Augustana contract management
Contract Review Process Workflow
Step one:
Purchaser submits the contract using this link.
Step two:
CRT reviews contract within 2 weeks of receipt of contract and provides feedback to purchaser
Legal and Purchasing review required in all contracts
IT related contract reviewed by CIO
Step three:
The purchaser works with vendor to make any updates and resolved and deadlocks
Certain clauses like auto renewal need to be removed
May require meeting with legal teams
Step four:
Final agreement signed by both parties
Final signed copies will need to be submitted electronically by purchaser
Justification for robust contract management guidelines and review process
Contracts come in an infinite variety of forms and levels of complexity which can pose great risk to the college if not reviewed and managed properly. Poor contract management practices could expose Augustana College to unnecessary legal and financial risk. The risks of inadequate contract management processes have been amplified by the following emerging trends:
- Increase in volume of contracts
- Increase in legal clauses in typical contracts and added complexities to auto renewal, indemnification, data protection, limitation of liability clauses
- Changes to current state and federal laws
Taking steps to ensure that Augustana College follows contracting best practices can help limit our exposure to unwarranted liability.
Purchasing policy
a. Contract Definition
A contract is an agreement between Augustana College and another party that is intended to have a binding obligation and be legally enforceable. Contracts should contain the terms and conditions under which goods or services are furnished by either party. In addition to formal documents commonly understood to be contracts, documents such as purchase orders, service agreements, leases, and letters or memoranda of agreement, or understanding are also enforceable and binding.
b. Applicability of Policy
This policy applies to all agreements between Augustana College and any other party, with the following general exceptions:
1. Contracts of employment
2. Contracts involving financial aid and student loans
c. Identification of College
The College shall be identified as Augustana College in all agreements and contracts. Departments and individuals may not contract in their own name on behalf of the College, but must identify the College as the contracting party. (The department may be identified in the agreement as the office though which the contract is being made.) The official College address is 639 38th Street Rock Island, IL 61201 and must be listed in all contracts and agreements.
d. Instances When a Written Contract is Required and Not Required
Not every arrangement involving the purchase of goods or services by the College will require a written contract, but many do. In general, if the arrangement involves any significant risk or potential liability that needs to be allocated between the parties, or involves a situation where the duties and responsibilities of the parties are not so basic and obvious that they do not need to be spelled out in writing, then a contract should be used. In the following subsections, some common types or categories of commercial or business transactions are described, and situations requiring (or not requiring) a written contract are specified. Keep in mind that contracts may be originated either by the College or by the other party to the agreement. Regardless of where they originate, they are must be approved by both parties.
i. Purchase of goods: Finished (or "off the shelf") goods that are commonly purchased by check or credit card valued under $5000.00 do not generally need a contract. However, if such finished goods or equipment are part of construction projects or require the vendor to deliver, install and/or service the goods, a contract is advisable to ensure clarity. These should be purchased using the College purchase order form or other contract form which will set forth basic terms and conditions including insurance and indemnity clauses.
ii. Provision of services: We require written contracts if the College is providing services, facilities or other resources to third parties. Examples include camps, conferences, persons or companies filming on campus, having other special events on campus such as receptions, seminars, etc.
iii. Purchase of Services: In general, services which the College is procuring and which will be provided on campus for hire should have written contracts regardless of the cost of the service. This includes arrangements with independent vendors for facilities work, speakers, consultants, performers, videographers, etc.
iv. Entertainment: Any arrangement that commits the College to hire entertainers or provide entertainment services requires a written contract.
v. Art/Exhibits: Any agreement to borrow or lend works of art, special collections, archives or exhibits requires a written contract.
vi. Miscellaneous: Any agreement with a third party that could create a condition that could result in more than a minor liability to the College (whether in favor of the vendor, its employees or others) or that could feasibly result in a dispute if the understandings and obligations of the parties are not clearly specified in advance, should be the subject of a written agreement. These arrangements should also be reviewed against these guidelines and against the contract template list to help you determine if a contract is appropriate or necessary.
