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

Avoiding Potential Contract Pitfalls

Presented by: Greg Cruthirds, Director of Purchasing and Materials Management

Clear Creek Independent School District - League City, Texas

October 2006 Market Driven Salary Plans 2

Where We’re Located


The District

o 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

o Students 36,200 students Projected enrollment of 47,500 within 12

years 66 different languages spoken


The District

o 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

o District Challenges Managing student growth Managing facility growth Special programs

Special Ed program growtho Workforce

More than 4,800 employees More than 2,600 teachers, librarians &

nurses


The District

Over the next five years, Clear Creek ISD will:o 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 Goal

To provide efficient and effective management of resources:

o 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

o Be flexible enough to change with the times

Best practices, Innovative programs


Define your needs

It is difficult to get what you need, if you don’t know what you want.

o Solicit information from potential vendors

o Meeting between buyer and department director/school principal

o Research the options

o Communicate with other school districts

o Attend vendor fairs


Request Proposals

o May go through the RFP process.

o May seek proposals from purchasing cooperatives.

o May get written quotes if less than $25,000.


Select Vendor

o 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


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…


Don’t Indemnify Them

Indemnification Clauses

o Be careful not to agree to indemnify third parties

o Such language would violate the Texas Constitution and should therefore be eliminated from any contracts


Stay Home

Venue Provision

o 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.

o Not New York, California, Massachusetts, Kalamazoo or Timbuktu!


God Bless Texas!

Governing Law Provision

o Make sure that the governing law is Texas law, not that of another state, or foreign country.

o You don’t want Napoleonic Law, Canadian Law, or the Laws of Mexico to decide your dispute.


Bonds & Insurance

Certification of Insurance Provision

o 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


“Terminator”

Termination Provision

o 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.

o Example: “District reserves the right to terminate contract with, or without cause, upon provision of thirty (30) days written notice.”


Scope

Scope of Agreement

o Include a provision stating that the written document is the entire agreement between both parties, and supersedes any previous written or oral agreements.

o Include a statement that any future amendments to the agreement will be in the form of a written amendment


“It expires when?”

Length of Agreement

o Do not be silent on the length of a contract.

o It will be assumed the contract is perpetual!

o Always state a specific contract term, subject to possible early termination.


“Pay Up”

Length of Time to Pay

o Include a statement that the district is on a Net 30 payment basis after receipt, not issuance, of invoice.

o May include a provision for a discount for early payment, ex. [2% - 10]


Lawyers are $$$

Attorneys’ Fees and Costs

o 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.

o This can be a double edged sword, but generally favors the school district.


Who?

Identity of Parties

o Be precise about the identity of both parties.

o The district should be one party, not an individual or a school.

o Also be precise about the identity of the vendor.


“Do I have to renew?”

Unfavorable Renewal Terms

o Automatic renewals can be risky

o Consider annual renewal options at the discretion of both parties

o Watch for early cancellation penalties


“They are sending us junk”

Vague Substitution Clauses:

o It’s All In The Details… Vague phrases like “Or similar

materials” can be dangerous

Specify costs Specify responsibilities Specify terms Specify approvals


Budget Busters

Incomplete Cost Listings:

o Don’t overlook hidden costs! Make sure all charges are included:

Delivery Setup/Installation Maintenance Repairs Training and travel Annual fees


“It wasn’t me!”

Collateral Damage

o 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.

o Payment for repair of district property.


Mediate

o Dispute Resolution Provision

o It is advisable to include a provision in your contracts that would require the parties to mediate any disputes before proceeding to litigation.

o 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.


Senate Bill 9

Criminal Background Checko In September 2007, Senate Bill 9 went

into effect, codified as Section 22.0834 of the Texas Education Code.

o Effects both employees of districts and contractors of districts

o 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


Criminal Background Checks Continued

Three Questions to Determine Whether a

Criminal Background Check is Required:

o Is there a direct contractual relationship Subcontractors are exempt

o Are the duties to be performed by the contractor continuing in nature?

More than one day?o 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

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.


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.


Contract Pitfalls To Avoid

QUESTIONS?

Contact InformationGreg Cruthirds,

Director of Purchasing and Materials Management

[email protected]

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

Documents

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parties o

options o

o example

district o academics

district o finances

texas o students

market driven salary