Slide 1. Slide 2. Slide 3 LEARNING OBJECTIVES WHAT S THE DIFFERENCE? PERSONAL AND PROFESSIONAL EXCELLENCE
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1 Slide 1 PERSONAL AND PROFESSIONAL EXCELLENCE Contract Administration Beginning With the End in Mind David E. Nash, CPPO, CPPB 50 TH ANNUAL CONFERENCE MAY 24-27, 2017 ORLANDO, FLORIDA Slide 2 LEARNING OBJECTIVES By participating in this workshop, the participant will be able to: Identify the concepts and principles of the contract administration process Identify potential contract risks Design a Contract Administration Plan Design a Performance Assessment Plan Develop acceptance criteria and payment terms Recognize breach and termination options Properly close-out the contract 2 Slide 3 WHAT S THE DIFFERENCE? Contract management essentially includes the entire procurement cycle from identifying the need to closing out the contract. Contract administration occurs after the contract is signed; is goal oriented in that it ensures enforcement of the T s & C s while achieving the stated outcome of the contract. 3
2 Slide 4 CONTRACT MANAGEMENT Establish contract goals Identify potential difficulties Assess likelihood of risk occurring Type of solicitation Develop specs or SOW that address need Develop contract clauses to mitigate risks Develop a Contract Administration Plan Formulate a contract that meets objective 4 Slide 5 CONSEQUENCES OF POOR CM End-user frustration End-user less willing to try new vendor Lack of contractor accountability Agency acceptance of poor quality Increased costs Under/overpayment to contractor 5 Slide 6 GENERAL Focus of Contract Administration Three broad goals of CA A quality product/service Delivered on time Within budget Two-pronged approach Process Product focus One size does not fit all 6
3 Slide 7 CONTRACT ADMINISTRATION Payment Monitoring of progress Inspection Acceptance Quality assurance Monitoring and surveillance Modifications Negotiations Closeout 7 Slide 8 CONTRACT RISKS (1) Proposal risk Contract is a legal document If it s not in writing it doesn t exist Language must be clear and concise Surety/liability risk Insurance and bonds Licensing; indemnification Contractual risk Handling changes Breach and cure Termination 8 Slide 9 CONTRACT RISKS (2) Schedule risk Deliverables Delivery terms Penalties Performance risk Defines acceptance Inspections Price risk Payment terms Payment schedule 9
4 Slide 10 CONTROL MECHANISMS Effective contract specifications Acquisition method Terms & conditions Surety/Liability Handling changes Contract pricing Delivery requirements 10 Slide 11 TYPICAL CA PROBLEMS Wrong or bad product Delay in delivery or completion Disputes over acceptance Change orders Personality conflicts Lack of competition Poor performance High risk of failure Use of Subcontractors High cost 11 Slide 12 TERMS AND CONDITIONS Inspection and acceptance Liquidated damages Change orders Key personnel Definition of performance Work and payment plans Delays Dispute resolution Subcontractors Termination 12
5 Slide 13 LIQUIDATED DAMAGES Motivates contractor to deliver on time Less severe monetary damages UCC authorizes Include clause in contract Usually some dollar amount per day Must be reasonable Do not call it a penalty Not a boiler plate condition Determine need case by case Excusable delay voids it 13 Slide 14 LIQUIDATED DAMAGES 14 Slide 15 CONTRACT ADMINISTRATION PLANS (1) Focus on who, what, when where and how Product of integrated team Anyone with a stake in the contract Made include financial, logistical, engineering Baseline document Sign off and give a copy to contractor Emphasis on process, output & outcomes Common framework, but not all the same May leave in topics with an N/A 15
6 Slide 16 CONTRACT ADMINISTRATION PLANS (2) Description Roles and responsibilities Period of performance/delivery dates Data and deliverables Testing Inspection and acceptance 16 Slide 17 CONTRACT ADMINISTRATION PLANS (3) Warranty provisions Personnel requirements Special terms and conditions Watch list items Critical milestones Schedules and meetings 17 Slide 18 PERFORMANCE ASSESSMENT PLANS Based on technical requirements of contract Actions used to evaluate performance Include with bid to provide suppliers with: What tasks will be inspected When tasks will be inspected What standards will be utilized How evaluation of performance will be made Not one size fits all Be clear due to levels of risk May be revised as we go along 18
7 Slide 19 SURVEILLANCE TECHNIQUES Inspection any time, any place Sampling What will be checked; quality level Lot or sample size; sampling selection procedures Performance criteria; analysis of results Checklists specific items to check Performance Requirement Summary Lists Tasks; method of surveillance Standards; acceptable quality levels; remarks Other information checking unique issues 19 Slide 20 OTHER OPTIONS Insight Experiential Intervene by exception Process-driven approach Prevent and improve Fix the cause, not the defect Oversight Traditional management approach Control; constraints; knowledge Detection; correction 20 Slide 21 CONTRACT ADMINISTRATION TEAM Identify the composition of the team Clarify the roles and levels of authority Identify the separation of duties Review the importance of ethics 21
