Faculty Briefing Contract Questions

1. Faculty BriefingContract Questions College of Liberal Arts August 15, 2011 Bill Woodward Office of Counsel X6633 bill.woodward@uah.edu

2. How do I know if I am dealing with a contract? • Includes documents entitled: Contract, Agreement, License, some Reservation Forms, some Room Use Forms, some Price Quotations, some Invoices, Leases, Equipment Rental Forms • If the document contains the word “agree,” it is almost certainly a contract

3. What is the Office of Counsel’s Involvement? • Provide legal review and counsel • Officials whose names appear on the BOT Contract Authority Resolution decide whether to sign the contract or not • Reviewed over 517 standard contracts FY 2010 • Reviewed over 300 non-standard contract FY 2010 • Reviewed over 40 construction contracts FY 2010 • Draft agreements

4. What is the Office of Counsel’s Involvement? (continued) • Prepare addendums to deal with “problem clauses” • Negotiate refinement of addendums to meet vendor’s concerns where possible. • If no one tells us the vendor has a problem with an addendum, we have no way of knowing • Problem: Vendor says “take it or leave it” • Could lead to personal liability on the part of signer

5. What are some common contract “problems”? • Indemnification, hold harmless provisions • Choice of governing law other than Alabama • Exclusive venue for dispute resolution in courts of another state • Submission of the University to the jurisdiction of a court • Arbitration requirements • Use of the University’s name/logo in advertising by the other party • Payment in a future fiscal year

6. What are some common contract “problems”? (continued) • Automatic renewals absent written notice so many days prior to end of current term • Reservation of the right to change the terms and conditions at any time • Requirements that the University accept responsibility for damage caused by those attending an event at a hotel • Provisions calling for first class air fare, limo service, 5 star hotels to vendor’s employees

7. What are some common contract “problems”? (continued) • Requirements that the University pay taxes • Confidentiality provisions without an exception that allows release required by Alabama Open Records Act • Bus charters without provisions relating to liability insurance and driver qualifications • Insurance requirements not met by the University’s standing policies

8. How do I start the contracting process? • Prepare a file containing legible copies of the quotation, license agreement, etc. • Complete the blanks • Locate/include in the file legible copies of documents referenced • Indicate if for academic or research purposes • Scan/email the package to purch@uah.edu • Fax to x6151 if you have no scanning capability • Call x6484 if all else fails • Purchasing will assign responsibility based on “commodity” • Prepare/submit requisition • Start early

9. Do I really need to read the contract? • Most written contracts will have a clause providing that it contains all of the matters agreed to by the parties and supersedes any oral or written understandings reached previously • Be certain that all of the matters important to you have been included in the written agreement

10. Does the Competitive Bid Law (CBL) apply? • CBL threshold is $7,500 • Can’t fragment purchases within a fiscal year to avoid CBL application • Exceptions include: • Goods: Sole source • Services: Personal services of individuals possessing a high degree of professional skill where the personality of the individual plays a decisive part • Noncompliance leads to null and void contract • It can be faster to use CBL process than to use sole source

11. What is a sole source item? • Goods/ services offered must be unique. • Uniqueness must be substantially related to the intended purpose, use, and performance of the goods/ services sought.  • Other similar goods/ services cannot meet the desired objectives of the entity seeking the goods/services. • No “gold plating”

12. When can I use a Professional Services Contract? • Using a Professional Services Contract is only appropriate if the individual being hired is an independent contractor, not an employee. Independent contractors pay their own Social Security, make their own quarterly estimated income tax payments, and provide their own insurance and retirement benefits, if any. • Employees work under the control and continuing supervision of the University while independent contractors are given a task and perform on their own. • The Professional Services Contract (with Terms and Conditions is on-line at: http://www.uah.edu/admin/bussvcs/Contracts/Professional%20Services%20Contract-General%20Terms.pdf

13. What happens if the Professional Services Contract is used inappropriately? • Using the Professional Services Contract form is not determinative • If the University misclassifies an employee as an independent contractor, it is subject to fines and must pay the withholding which was not collected from the employee’s salary. • Consider part-time or on-call employment status

14. Are the documents legible? • Try to get vendors to scan original documents and email them to you. • Helps insure legibility • Can make it easier to send information to Purchasing or OOC more quickly and easily • Faxes are discouraged. Second and later generation faxes are almost always either illegible or not comfortably legible. This slows down processing.

15. Does the contract refer to other agreements, documents or websites? • If there are references to other agreements, documents, or websites, they should be found, printed, and made a part of the contract package • Failure to do this will slow processing

16. How can I use a software “education license”? • Education licenses are offered at a price discount or, on occasion, at no cost • The trade-off is that the use of the software is typically restricted to use for education purposes with commercial use specifically prohibited. • If “donated,” vendor may well say “take it or leave it” when an addendum is proposed to deal with sovereign immunity issues

17. What are some of the common restrictions in software licenses? • Education use only • Limit on number of installations, if not a site license (audit rights to enforce) • Limit on number of simultaneous users (audit rights to enforce) • Requirement to have individual users agree in writing to abide by the terms of the University’s license • Requirement to appoint a license administrator in writing