edits to legal terms.

Who can sign the Agreement? • Delegation of Authority – Only authorized personnel in your school/unit/department are permitted to sign legal agreements and bind the University in contract. – You can find who is authorized by searching the Delegation of Authority – If you sign and are not authorized, you could be personally liable for the contract under Minnesota law.

Future OGC Tools for Contracting • Videos • Contract Review Flow Chart Updates • Updates to Contracts Library – Addendum to Contractor’s Form • Updated OGC Website • Additional training opportunities or guidance to allow for further unit/departmental independence with low risk, low dollar value agreements.

Thank you! Questions?