1 Welcome to the Practitioner Class 4 : Preparing the Contract. Housekeeping Fire procedures Toilets Focus : mobiles off etc. Future Events Practitioner Class 5 : Selecting the Right Provider – Afternoon of 24 th September – Tony Newberry – Here. Practitioner Class 6 : Managing the Contract – Afternoon of 29 th October – John Lake (with me) - Here. The Outer Circle (& beyond) : Receive Information via general APM publicity & word of mouth The Middle Circle : Those on the C&P web mailing list. The Inner Circle : Those who are willing to contribute when asked e.g. Talks, contributing & reviewing documents. Limited direct emails. The Bulls Eye : Committee members & those who want to initiate ‘projects’ & pro-actively contribute. Copied in on most emails wrt SIG initiatives. Bi-monthly web / teleconferences. 2013 Contracts &Procurement SIG Structure
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Practitioner class 4 Preparing the contract 04 july13
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Transcript
1
Welcome to the
Practitioner Class 4 :
Preparing the Contract.
Housekeeping
� Fire procedures
� Toilets
� Focus : mobiles off etc.
Future Events� Practitioner Class 5 : Selecting the Right
Provider – Afternoon of 24th September – Tony Newberry – Here.
� Practitioner Class 6 : Managing the Contract –Afternoon of 29th October – John Lake (with me) -Here.
The Outer Circle (& beyond) : Receive Information via general APM publicity & word of mouth
The Middle Circle : Those on the C&P web mailing list.
The Inner Circle : Those who are willing to contribute when asked e.g. Talks, contributing & reviewing documents. Limited direct emails.
The Bulls Eye : Committee members & those who want to initiate ‘projects’ & pro-actively contribute. Copied in on most emails wrt SIG initiatives.Bi-monthly web / teleconferences.
Masterclass?� Mastery of anything (including contract preparation) only requires
you to do basic things well and consistently
� Effective contract preparation is not rocket science
� As individuals we easily enter, use, manage and exit contracts all the time
� Effective contract preparation is possible:
o 69 Contracts negotiated in parallel
o 200+ legacy issues
o 7 different existing contract forms
o Completed in under 12 months
Introduction� However good a contract strategy is, it can be completely
undermined by a poorly drafted conditions of contract and / or technical requirement documents which:
o do not reflect the contract strategy
o contain ambiguities and inconsistencies, both in the individual documents which make up the contract and between the documents
o contain errors or omissions, whether in terms of scope, constraints or the starting point
o are generally unclear and hard to navigate
� Effective contract preparation is actually a project within a project
The Good News: What it Requires
� Proper planning, and adequate, well briefed resources
� Clear definition of Benefits the contract must deliver
� Leadership, project management skills, and a clear understanding of Who, needs to do What, by When
� Management of multiple stakeholders to bring together a coherent whole within an agreed timeframe
� Identification and active management of risks and issues associated with the contract (with both content and creation)
� Getting it right is well within a Project Manager’s skill set
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Things to Consider before you Start:
� Consider Contract Structure – it will decide how and when you engage your professional team and define their scope of work
� Consider use of Main Body versus Annexes:
o Main Body for the overall agreement you’re putting in place and the rights and obligations you want to exist for the duration of the agreement
o Order of Precedence
o Annexes for information to be modified or updated over time
o Annexes work well for contracts with multiple contributors
o Often easier changing an annexe than the whole
Things to Consider before you Start:� Consider how you will run the ‘Project’
� What can you afford? Against your budget, decide what you will outsource versus do internally
� With external resources obtain an indication of rates and budget quotes for specific scopes of work
� Best use of resource - against unit cost, decide how you can best leverage the skills of the team whilst minimising spend so that you maximise the ‘value added’
� Decide who you want to write or lead which element
Things to Consider before you Start:� Understand interdependencies and who needs to be consulted in
preparation of each component (RACI useful)
� Understand the steps to bring it together in a coherent whole with a minimum of recycling (complete rough draft early is key)
� Decide how you want the team to work together (virtual or face to face, control of masters, information sharing)
� Allow sufficient time for internal review and compilation as well as external review and comment by the other Party
� Operate change control, so you don’t incur escalating professional fees
Briefing the Professional Team:
� Hold a kick off meeting
� Explain wider context and steps that preceded contract preparation (where you are now)
� Explain what you want the contract to deliver:
o The benefits you want from it
o The risks and issues it must address
o The unknowns and how they will be handled
o How you intend to operate the contract once in place
o What your risk appetite is
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Briefing the Professional Team:
Discuss how you plan to operate the contract and what your requirements are for:
� Uncertainty (now and at contract signing)
� Change/Flexibility and Change Management
� Operation of the contract – performance management, meeting your obligations
� Exit/Reversion – planned and unplanned
� Future business considerations (is this one of many)
Briefing the Professional Team:
� Explain anticipated team roles and how they will be involved over time
� Review/confirm the deliverables required and how they will fit in the overall contract structure
� Discuss and confirm the interdependencies between the team/deliverables
� Decide how the team will work together
� Explain the timeline and sequence of steps for creation of individual deliverables and compilation (1st Drafts & Finals)
General reminders for Professional Team:� The team will have different ways of working and writing
� Require them to say it once, in one place, and then refer –duplication will lead to contradiction
� Ensure that everyone understands the importance of the language being consistent and tight (£150,000 per word)
� Be specific and explicit in scope and obligations, but balance that with creating gaps in scope (including but not limited to..)
