TITLE: Supplier Contracting Guidelines Process: FIN_PS_PSG_050 Replaces: Manual Sections 6.4, 7.1, 7.5, 7.6, 7.11 Effective Date: 6/1/2012 Contents

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1 TITLE: Supplier Cntracting Guidelines Prcess: FIN_PS_PSG_050 Replaces: Manual Sectins 6.4, 7.1, 7.5, 7.6, 7.11 Cntents 1 Abut university supplier cntracting When is a cntract required? Wh may sign a cntract? What is a cntract?... 4 Purchase Order (PO)... 4 Master Services Agreements... 5 Preferred Supplier Agreements Statement f Wrk Sftware Licenses Cntracting Rles and Respnsibilities: Purchaser/Department Respnsibilities: University Cntracts Office Respnsibilities: Prcurement Services Respnsibilities: The Cntract Creatin and Review Prcess:... 8 Step 1: Purchaser/department submits initial request t University Cntracts Office Step 2: University Cntracts Office creates/reviews cntract Step 3: UCO frwards cntract t department fr review Step 4: The department frwards the cntract t the supplier fr review Step 5 Negtiatin (if necessary) Step 6 Signature Step 7 Filing the Cntract and Ntificatin f Accunts Payable Sme Related University Plicies and Prcedures... 11

2 Supplier Cntracting Guidelines Dcument: FIN_PS_PSG_050 Definitin f Terms Carnegie Melln University referenced as CMU, Carnegie Melln, r the university Department represents the department r the department s persnnel (including buyer, purchaser, etc.) invlved in acquisitin/cntract. OSP is the Office f Spnsred Prjects (part f the VP f Research rganizatin) Prcurement is Prcurement Services (part f the Cntrller s Office in the Finance Divisin). Supplier represents the vendr r supplier that wuld be prviding gds r services t the university. UCO is University Cntracts Office [part f the Office f the General Cunsel (OGC)] Types f Agreements: MSA Master Services Agreement PO Purchase Order PSA Preferred Supplier Agreement SOW Statement f Wrk Page 2

3 Dcument: FIN_PS_PSG_050 Supplier Cntracting Guidelines 1 Abut university supplier cntracting A cntract defines the business arrangements and legal bligatins between Carnegie Melln University (hereinafter Carnegie Melln r the university) and the selected supplier f gds r services. When purchasing gds r services frm a supplier, it is essential fr Carnegie Melln t btain prtectins in the cntract with the supplier frm the material risks that are assciated with the purchase f the gds r services frm that supplier, regardless f the purchase methd utilized. The University Cntracts Office (UCO) and Prcurement Services have develped these guidelines t dcument the supplier cntracting prcess and describe situatins when a cntract is required befre any University purchase can be made frm a supplier. T facilitate cmpliance with this prcedure, the University Cntracts Office administers the review and assists in the negtiatin f mst supplier cntracts fr the university. 2 When is a cntract required? Carnegie Melln requires a cntract in cases where the university may be expsed t material financial r legal risks frm the purchase f gds r services. As a result, in mst cases, a cntract is required whenever the university is purchasing a service frm a supplier. As well, in many instances, a supplier will als require a cntract t be executed befre it will prvide gds r services t the university. Cmmn situatins where a cntract is required: Services that invlve the perfrmance f labr by individuals while physically present n the university s premises The purchase f services where deliverables (such as sftware r a reprt r a website) are created and needed The purchase f prfessinal services, including temprary emplyment and cnsulting services Agreements fr Leased space r facilities Space rentals fr ff-campus events including exps, exhibitins, etc. Catering services Sftware licenses and sftware maintenance agreements Equipment leases When creating a cntract, the fcus is generally n: Ensuring that the cntract reflects all f the material agreed upn business terms, including pricing and payment terms Obtaining the apprpriate cmmitments, representatins and warranties frm the supplier Obtaining the apprpriate indemnificatins frm the supplier when warranted Eliminating any inapprpriate limitatins n the supplier s liability t the university Prtecting cnfidential infrmatin Page 3

