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
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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
PI
PI
Dept Staff Dept Staff
Pre-Award Post-Award
TTO
Legal
Award
Mgt.
Post-Award
SPA
President
PI
OCG
SPA
TTO
CONTRACTS: PROCESS
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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
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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 NonDisclosure potential problems?
• How are Confidentiality and NonDisclosure 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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