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Avoiding Potential Contract Pitfalls

Avoiding Potential Contract Pitfalls

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Avoiding Potential Contract Pitfalls

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  1. Avoiding Potential Contract Pitfalls Presented by: Greg Cruthirds, Director of Purchasing and Materials Management Clear Creek Independent School District - League City, Texas

  2. Where We’re Located Market Driven Salary Plans

  3. Academics Only “Large” school district in Texas to be “Recognized” for 10 of the last 11 years 15 of 37 campuses (41%) are Exemplary 60% of Elementary campuses are Exemplary Stewart Elementary named a National Blue Ribbon School of Excellence One of only 23 schools in Texas Students 36,200 students Projected enrollment of 47,500 within 12 years 66 different languages spoken The District Market Driven Salary Plans

  4. Finances $249 million General Fund Budget $44 million Debt Service budget $12 million Food Service Budget Completing a $264 million bond program Beginning a $183 million bond program District Challenges Managing student growth Managing facility growth Special programs Special Ed program growth Workforce More than 4,800 employees More than 2,600 teachers, librarians & nurses The District Market Driven Salary Plans

  5. Over the next five years, Clear Creek ISD will: Experience tremendous growth in facilities New Central Support Facility – Summer 2008 Elementary Schools 25th & 26th planned in 2009 Intermediate Schools 9th planned in 2010 10th planned in 2011 11th planned in 2011 High Schools 4th opened in August of 2007 5th planned in 2010 Early College High School The District Market Driven Salary Plans

  6. The Goal To provide efficient and effective management of resources: • Meet the District’s administrative and operational needs • Ensure that end users are getting what they want • Ensure that they are getting it when they need it • Ensure that they are getting good value • Be flexible enough to change with the times • Best practices, Innovative programs Market Driven Salary Plans

  7. It is difficult to get what you need, if you don’t know what you want. Solicit information from potential vendors Meeting between buyer and department director/school principal Research the options Communicate with other school districts Attend vendor fairs Define your needs Market Driven Salary Plans

  8. Request Proposals • May go through the RFP process. • May seek proposals from purchasing cooperatives. • May get written quotes if less than $25,000. Market Driven Salary Plans

  9. Select Vendor • Select the vendor • Evaluate proposals as a committee whenever possible • Must use purchase price, vendor reputation, quality, school district’s needs, past relationship with vendor, total long term cost and any other relevant factors to evaluate. • Finalize negotiations • BAFO • Get Board Approval Market Driven Salary Plans

  10. Contract Time! • Now its time to formalize the agreement – “Contract Time” • Often it is useful to use the vendors boilerplate contract, but • Be Careful! There are some potential contract pitfalls to watch out for… Market Driven Salary Plans

  11. Indemnification Clauses Be careful not to agree to indemnify third parties Such language would violate the Texas Constitution and should therefore be eliminated from any contracts Don’t Indemnify Them Market Driven Salary Plans

  12. Venue Provision Make sure that you have a venue provision in your contract whereby any lawsuits that may arise are brought in the county of the administrative headquarters of the school district. Not New York, California, Massachusetts, Kalamazoo or Timbuktu! Stay Home Market Driven Salary Plans

  13. God Bless Texas! Governing Law Provision • Make sure that the governing law is Texas law, not that of another state, or foreign country. • You don’t want Napoleonic Law, Canadian Law, or the Laws of Mexico to decide your dispute. Market Driven Salary Plans

  14. Bonds & Insurance Certification of Insurance Provision • Make sure that all contracts are specific as to the type of insurance required and that your district is named as the insured party. • Verify the insurance coverage • Verify any payment and performance bonds Market Driven Salary Plans

  15. Termination Provision Whenever possible, include a termination provision in your contract to allow your district the ability to terminate a contract for any cause, or no cause, with a certain number of days written notice. Example: “District reserves the right to terminate contract with, or without cause, upon provision of thirty (30) days written notice.” “Terminator” Market Driven Salary Plans

  16. Scope of Agreement Include a provision stating that the written document is the entire agreement between both parties, and supersedes any previous written or oral agreements. Include a statement that any future amendments to the agreement will be in the form of a written amendment Scope Market Driven Salary Plans