Vendors may attempt to provide goods or services without a contract in order to avoid the cost and/or responsibility of negotiating and/or abiding by terms and conditions that would protect the College in a transaction. If there is any question about the need for a contract, consult the Director of Purchasing or General Counsel, who can assist in developing a contract and guiding it through the review and authorization process, prior to any negotiations.
e. Contract Approval and Signatory Authority
Signatory Authority at Augustana College (Rock Island, Illinois) is sometimes delegated but contract approval authority and responsibility rests ultimately with the College’s Officers and those other employees specifically delegated by the Board of Trustees. When these Officers delegate their approval or signatory authority, they must still exercise reasonable oversight and maintain ultimate responsibility for the contracts. Only authorized signatory may enter into binding contract negotiations. People who are not authorized signatories may only enter into binding contract negotiations with permission from an authorized signatory who is also the Vice President of their Area or their Department Head or Chair. It is a violation of college policy to sign an agreement on behalf of the college without appropriate authorization to do so. More specific guidance on Signature Authority is available online.
f. Requirement of an Arm’s Length Transaction
If a contract directly benefits the employee forming the contract or the employee who is responsible for managing the contract, or such a person’s relative or personal friend, or poses other potential conflicts of interest whether real or perceived, (e.g., the contract initiator or a key department member serves as a paid consultant to the vendor), the contract must be reviewed by both an authorized person with signatory authority who is unconnected with the agreement and the Chief Financial Officer , with all potential conflicts of interest disclosed to the Chief Financial Officer. The risks for such agreements include self-dealing, operational difficulties, financial loss to the College and damage to the reputation of the College.
Any agreement that involves revenue sharing (including commissions, fees, or other payment) with the College, department or an individual from sales by the outside party to other third parties (including students, alumnae or employees) must be reviewed by the Chief Financial Officer or his/her designee. If the agreement is being entered into by the Finance and Administration Division, it must be reviewed by another Vice President as well. Such arrangements are rare and generally discouraged, since they normally signify a commercial joint venture in which the College may assume risk of loss, and may implicate non-profit tax questions or concerns.
"Conflicts of interest may not always be clear-cut, and any questions should be forwarded to the Office of the President or the General Counsel."
g. Policy on Reporting Suspected Fraud and Abuse
If a person believes that a supervisor, colleague, subordinate or any other person is acting outside the College policy on contracting, s/he should report the concerns to their area Vice President for Finance or Director of Purchasing.
h. Funding
The proper funding should have been secured before pursuing a contract with account numbers identified with the help of the Business Office. The contract’s financial terms should be in line with the funding that was secured.
Contract review process
The office or department initiating a contract is responsible for reviewing the contract to ensure that the contract accurately reflects the intent and mutually agreed upon terms and obligations of the parties.
a. Contacts
Who Should I Contact with Questions About…?
i. Legal Matters Relating to Contracts:
Sheri Curran
General Counsel
309-794-8058
ii. IT Related Matters Relating to Contracts:
Chris Vaughan
Chief Information Officer
309-794-7439
iii. Purchasing Policies and Contract Process:
Darin Lamont
Director of Procurement
309-794-7499
b. Review Turn-Around Time.
The Contract Review Team strives to conduct reviews on a timely basis. However, when initiating a contract for review, whenever possible, please provide at least two weeks for contract review.
Further review of the contract shall be completed by the Director of Purchasing and General Counsel, and as appropriate by Chief Information Officer (IT related contracts).
i. General Counsel Review
Contracts greater than $25,000 must be reviewed by the General Counsel. Legal review is available and encouraged for any contract, and required with contracts that may fall below the $25,000 threshold but involve indemnification obligations, or otherwise pose a risk to the College that requires allocation of that risk.
ii. Director of Purchasing Review
The Director of Purchasing must review and sign all contracts $5,000 or greater prior to execution. The Director of Purchasing is authorized to sign contracts totaling up to $50,000.
iii. Chief Information Officer (CIO) Review
The CIO will review the purchase or acquisition of software/hardware as per the Section IV. Applicable Software/Hardware in the Technology and Data Services Purchasing Policy. In general any software that requires a collection and exchange of college data or needs to integrate with college IT systems will require the CIO’s review of the contract.