� Sanity check the ‘reasonableness’ of the provisions your team make and enforce a consistent risk appetite – you’ll have to negotiate it with the other Party
� Mandate a Clarification/Issues log and be relentless in its use
The Professional Team: BenefitsUsing any professional or professional team has benefits and limitations. Benefits include:
� They know their subject
� They understand the risks and issues associated with their scope and will bring experience and lessons learned you will not have
� They provide a ‘cold eyes’ review of where you’re at
� They’re great for a sanity check – if you can’t brief them well enough for them to make an effective start you’re probably not yet ready to put a meaningful contract together !
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The Professional Team: Issues� Most are fee driven and may be happy to work as mandate (even
if its not the most effective use of their time)
� Some may seek through the process to increase their scope/ contribution and therefore their fees
� The quality of their work is largely dependent on quality of briefing and how well their contribution is project managed (rubbish in = rubbish out)
� They will never have as much skin in the game as you (limited liability) and will manage their liability as much as yours
� They will often have conflicting drivers and views
� They typically will not know as much as you, or be as invested
Briefing The Professional Team: Summary� Plan the process properly before engaging them
� Be specific on the scope they are to deliver
� Have a quote against scope/deliverables including allowances for briefings, meetings etc.
� Have a clear plan up front to integrate the component parts and get a complete rough draft as soon as possible (providing one is a good way to go, using the professionals to edit)
� Have a plan to engage the other contract party’s professionals
� Don’t accept anything you can’t operate
� Don’t accept anything you don’t understand
Q&A’s
Preparing the contract
Doug Locke, Partner
Lawyers & Parliamentary Agents
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Contents
• Intellectual property
• Contract terms
• Change management
Collaborations
Collaborations
Please vote now using your keypads
Does a co-owner of intellectual property rights have the right to grant licences?
1. Yes
2. No
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Law and jurisdiction
Please vote now using your keypads
If you granted a licence, do you have the right to grant sub-licences?
1. Yes
2. No
Exclusivity
• “Sole and exclusive”
• Dangerous for licensor without:
• clear obligations on licensee
• minimum royalties
• Licensee’s right to enforce
Warranties
• “Operating within the scope of the licence will not
infringe third party IP”
• “The Licensor warrants that the patent is valid”
• Obligation to inform
• Obligation to co-operate
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Payments
• Indexation
• Royalties based on revenue or profits?
• What does “revenue” mean?
• Information and audit rights
• Interest on late payments
Duty to act in good faith
Compass Group v Mid Essex NHS Trust
Duty to act in good faith
• Those deductions were “ absurd” and they were
repaid. But other deductions were valid.
• The contract gave the Trust the right to terminate
(and claim compensation) if deductions reached a
certain level.
• But could the caterers terminate (and claim
compensation) because the Trust had acted in
bad faith?
Duty to act in good faith
High Court:
• Trust’s breach of duty to act in good faith
constituted a serious breach of a long term
contract requiring co-operation.
• The caterers could terminate.
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Duty to act in good faith
Court of Appeal
• The Trust could terminate. In terminating, the
Trust had simply enforced the contract.
• No general duty to act in good faith.
• (But, an implied duty not to act capriciously
where a contract allows a party to make an
assessment, or choose from a range of options,
taking into account the interests of both parties.)
• Different in other jurisdictions.
Change management
• Big changes and small changes
• Changes requested by customer and changes
requested by contractor
• Changes in law
• Who pays for analysis and costing?
Termination
• If someone breaches an agreement, do you have
the right to terminate it?
• Serious breaches
• Repeated breaches
• Delays
Dispute resolution
• Escalation
• Mediation
• Expert determination
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Exclusions of liability
English law prohibits:
• the restriction of liability caused by negligence
unless the term is reasonable
• in contracts on a party’s written standard terms,
clauses which permit that party to restrict liability
for a breach of contract unless the term is
reasonable
Exclusions of liability
To be reasonable, a clause must be:
• “fair and reasonable having regard to the
circumstances which were, or ought
reasonably to have been, known to or in the
contemplation of the parties when the contract
was made.”
Reasonableness factors
• Bargaining strength
• Inducement
• Opportunity to avoid
• Knowledge
• Availability of insurance cover
Endeavours
• Best endeavours
• Reasonable endeavours
• All reasonable endeavours
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EndeavoursJet2 v Blackpool Airport
Please vote now using your keypads
“All reasonable endeavours”?
1. More than “reasonable endeavours”, but less than “best endeavours”
2. The same as “best endeavours”
3. Meaningless
Jet2 v Blackpool Airport
“Jet2 and Blackpool Airport will use their best
endeavours to promote Jet2’s low cost services
from Blackpool Airport, and Blackpool Airport will
use all reasonable endeavours to provide a cost
base that will facilitate Jet2’s low cost pricing.”