David, as you are probably aware, MFN clauses are inevitably problematic unless there are independent sources of price comparison. In many cases, even if there are research companies offering data, the most highly negotiated deals are protected by confidentiality undertakings. And even when some data can be accessed, it is usually possible for a supplier to claim that price differences reflect other differences - for example, in risk allocation, availability, volume or term of agreement etc. In my experience, MFN clauses are of limited meaning or value.
However, this does depend to some extent on how much you trust the integrity of your supplier and also you should be clear about your own goals. For example, do you really need to have better prices than all other customers, or is your real sensitivity that you want better prices than your competitors? Must you really be best, or perhaps it is sufficient to be in the top 5 or 10%.
You might make such a provision subject to periodic confirmation by the supplier, making it clear that misrepresentation would represent a fundamental breach of the agreement. You can require independent audits, though few large suppliers will agree to this and the cost may be prohibitive. You could commission periodic research which, depending on the market and the nature of the service, may yield practical results.
I would suggest that your real concern here is that you want to ensure pricing remains fair and reflects market trends. Often the only way to test this is by regular market testing via competitive bidding. Such an approach has little attraction for you or the supplier - it is expensive and potentially disruptive. So you might consider a clause modelled around the principle that the supplier has responsibility to demonstrate not only that your prices are the best they offer, but also that they are among the best available in the market. But again, be cautious that in your focus on price you do not lose sight of broader issues of value. There will always be someone cheaper, but what is the cost associated with 'being cheap'?
Thanks for your comments Tim. In this case, we are actually the supplier who has (unfortunately) agreed in the past to include a MFN clause in certain ongoing agreements. This was done so at the absolute insistence of a handful of our customers. While we readily see the downside of agreeing to such a restriction, it's amazing what gets negotiated at the 11th hour when finalizing a deal with a major client! In any case, we are now faced with creating some validation analysis that would support our adherence to the "spirit" of the clause. What makes it difficult is that the services that we provide (market research) have some common aspects across clients, but no 2 packages are exactly alike. While this may ultimately be our saving grace, we do feel the need to prepare some form of validation in case one of these customers request an audit of some kind. At this point we are doing our best to note both the common aspects across specific client deals, as well as outlining the variables that might affect the ultimate prices we charge. While we feel that we are in full compliance with the clause, providing evidence of this for our customers is proving to be a bit of a challenge.
• Sodexo SA
David, A useful comparison may be drawn between your situation and the delivery of FM in the PFI market, where benchmarking is a standard requirement.
It is normal practice in such scenarios to make 'adjustments' (e.g. adjusting for the size of buildings, No of occupants etc) to comparators so that the benchmarking exercise is 'fair'. Whilst this is an inexact science it is an attempt to demonstrate compliance. This type of approach can be dismissed by a client, but ultimately if the client chooses to be difficult they could reject any approach you take.
Demonstrating different options to them will show your willingness to work with them and may encourage them to engage in dialogue about what will satisfy their concerns.
David, I agree with John's observation. Given that there is rarely - perhaps never - an exact 'like for like', comparisons will always have a degree of subjectivity. It is good that you make efforts to validate your position.
As mentioned in my previous reply, you may want to think about alternatives with the customer and discuss their real concerns. In particular, if you can build confidence over the market competitiveness of your pricing, there is potential for a 'win-win' by avoiding the need for future competitive bidding as a method of validating your price. This seems to me a much more productive and relevant discussion. Meantime, I think just continue your monitoring.
I hate saying depends but you might want a lot of IP clauses or very few depending on the seat you are in.
A good approach is to start with a blank piece of paper imagine the delivery is occurring and consider how you might answer a series of questions from the Board then check if the contract has the answers. if not it should.
Questions might include:
Who can make one of these again?
Who owns the plans, diagrams, blueprints, samples when all is done?
Are the plans etc trade secrets and subject to a range of different types of copyright and who has ownership and/or has licence rights?
If repairs, rectification is needed, who has a right to access plans, drawings etc to get work done
More suggestions for questions and issues to tick off?
• Nexen Energy ULC
My experience has lead me to asking an EPC company to expressly list what in the scope of executing this contract they feel is their intellectual property. From that list I would find out what has patents/licenses associated with it and either reject or negotiate the balance.
It is a reasonable expectation that a contractor would limit the use of it's work product solely to the contract's stated purpose. WRT IP, I always want the contractor to give us a royalty free, non-irrevocable license to use their IP for future projects and use what info (drawings, etc.) they have given us for the maintenance and repair of the work product.
In addition to the issues listed above, be sure to consider any proprietary background IP, methods, know-how, or expertise you are contributing to the results. You want to give the client the ability to use the project results while still protecting anything you want to be able to use again on future projects for other clients. For example, you may give the client a license but not ownership of the IP, or limit their use of the IP to a specific field or geographical area so you do not unduly limit your future business opportunities.