Contracting guidelines
a. Main components of a typical contract
i. Legal Name and Address:
The requesting department should ensure the legal name of the vendor is reflected in the contract.
Financial Terms:
Each contract should identify with specificity the payment obligations of both parties, including the timing, means and method of the payment.
ii. Responsibilities of the Parties/Scope of Work or Service:
The contract should clearly outline the duties and responsibilities of each of the parties. Contracts where the college is requiring the vendor to perform a service or complete a task or work product should have a detailed description of the scope of work or service to be performed and time frame for completion.
iii. Term and Termination:
The term or length of the contract, including start date and end date, should be clearly stated in the agreement. The basis for early termination should also be clearly stated in the agreement. Clauses that provide for automatic renewal of an agreement are not allowed and should be deleted if suggested by a vendor.
b. Additional Terms and Conditions
The following terms are often included in a written agreement and should be reviewed carefully:
i. Insurance – The agreement should outline the level of insurance required to be provided by the vendor.
ii. Indemnification – The agreement should contain an assurance that the Vendor will be financially responsible for its negligent acts and omissions. Indemnification agreements from the College should be reviewed by the General Counsel before agreed to.
iii. Assignment Clause – The agreement may specify whether the agreement can be assigned to a third party during its term. This may or may not be appropriate and must be considered in relation to the services provided.
iv. Warranty and Representation – The agreement will usually detail any warranty or vendor representations about its product or services. These are important to review and should be compared to promises made when the product of service was marketed.
v. Confidentiality – The Vendor should represent that it will not disclose confidential information provided by the college to any third party. It is common for confidentiality clauses to also restrict the College’s ability to share vendor information.
vi. Use of College’s Name and Trademark – Clauses in agreements that grant a vendor a license to use our name or likeness should be deleted. The Office of Communication and Marketing must approve the licensing or other authorization of the use of any college trademark.
vii. Notice – The contract will usually identify how, to whom and to where notices of any event under the contract should be sent to parties, and should be fully completed.
c. Impermissible Contract Terms
i. Automatic Renewal: The College does not allow contracts to contain an automatic renewal clause unless there is also a clause permitting the College to terminate the contract at will.
d. Clauses That Require Careful Consideration
i. Exclusivity:
The College needs to be very careful when awarding contracts that promise the vendor that they will be the exclusive vendor for the goods and services to be provided. Such an agreement may conflict with a contract that has already been entered in a different department or division, or it may conflict with other operational needs. Exclusivity agreements require an institution-wide awareness of contracts on campus, and require working with the Purchasing Office.
ii. Limitation of Liability:
Vendors will often attempt to limit their liability, and these clauses must be carefully considered. The extent of the limitation along with the nature of the services or product will inform what might be an acceptable limitation of liability, if any.
iii. Single Indemnification Clauses to benefit the contracting party only:
The College generally does not allow single indemnification clauses that only protect the contracting party.
These clauses may change in regards to the changes in the legal environment and related circumstances.
Contract negotiation tips
You do not have to use a particular negotiation style to become a successful negotiator, but your chances of success will improve when you adopt 10 basic bargaining rules followed by win/win negotiators.
Rule 1: Be Prepared
Importance of Preparation: Successful negotiators are generally the best prepared negotiators. No amount of negotiation experience, skill, or persuasive ability can fully compensate for the absence of preparation. Moreover, none of the other bargaining rules can be entirely effective without preparation.
When vendors are better prepared than college negotiators, they have an important bargaining advantage. Although members of the vendor’s team may not spend any more time on a contract than the college, the cumulative preparation time they have spent selling the same product over and over again may give them an edge over individual buyers.
Successful negotiators realize that a relatively small amount of preparation in these areas is well worth the effort. Since there is just no substitute for good preparation, you should never negotiate unless you are adequately prepared.