8 Slide 22 COMPOSITION OF THE TEAM (1) Contracting officer Procurement manager, agent, buyer Advisor, decision maker, coordinator Negotiator Authorizes changes to contract Settles disputes Ensures both parties meet contract obligations Protects the interests of the agency 22 Slide 23 COMPOSITION OF THE TEAM (2) Contracting officer s representative Understands requirements Assists in preparation of specs or SOW Provides technical guidance to contractor Focal point for all correspondence Maintains files Identifies waste Contract compliance Keeps CO informed of significant events 23 Slide 24 ETHICAL CONSIDERATIONS Conflicts of interest Actual; Potential; Appearance of Public employee conflicts Use of position to secure benefits Contractual relationship affects independence Action as an agent for the contractor Resolving conflicts Immediate action Transfer responsibility 24
9 Slide 25 START-UP CONFERENCES Should we hold one: Size and complexity of project Contract type Urgency of the project Contractor s performance history Who attends? Basic objectives Understanding of technical requirements Clarify rights and responsibilities Determine need for follow-up meeting 25 Slide 26 ISSUES TO REVIEW AT START-UP Mission/objective related to contract Restating promises Special provisions ID decision makers Monitoring QA approaches by contractor Incentive features Reporting needs Payment methods Subcontracting Delivery Operational and safety issues 26 Slide 27 CONTROL BY MONITORING Quality or incorrect item received Schedules Acceptance Contract changes Conflicts Data management Performance Budget and payment Risk of failure Subcontractors 27
10 Slide 28 BEING PROACTIVE Public agency retains control over contract Watch time limits and action items Do not create employer/employee relationship Avoid poaching of employees Institutional memory must reside with the agency Contractor should not represent agency before a governing board 28 Slide 29 CONTRACT FILES Contract, bid docs & notice of award Bonds/insurance Conflict of interest forms Post-award docs to & from contractor Notice to proceed Approvals, waivers, disapprovals Performance Mon. Changes to cont. Delivery or contract price changes Disputes, audits, legal issues Stop work orders Inspection/accept. Contract closeout 29 Slide 30 INSPECTION AND ACCEPTANCE Right to inspect Cost of inspection Allowance for testing Place of inspection Time of inspection Acceptance Warranties 30
11 Slide 31 TYPES OF MODIFICATIONS Bilateral Must be approved by both parties Relate to something substantial Be clear in what is affected Unilateral Right has been given in contract Modification is minor Change order authority Constructive changes 31 Slide 32 EXCUSABLE DELAYS Requirements for consideration: Beyond control of contractor Unforeseeable, preventable, can be overcome No fault or negligence of contractor Causes Acts of God (force majeure) Acts of the agency Fires, floods, epidemics, etc. Unusually severe weather Subcontractor delays Options 32 Slide 33 EXCUSABLE DELAY? 33
12 Slide 34 NON-EXCUSABLE DELAYS Financial difficulties Lack of materials Labor problems, excluding strikes Lack of equipment or facilities Lack of knowledge Reasonable delays preceding award 34 Slide 35 PAYMENT ISSUES Payment methods Completion payment Partial payments Progress payments Milestone payments Advance payments Withholding payments Prompt payment act Assignment of claims 35 Slide 36 DISPUTES AND CLAIMS Failed attempt to reach agreement on matters of disagreement Contract clause Submitted in writing to CO Time limit for a decision by CO Decision is final, unless appealed Time limit for appeal Continued performance Resolution of issues Claim written request for money, adjustment of terms or other relief 36
13 Slide 37 PRINCIPLES OF CONFLICT RESOLUTION Think before reacting Listen actively Assure a fair process Attack the problem, not the person Accept responsibility Use direct communication Look for interests Focus on the future Look for options for mutual gain 37 Slide 38 FIVE-STEP PLAN First field manager deals with contractor s on-site supervisor to resolve issue Second contract manager or CO contacts the contractor directly Third hold a formal meeting with the same people Fourth use liquidated damages or cure Fifth pursue contract termination 38 Slide 39 TERMINATION FOR DEFAULT Document must be able to sustain default Right to terminate for breach Reasonable grounds Failure to perform or deliver in time Failure to make progress Procedural notification Cure notice Show cause notice Proper handling Appeal 39
14 Slide 40 TERMINATION FOR CONVENIENCE Allows agency to terminate without cause Contractor limited to recovering costs and profit for work already performed Sends a signal to bidders Usually invoked when goods or services are no longer needed Notice: Contract number Termination for convenience Effective date Scope of termination 40 Slide 41 CONTRACT CLOSEOUT Checklist Administrative issues Deliverables Payments & invoices Property Contract Administration Analysis Contract development Were goals adequate; any changes needed Contract administration Does team need additional training; did unanticipated problems appear; different or better next time 41 Slide 42 QUESTIONS? 42
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