4 Supplier Cntracting Guidelines Dcument: FIN_PS_PSG_050 Obtaining wnership f r the apprpriate right t use intellectual prperty (when applicable) The ptential fr disputes r claims arising ut f the services r prducts purchased, including infringement claims Cmpliance with applicable laws and University plicies The respnsibility fr applicable taxes There is n minimum financial threshld required fr a cntract. Purchases fr small dllar amunts r at n cst t the university may present legal r financial risks t the university that are many times greater than large dllar purchases. In additin, cntracts are required regardless f the purchase methd including, but nt limited t, Purchase Orders, Purchasing Cards and Expense Reimbursements. 3 Wh may sign a cntract? The authrity t sign cntracts is gverned by the university s plicy fr Authrized Signatures fr Agreement, Cntracts and Licenses. Individuals may nt sign cntracts n behalf f the university unless they have the authrity t d s in accrdance with this plicy. Fr the purpses f this dcument, signatures include bth physical signatures in ink and electrnic signatures cmmnly identified as click-thrugh agreements that acknwledge the acceptance f, r agreement t terms and cnditins. In accrdance with this plicy, the Directr f the University Cntracts Office is authrized t execute supplier cntracts fr purchases up t $100,000. Cntracts fr purchases in excess f $100,000 will be ruted by the Directr t the apprpriate University signatry. 4 What is a cntract? A cntract r agreement is a legal dcument between tw r mre parties that specifies the financial, business and legal terms between them. At Carnegie Melln, a cntract may take the fllwing frms: Purchase Order (PO). A Purchase Order is ne f the simplest frms f a cntract at Carnegie Melln. A PO is an rder issued by the university t a supplier that includes cmmercial infrmatin and the terms and cnditins that gvern the purchase. POs are generated in the Oracle financial system and include the apprpriate university standard terms and cnditins gverning the purchase. A purchase rder des nt require a signature; rather, it requires the apprval f designated individuals in Oracle financial based n the identity f the purchaser/department, the surce f funding and the transactin size. The electrnic apprvals are captured within the system fr the purchase in lieu f signature. The Directr f the University Cntracts Office can determine if a Purchase Order is acceptable t meet Carnegie Melln s purchase requirements in lieu f a separate signed cntract fr a specific Page 4

5 Dcument: FIN_PS_PSG_050 Supplier Cntracting Guidelines purchase. Buyers shuld request and maintain a cpy f crrespndence between themselves and the University Cntracts Office indicating University Cntracts Office apprval. Master Services Agreements. A Master Services Agreement (MSA) is a cntract between Carnegie Melln University and a supplier that specifies many f the material legal and business terms f the university s purchases f gds r services with that supplier. The MSA is designed t be used repeatedly by the university t prcure gds r services frm that supplier ver a perid f time using the same agreed t terms. Typically, an MSA des nt include negtiated pricing. In mst cases, the department will need t negtiate sme pricing r ther specific business terms f the specific gd r service that will be purchased (fr example, quantity r timing f delivery), but will nt need t negtiate the legal r business terms already agreed t in the MSA. Use f an MSA t purchase a gd r service generally requires the university t enter int an additinal cntract dcument with the supplier t dcument the specific business terms f the purchase that have nt been agreed t in the MSA, which may take the frm f a PO r Statement f Wrk that cvers these business terms. Preferred Supplier Agreements. A Preferred Supplier Agreement (PSA) is a cntract between the university and a supplier that specifies all f the material legal and business terms f the university s purchases f gds r services with that supplier, and can be used by the university t make repeated purchases f gds r services frm that supplier ver time. Unlike an MSA where sme terms need t be negtiated and dcumented by way f a PO r Statement f Wrk with each purchase, with a PSA, since all business and legal terms (including pricing) have been negtiated, n further negtiatin is required t make a purchase (subject t the prcurement limitatins f Carnegie Melln s Prcurement Plicy). Statement f Wrk. A statement f wrk (SOW) is a dcument that details the wrk activities, deliverables, timelines and ther requirements f a supplier in perfrming specified wrk. Detailed requirements and pricing are als usually included in the statement f wrk. In mst cases, a statement f wrk must be cmbined with a services agreement t cmprise a cntract, since statements f wrk generally d nt cntain all f the terms and cnditins f the purchase. Sftware Licenses. A sftware (cmputer prgram) license is a cntract with a sftware supplier/licensr gverning the use f supplier/licensr s sftware. A license is required t use mst sftware wned by thers. A typical sftware license grants the user/licensee permissin t use ne r mre cpies f the sftware (which may be prvided by the sftware supplier/licensr, fr example, thrugh DVDs, dwnlads thrugh the internet r subscriptin services) in ways where such use wuld therwise cnstitute infringement f the sftware supplier s/licensr s rights under law. Sftware licenses are either in written frm r in a frm that can be accepted by an authrized University signatry ver the internet (e.g., thrugh click-thrugh licenses, dwnlads r subscriptin internet services which may be purchased with a Purchasing Card). Bth frms require the review and apprval f University Cntracts Office befre they can be executed r accepted/purchased ver the internet. Page 5