Rule 2: Aim High
Importance of Aiming High: The expectation level of negotiators is closely related to the outcome of the negotiations. Expectations are the gauges by which people measure their performance. Generally, the higher your expectations, the better you will ultimately perform. The reason for this relationship is that expectations influence your behavior and that behavior influences the outcome of the bargaining session.
Make Positive Assumptions: The key to establishing high expectations is developing positive assumptions about your bargaining position. Positive assumptions lead to high expectations while negative assumptions lead to low expectations.
Always Aim for a Win-Win Outcome: In college contract negotiations, high expectations should be more than just obtaining contracts at good prices. You should “aim high” by striving for win-win outcomes with high expectations on both price and on non-price (e.g., contract requirements) issues.
Aiming high must not conflict with a win/win approach to negotiation: High expectations include good quality, timely delivery, and a mutually beneficial long term relationship. Moreover, there is typically a range of prices that you could consider fair and reasonable. Having the expectation of negotiating a contract price below your minimum estimate of a reasonable price is not a win/win approach. Aiming to negotiate a price that is not fair and reasonable will likely result in a win-lose or lose-lose outcome.
Rule 3: Give Yourself Room To Compromise
Importance of Giving Yourself Room to Compromise: Compromise is essential to successfully conducting most negotiations. Even the most skilled bargainers must make concessions in order to obtain successful outcomes. Yet, many negotiators are unable to make material sacrifices because their opening position is too close to their expectation level.
When negotiating contract price, college negotiators should normally present an initial position below what they feel the ultimate price will be in order to be in the position to make concessions before agreeing on the final price.
Compromise Takes Planning: Whenever you review a proposal or quote and related College analyses there is a temptation to only develop one position, the College objective. In developing that objective, you typically consider many compromises from positions taken by one or more College analysts.
If you only present the College objective to the vendor, the vendor’s negotiator will never fully understand the compromises that you have made in arriving at that position. The vendor’s negotiator will think that you are inflexible. Instead, you need to develop a variety of positions that will permit you to demonstrate a range of apparently fair and reasonable positions.
Caution: Never establish an unreasonable position just to give you room to compromise. Such positions are normally counterproductive because they often cause the vendor’s negotiator to view you as a win-lose negotiator. Guard against this predicament by supporting your opening position with a valid rationale based on available facts and reasonable judgments. In College contracting, your opening position should be your minimum position in the range of fair and reasonable prices.
Rule 4: Put Pressure On The Vendor
Importance of Putting Pressure on the Vendor: Because of the pressure inherent in every negotiation, success in negotiation stems in large part from the ability of a negotiator to increase pressure the other negotiator while at the same time limiting the pressure on them. You can often accomplish this by following some simple procedures which will reduce your stress while increasing the pressure on the other negotiator. Consider Pressures Facing the Other Party by listening and watching during negotiations to identify cues on the pressures affecting the vendor’s negotiator.
Consider Competitive Alternatives: In non-competitive negotiations, just the hint of potential competition might pressure the perspective vendor into being more conciliatory and innovative in meeting the College needs. Do not let artificial pressures, such as the perceived stature or the impressive credentials of the vendor’s negotiator, increase the negotiating pressure on you.
Rule 5: Do Not Volunteer Weaknesses
Importance of Not Volunteering Weaknesses: Never volunteer information that would weaken your negotiating position or enhance the bargaining position of the vendor. Although this rule is only common sense, it is often overlooked because most people are candid and forthright by nature.
Be Honest But Be Careful: Honesty and ethical behavior are always paramount in any negotiation. However, you do not have to be dishonest to avoid volunteering weaknesses. There are many ways to respond to questions without telling falsehoods or volunteering information detrimental to your bargaining position.
Rule 6: Use Concessions Wisely
Importance of Using Concessions Wisely: Because compromise is a vital part of contract negotiations, most successful negotiators are masters of when and how to make concessions. The concessions that you make, when you make them, and how you make them will all have a significant effect on the outcome of the negotiation.
