Drafting the Request for Tender Offers: Important Terms and Conditions – Charles Rumbaugh Guest Lecturer Naval Postgraduate School IDARM International.

Drafting the Request for Tender Offers: Important Terms and Conditions –

Charles RumbaughGuest Lecturer

Naval Postgraduate School

IDARM

International Defense Acquisition Resource Management Program

Goal(s) of the Request for Offers • Meet end user requirements• Specifies proposed conditions of the sale• Requests that prospective contractors submit an

offer• Other goals could include…

– Maximize competition– Seek (alternative) solutions to a mission requirement– Quick response– Minimize price to be paid– Other?

May be multiple/conflicting purposes

Long Term Goal(s)

• May be negatively impacted in achieving the immediate goal. For example: – Limiting competition can have a serious

consequence related to life cycle/ownership costs

– Using commercial/“off-the-shelf” items– Others?

Maximize Competition

• Clearly, accurately, and completely describe requirement(s)– Exclude unnecessary restrictive specifications– SOW

• Provisions that are generally acceptable to the industry– Role of Market Research– Benchmarking

• Reasonable time for submission of tender offers• Clear evaluation methodology that will result in

fair evaluation and selection of the best offer.

Quick Response• Adequate Market Knowledge of Potential

Sources• Existing Contractual “vehicle?”

– Past Performance a factor?• Predefined Bidding Limitations

– Specification/SOW issues• Legal Right to Exclude Sources• Problems with this Goal

– Pricing issues– Lack of competition – May affect quality– Influences contract type– Other approaches available? “Alpha Contracting”– And others…..

“Must Haves”

• Price• Period for Validity of Offer• Responsive Offer from Responsible Offeror• Compliant with Request except for…• Certifications• Representations/Warranties—What are they?• Identification of Authorized Negotiators• Others?

“Nice to Haves”

• Alternative Offers

• Negotiable Items – You may be willing to eliminate these items– Relationship to Price

• Options

• “Nice to have” and “must have” provisions can impact price

Functions of the Contract

• Record of “the” agreement

• Document which frames and facilitates contract administration activities

• Risk allocation among the parties

• Defines Payment Terms

• Performance Incentive to Contractor

Request for Tender Forms the

Foundation For the contract

First Steps—RFT

• Identify the approved requirement

• Ensure specification and SOW is clear

• What is the estimate?• Ensure that funds

are/will be available– The contract will

create a legal obligation to pay

Funding over the near and long term

Next…Organization of Information

• Uniform assembly of information that permit interested suppliers ease of access to information necessary to submit an acceptable tender offer.– Web/electronic posting

• Systemic approach is preferred

Pricing Information

• What information is necessary to determine a fair price?

• What information may be available to determine a fair price?– Market Research– Reverse Engineering

• To what extent does the request for tender provide you the flexibility to obtain the necessary pricing information?

Next Steps

• Selection of the contract type– Consideration of

• Risk• Payment mechanism• Maturity of requirement• Clarity of requirement• Urgency

Cost Typ

e

Fixedprice

Hours

Unpriced

Next Steps

• How to conduct the procurement….Competitive.

.Restricted..

Next Steps

• How to Identify and Solicit Potential Sources– Trade Associations

Market Research

Advertisements

Other Customers

www.thomasregister.comEmbassies

Next Steps

• The Team….who is on the team

Who does not belong on the team?

Dealing with Interested Parties

What are the ground rules for communication?

Terms & Conditions

• Tender/proposal submission requirements• Provisions that must be included in the

subsequent contract• How capabilities will be evaluated

Changes that are required after release impact schedule/price

Provisions…….Provisions…….InspectionInspection

DataData

QualityQuality

SecuritySecurity

DeliveryDelivery

WarrantyWarranty

ModificationsModifications

TerminationsTerminations

EthicsEthics

InsuranceInsurance

DisputesDisputes

NotificationsNotifications

Record Keeping

Record Keeping

PaymentsPayments

OptionsOptions

Provisions…….• Inspection• Acceptance Criteria• Intellectual Property

Rights• Software• Quality Terms/Processes• Payment Provisions• Security• Warranties-Expressed/

ImpliedEvergreen

• Changes/Modifications

• Delivery TermsINCOTERMSBill of Ladings

• Indemnification• Insurance• Limitation of Liability• Terminations—Default/

Convenience Delays/Force MajeureLiquidated Damages

• Dispute ResolutionArbitrationNew York Convention

on Enforcement of Awards

More Provisions…….

• Recordkeeping and Reports

• Notifications• Countertrade and Offset

agreements• In-Country sources of

supply• Key Personnel• Language• Taxes• Subcontractors

• Import/Export law—LicensesITAR

• Applicable LawForeign Corrupt Practices

ActEthics/BriberyUN Convention on Contracts

for the International Sale

of Goods (CISG)/Treaties

Uniform Commercial Code (UCC)

And Even More Provisions…….

• Additional Terms

Assignment

Environmental

Nondisclosure/Publicity

Severability

Integration clause

Other…

RFT Summary/Best Practices

• Conduct Market Research/Benchmark• State with clarity, accuracy, & completeness the

desired goods/services

• Identify Risks & Select Right Contract/Pricing Approach

• Develop Quality Request for Tenders • Plan Selection and Negotiation Strategy• Use (appropriate) consultants• Create Contract Provisions “Favorable” to Buyer!