6 Supplier Cntracting Guidelines Dcument: FIN_PS_PSG_050 5 Cntracting Rles and Respnsibilities: Ensuring that a cntract cntains the agreed t business terms and that the university is prtected against unnecessary risk and is cmplying with its legal and financial bligatins assciated with that cntract (including audit requirements) requires a cllabrative prcess with rles and respnsibilities shared by many members f the campus cmmunity. 5.1 Purchaser/Department Respnsibilities: Understand and cmply with Carnegie Melln s purchasing plicies and prcedures. Negtiate the business terms f the purchase, including pricing and delivery, with the supplier. Fr purchases being made with spnsred prject funds: understand the surce f funding fr the purchase and the purchasing requirements and restrictins f the rganizatin/entity (e.g., a crprate r federal spnsr) that funds the purchase. Nte that purchases funded by spnsred prject agreements shuld typically be frwarded fr review t the Office f Spnsred Prgrams (OSP) rather than the University Cntracts Office. The Office f Spnsred Prgrams will need t ensure that the purchase and related cntract fr the purchase meets the requirements f the spnsred prject agreement fr reimbursement. As a result, purchases funded by spnsred prject agreements shuld, as a general rule, be sent t the Office f Spnsred Prgrams and nt the University Cntracts Office. Fr nn-spnsred purchases, cmmunicate details required fr the cntract t the University Cntracts Office in a timely manner, including: The cmplete legal name and address f the supplier; A descriptin f the gds r services t be purchased; When the services will be perfrmed r gds will be purchased/delivered; Where the services will be perfrmed r gds will be delivered; All requirements and specificatins fr the gds r services t be purchased; (including any RFPs r ther dcuments relating t the purchase); and The cntact persn within the department wh will respnd t questins abut the business terms f the purchase. The surce f funds fr the purchase (Oracle accunt string). Fr the purchase f services utilizing agency funds, cntact the University Cntracts Office prir t purchase t determine whether a cntract is required. Agency funds cnsist f funds held by the university which belng t rganizatins external t the university. An example f agency funds wuld be funds held n behalf f student activity grups/clubs. In the Oracle financial system, agency accunts are included in general ledger strings ending in 95 r 96. An executed cntract r a written apprval frm the University Cntracts Office must be btained prir t the purchase f services utilizing agency funds and this must be attached t the applicable PRC r the purchasing checklist. If the purchase des nt require cmpletin f the Purchasing Checklist/Bid Summary, executed cntracts r cpies f the Page 6

7 Dcument: FIN_PS_PSG_050 Supplier Cntracting Guidelines cmmunicatin between the buyer and the UCO shuld be frwarded t Prcurement Services at prcurement-inbx@andrew.cmu.edu. Prvide timely review f the cntract drafts fr cnsistency with agreed business terms and advise the UCO f any incnsistencies. Prvide timely respnse t questins frm the University Cntracts Office abut the business terms f the purchase. Act as the liaisn between the supplier and the university and ther university departments which may have an interest in the cmmitment (e.g., Risk Management, Facilities Management, Envirnmental Health and Safety) t facilitate cntract negtiatin. Wrk with Office f Risk Management t btain frm r prvide t the supplier the required insurances and/r the certificates f insurance evidencing the required insurance.once the cntract has been executed, (i) adhere t the prvisins f the cntract, and (ii) mnitr perfrmance f the supplier under the cntract and prmptly advise the University Cntracts Office r the Office f General Cunsel r the Prcurement Services department f any subsequent issues r prblems invlving the supplier r the cntract and assist them in reslving thse issues r prblems. Respnsible fr retentin f signed cntracts fr department purchases. 5.2 University Cntracts Office Respnsibilities: Review cntract requests in a timely manner. Prir t affixing a University-Authrized signature, review the cntract fr accuracy, risk reductin and terms favrable t the university. Assure that: A legal review f the cntract (r the terms f the cntract has ccurred), as apprpriate All University requirements have been met, and Any ther University department which may have an interest in any f the cmmitments under the cntract (e.g., Risk Management, Facilities Management, Envirnmental Health and Safety, etc.) is ntified r cnsulted in advance, as apprpriate. Wrk with the department t draft r review cntract language that will prtect the interests f the department and the university. Manage the escalatin f issues that require input frm the Office f General Cunsel t reslve. Draft cntract prvisins cnsistent with the department s and university s requirements and university plicies. Review cntracts fr cmpliance with Carnegie Melln legal and plicy requirements. Assist purchaser/department in negtiating reslutin t issues that are acceptable t Carnegie Melln and the supplier when pssible. Page 7