Concession Amount: Do not appear overly generous or rush to make concessions. Concede slowly and in small amounts. Concessions too large or given too quickly may raise the expectations of the other negotiator or give the other negotiator the impression that the concessions were not that important to you or that you are overly anxious for a settlement. Simply put, you should link your concessions with the spirit of compromise.
Equal-Concession Trap: Negotiators often demand equal concessions, particularly when negotiating contract price. While matching a concession may appear logical equal concessions are only equal if you are equally far from your objective
Splitting-the-Difference Trap: Splitting the difference is a form of the equal-concession trap. It is most often offered in price negotiations and it often sounds reasonable. However, there is no guarantee that the resulting price will be fair and reasonable. Repetitive splitting the difference over relatively small amounts should be avoided. This technique often portrays the user in a win-lose vein as someone more concerned about small amounts than a win/win outcome.
If a vendor’s offer to split the difference will not enable you to meet your objective, accept the offer as a new vendor position and continue negotiations from there. Remember that when the vendor’s negotiator offered to split the difference, that negotiator, in reality, adopted a new negotiation position. If you refuse to split, the negotiator making the offer normally cannot easily retreat from it.
Rule 7: Say It Right
Importance of Saying It Right: The importance of good interpersonal relationships cannot be overemphasized. The reason for this is simple. You are trying to negotiate a mutually satisfactory result. Even the most generous offer may be rejected when the vendor feels slighted or offended.
Key Points to Saying It Right:
- Sell Yourself and Your Ideas.
- Be Polite and Show Respect.
- Negotiate from Strength. Use your strong points — be confident.
- Keep It Simple.
- Never Personalize Differences.
- Emphasize the Need for Cooperation. Both parties need to work together to resolve issues.
- Be Cautious About Expressing Unrelated Opinions.
Rule 8: Satisfy Non-Price Issues
Importance of Satisfying Non-Price Issues: Most negotiations will not end in agreement unless both the price and non-price issues are satisfied. Yet, many negotiators enter negotiations with an awareness only of price issues facing each side and fail to identify important non-price needs of the vendor. In contrast, successful College negotiators are able to identify the non-price needs of the other party and develop ways to satisfy those needs.
Never narrow down the objective of negotiations to just price issues. Look for non-price needs and the corresponding ways of satisfying the other party. Non-price needs are often difficult to identify because these issues are not specified by the other party.
Identifying Non-Price Issues: Common non-price issues that you must consider include:
- Technical requirements
- Data requirements
- Contract start
- Contract type
- Contract financing
- Delivery
- College furnished property
Rule 9: Use the Power of Patience
Importance of Using the Power of Patience: The power of patience seems obvious. However, practicing patience is often harder than it sounds because of the pressure inherent in every contract negotiation. The quicker the negotiations conclude, the sooner contract performance begins...and this natural pressure is relieved.
Rule 10: Be Willing To Walk Away From or Back to Negotiations
Importance of Being Able to Walk Away from or Back to Negotiations: Deadlock cannot always be avoided and, in fact, is sometimes necessary when dealing with unfair or unreasonable parties. Even the best negotiators sometimes fail to come to mutual agreement and experience this lose-lose outcome. However, good negotiators are neither afraid to walk away from bad deals nor too proud to return to the negotiation table once they realize a better deal cannot be obtained elsewhere. However, the College team should objectively decide if a stalemate is in the best interests of the College. For urgently needed items, it may be better for the College to be on the losing end of a win/lose agreement instead of the losing end of a lose-lose outcome resulting from a deadlock. Nevertheless, the willingness to deliberately deadlock when a fair deal cannot be obtained is extremely important because this attitude gives you the resolve to credibly apply other bargaining techniques.
Walkout Risk: A walkout or even the threat of a walkout may be used to your advantage during the conduct of the negotiation, but not without some risk. The risk is that it may be very difficult to get the negotiation started again and back on track. Whenever a negotiation conference has reached a point where you think you should terminate discussion and walk out, consider the impact your walkout will have. When you believe the other side will perceive the walkout as a clear indication they should be more flexible, then the walkout may be appropriate. When the walkout would be perceived as a win-lose ploy, then do not walk out unless you have first tried everything else.