  17. “It expires when?” Length of Agreement • Do not be silent on the length of a contract. • It will be assumed the contract is perpetual! • Always state a specific contract term, subject to possible early termination. Market Driven Salary Plans

  18. “Pay Up” Length of Time to Pay • Include a statement that the district is on a Net 30 payment basis after receipt, not issuance, of invoice. • May include a provision for a discount for early payment, ex. [2% - 10] Market Driven Salary Plans

  19. Lawyers are $$$ Attorneys’ Fees and Costs • Include a provision in the contract that states that the prevailing party in any suit shall pay all reasonable attorneys’ fees and costs incurred in a lawsuit brought to enforce the agreement. • This can be a double edged sword, but generally favors the school district. Market Driven Salary Plans

  20. Who? Identity of Parties • Be precise about the identity of both parties. • The district should be one party, not an individual or a school. • Also be precise about the identity of the vendor. Market Driven Salary Plans

  21. Unfavorable Renewal Terms Automatic renewals can be risky Consider annual renewal options at the discretion of both parties Watch for early cancellation penalties “Do I have to renew?” Market Driven Salary Plans

  22. Vague Substitution Clauses: It’s All In The Details… Vague phrases like “Or similar materials” can be dangerous Specify costs Specify responsibilities Specify terms Specify approvals “They are sending us junk” Market Driven Salary Plans

  23. Incomplete Cost Listings: Don’t overlook hidden costs! Make sure all charges are included: Delivery Setup/Installation Maintenance Repairs Training and travel Annual fees Budget Busters Market Driven Salary Plans

  24. Collateral Damage Include a contract provision that will hold the vendor responsible for damage they may cause to district property in the performance of their contracted duties. Payment for repair of district property. “It wasn’t me!” Market Driven Salary Plans

  25. Mediate • Dispute Resolution Provision • It is advisable to include a provision in your contracts that would require the parties to mediate any disputes before proceeding to litigation. • This provision should include language that the parties should attempt to agree on a mediator, and that both parties will share equally in the costs of mediation. Market Driven Salary Plans

  26. Criminal Background Check In September 2007, Senate Bill 9 went into effect, codified as Section 22.0834 of the Texas Education Code. Effects both employees of districts and contractors of districts Important date: January 1, 2008 For contractors hired prior to this date criminal background checks can be run by any law enforcement agency For contractors hired after this date, fingerprints are required to be processed through the DPS criminal history clearinghouse Senate Bill 9 Market Driven Salary Plans

  27. Three Questions to Determine Whether a Criminal Background Check is Required: Is there a direct contractual relationship Subcontractors are exempt Are the duties to be performed by the contractor continuing in nature? More than one day? Does, or will, the contractor have direct contact with students? Any project that requires a vendor to work in a classroom, gymnasium, parking lot, or other part of a school building where students will have access is effected Criminal Background Checks Continued Market Driven Salary Plans

  28. Criminal Background ChecksContinued Who is Responsible For Obtaining Background Checks? The contractor is responsible for obtaining and is also required to certify to the district that it has received all criminal history record information for all employees to whom the law applies. Market Driven Salary Plans

  29. Suggested Contract Language for Criminal Background Checks Prior to commencing any work on this Project, Proposer [or Vendor] will certify, on the form provided herewith, that for each employee of Proposer [or Vendor] that will have direct contact with students, the Proposer [or Vendor] has obtained, as required by Texas Education Code Section 22.0834: (a) national criminal history record information from a law enforcement, or criminal justice agency, for each employee of Proposer [or Vendor] hired before January 1, 2008; and (b) national criminal history record information from the Texas Department of Safety for each employee of Proposer [or Vendor] hired on or after January 1, 2008 Any employee who will, or may, have direct contact with students must not have been convicted of an offense in Texas Education Code Section 22.085. Market Driven Salary Plans

  30. Contract Pitfalls To Avoid QUESTIONS? Contact Information Greg Cruthirds, Director of Purchasing and Materials Management 281-284-0211 Market Driven Salary Plans