8 Supplier Cntracting Guidelines Dcument: FIN_PS_PSG_050 Discuss the risks f varius cntract prvisins with the purchaser/department where apprpriate and respnd t questins abut varius cntract prvisins frm the purchaser/department where apprpriate. Sign apprved cntracts fr purchases having a value up t $100,000, and assist in the management f the signature prcess fr ther cntracts in accrdance with University plicy. Maintain a database f cntracts executed by the University Cntracts Office. 5.3 Prcurement Services Respnsibilities: Assist purchasers/departments with understanding Carnegie Melln purchasing plicies and prcedures. Assist purchasers/departments in identifying existing cntracts that may be used fr purchases. Prvide apprpriate assistance in negtiatin f cmmercial relatinships when requested. Negtiate legal terms in accrdance with the university s accepted terms. Assist purchaser/department in issue/cnflict reslutin with suppliers engaged by CMU (Nte: it is the purchaser/department s respnsibility t timely advise Prcurement Services, University Cntracts Office and/r the Office f General Cunsel f any issues with any supplier r cntract and t prvide such assistance t them as may be required t reslve the issue/cnflict). 6 The Cntract Creatin and Review Prcess: The cntract creatin and review prcess is best facilitated with clear, timely and active cmmunicatin between all participants in the prcess. The bjective f this prcess is a cntract that meets the needs f the department while ensuring that necessary cntractual prtectins fr the department and the university are in place. The prcess t request a cntract is as fllws: Step 1: Purchaser/department submits initial request t University Cntracts Office. The department shuld submit its cntract request t the University Cntracts Office by ing university-cntracts@andrew.cmu.edu. (Nte: Cntract requests fr purchases funded by spnsred prject agreements shuld generally be submitted t the Office f Spnsred Prgrams and nt the University Cntracts Office.) Alng with the request, the department shuld include an apprpriate descriptin f the requirements, including the supplier s cmplete name and address, a descriptin f the gds r services t be purchased, when the services will be perfrmed r gds will be purchased/delivered, where the services will be perfrmed r gds will be delivered, all ther requirements and specificatins fr the gds r services t be purchased, surce f funds fr the purchase and the cntact persn within the purchaser s department wh will respnd t questins abut the business terms f the purchase. Page 8

9 Dcument: FIN_PS_PSG_050 Supplier Cntracting Guidelines If the supplier has already prvided a draft cntract fr review, that cntract shuld als be attached t the . In additin, if the purchaser/department has issued a request fr prpsal (r similar dcument) and/r the supplier has respnded with a prpsal, these items shuld als be attached t the . IMPORTANT: The purchaser/department shuld always read the supplier s prpsed draft cntract prir t sending it t the University Cntracts Office and advise the University Cntracts Office in the f the prvisins f the cntract with which it des nt agree r understand, d nt reflect the agreed upn business pints with the supplier, etc. If the cntract request is time sensitive, that fact shuld be indicated in the subject line r prminently in the bdy f the (e.g., THIS CONTRACT IS NEEDED FOR AN EVENT TO BE HELD [insert actual date]). The cntract request will be assigned t a UCO representative wh will create and/r review the cntract and assist the purchaser/department in the negtiatin and reslutin f issues with the supplier. Step 2: University Cntracts Office creates/reviews cntract. The UCO representative will perfrm an initial review f the request t determine hw next t best prceed. The UCO may als determine if a Master Service Agreement with the supplier exists r whether a recent cntract has been negtiated with the same r similar supplier r service. If a Master Service Agreement exists, the UCO will determine if the service t be prvided may be cvered by the Master Service Agreement. If it is cvered, the UCO will advise the purchaser/department f any additinal requirements, such as dcumentatin f the prject scpe and signature requirements befre the service can begin. If a cntract needs t be drafted, the UCO will draft a cntract with the intent f accurately dcumenting the business terms f the purchase, including the pricing and payment terms. In additin, the UCO will include language in the cntract that adequately prtects the university frm a financial and legal perspective. When reviewing a draft cntract prvided by a supplier, the UCO applies the same standards t ensure that the business terms are described accurately and that the university s interests are prtected frm a financial and legal perspective. When drafting r reviewing a draft cntract, the UCO may need the buyer s timely respnse t specific questins n varius business r legal issues identified in rder t prvide a draft cntract r finalize the review. The department and the UCO must wrk tgether t understand the business terms, and the risks assciated with the specific purchase under the cntract and the cnsequences shuld the prduct r service fail, in rder t draft an apprpriate cntract. Step 3: UCO frwards cntract t department fr review. Once drafted r reviewed, the UCO will frward the reviewed/drafted cntract t the department and highlight any remaining questins r issues, r any particular areas f risk. Page 9

10 Supplier Cntracting Guidelines Dcument: FIN_PS_PSG_050 It is the department s respnsibility t review the draft cntract t ensure that it reflects the desired business terms. If the department is nt in agreement with the draft cntract (e.g., it des nt reflect the desired business terms) r has questins abut the draft cntract, the department shuld cntact the UCO fr further revisins r discussin. Step 4: The department frwards the cntract t the supplier fr review. After the draft cntract is received frm the UCO and reviewed and agreed t by the department, the department will frward the draft cntract t the supplier fr review. The supplier may agree t sign the draft cntract prvided r, after reviewing the cntract, the supplier may have questins r cmments n the draft cntract. Step 5 Negtiatin (if necessary) If the supplier has questins r cmments n the draft cntract prvided, the supplier will typically raise these cncerns and a series f negtiatins and further drafting will take place t reslve issues until the cntract is agreeable t bth Carnegie Melln and the supplier. The UCO will mst ften participate jintly with the department in these negtiatins with the supplier (r will assist the supplier in drafting language after the department s further discussins with the supplier, etc.). These negtiatins are mst ften cnducted by telephne r but n ccasin may be in persn. Step 6 Signature Once the cntract is in its final negtiated frm, it is ready fr signature. Carnegie Melln prefers that the supplier be the first t sign negtiated cntracts. The university will, in mst cases, accept signatures by r fax (i.e., generally, an riginal pen and ink signature is nt required t have a legally enfrceable cntract). The Directr f the University Cntracts Office is authrized t execute supplier cntracts fr purchases f up t $100,000. If the cntract is fr greater than $100,000, the UCO will crdinate signature with an authrized University signatry. Step 7 Filing the Cntract and Ntificatin f Accunts Payable Once the cntract has been signed by bth the supplier and the university, the UCO will frward an electrnic cpy f the signed cntract t the department. It is the department s respnsibility t send the signed agreement t the supplier and t thers within the department r the university wh may need a signed cpy (e.g. Office f Risk Management in the case f certificates f insurance are required t be prduced by the university f supplier in the cntract), and t keep the signed cpy in a place where it can be btained fr reference in the future if needed. The UCO will als retain an electrnic cpy f the cntract (but n printed files f cntract dcuments are maintained). The University Cntracts Office will ntify Accunts Payable that a cntract has been finalized and is available fr reference in the purchasing prcess. Page 10

11 Dcument: FIN_PS_PSG_050 Supplier Cntracting Guidelines 7 Sme Related University Plicies and Prcedures Purchasing Plicy ( Prcurement Card Prcedures ( Plicy fr Authrity t Cmmit the University ( Authrized Signatures fr Agreements, Cntracts, and Licenses ( Appintment and Tenure Plicy ( Prperty Management Plicies and Prcedures ( Carnegie Melln University Business and Travel Expense Plicy ( Page 11