• Innovation Fixer
1. BACKGROUND IP - what are you bringing to the table? What is the other party bringing? Does the commercial outcome need cross-licensing? You should ensure this licensing does not restrict your continued use in other applications in any way, unless that is part of the trade/partnership. You may wish to define the field of use quite specifically, and limit use and licensing to this area. Will your ability to sub-license the IP to other parties be limited? Again, this is a concession that's worth something.
2. ARISING IP - who will own any IP generated in the collaboration? Try to avoid joint ownership; instead one party should own and the other have licensing rights. One option is for one party to own, and the other to have exclusive rights to a field of use. Will use be limited to the parties, a so-called semi-exclusive? Will one or both parties have the right to sub-license?
The owners of any IP in a collaboration should be obliged to maintain the IP and defend it against challenge. If they decide to let e.g. a patent lapse, there should be a reversion clause which allows the licensee to take over ownership of the IP.
This is just a start.....!
• T. Mackey Enterprises, LLC
To Whom It May Concern:
I think that there are several things to be concerned about in a R&D Contract. Whether you are contracting with a Government or another business entity, here is a list of terms, (in order of importance), that I think should be clearly described:
1) Statement of Work: Clearly describe what will be researched/develop.
2) Period of time that the research will be conducted.
3) Who, (key personnel/researchers), in your company will conduct the research.
4) The contract value of the research in the monetary unit applicable to your country.
5) The frequency of research progress reports that will be submitted to the Buyer, (Schedule of Deliverables), the format that the progress reports will be in, and the monetary value of each Progress Report in relation to the Total Contract Value/Price so that your company can submit invoices for incremental payments until the Period of Performance/R&D Contract is completed. Usually progress reports are delivered on a quarterly schedule.
6) Ownership of any Inventions or patents during the research by your company's researchers.
7) Use Rights for any Technical Data, S/W, or any Intellectual Property OTHER THAN INVENTIONS OR PATENTS, which is created during the performance of the contract retained by your company.
8. The ability to terminate the contract if it's apparent to both parties that the research is futile.
9. The type of contract: Fixed Price, Cost Reimbursement, Time & Material, etc.
I've seen different systems. In general, I view a methodology that aims to reproduce the details of the contract into another form such as a report or Excel worksheet as a paper exercise. Essentially, a company wanting to do that might be better off looking at some sort of project management tool.
Think about the way a typical person views a contract: It's complicated, confusing, and reading it in detail is a task avoided at all costs. There is even a trend toward thinking, "Well, it's not like we follow the contract anyway." In that light, I believe that a system designed to break out the actual deliverables and the owner of each, and then the restrictions or prescriptions for each deliverable that differ from the company standard, would make more sense. Presumably your personnel know the standard way of operating for your company.
Another issue is identifying the audience. Most issues have an owner and a separate driver. If one were to invite only Senior Directors and up to a meeting, the folks in charge of delivering on a day to day basis might not get critical information. A contract handover is supposed to be about transitioning from negotiation to operationalization. Keep that in mind when selecting the participants.
I agree with the post below. Teh most important thing is to get the audience right, and understand the obligations. Where I work, for substantial contracts we prepare an obligations tracker to show Deliverable obligations with dates, behavioural obligations and event driven obligations. Combining that with a high level deal sheet including term date, general overview of services and costs should be a reasonable starting place for anyone that needs to use the contract.
• Alghanim International General Trading and Contracting company
The transfer process may be initiated with a Post award Contract kick off meeting and subsequenly a Contract management plan, Project management plan/ procedure, Responsibility matrix for supply, deivearbles etc, MTOs, Quantity take off etc to ensure consistenacy as per CONTRACTUAL obligation/ clauses etc.
Vail Resorts Management Company
Yes, I am based in Canada and am the head of contract formation and administration for an Alberta based Power Generation company.
I'm sure I can help.
I am working in contract administration in Canada. Let us know you question.
I do European sales contracts, and feel more comfortable using Canadian law rather than US law.
But you need to qualify your question a bit more.
I'm not sure if this is of any use to you, but as a Canadian who has worked with all types of contracts and various lawyers in Canada and the US, when developing a contact with a US vendor, if the laws that govern the contract have to be American (upon the vendor's requirements because of course we would prefer Canadian law :) ), then we have insisted that the governing laws be that of either the State of New York or the State of Delaware as they closely resemble the Province of Ontario (Canada). As for the Province of Alberta, the person who commented below may be able the shed some light as there are a few difference amongst the provinces relating to governing law. For example, there is a federal privacy act however, for the provinces of BC, Alberta and Quebec they all have their own privacy acts which supersedes the federal act or PIPEDA (Personal Information Protection Electronic Documents Act). The other point to note is that Quebec law is based on civil law while the rest of the provinces and federal law is based on common law. Hope that helps!
• ANJO Global Consulting Ltd
Hi, I am a procurement consultant working in the public and private sectors and based in Ottawa, Canada.
Mark - the Australian Coomonwealth, through the Defense Materiel Organisation, has been leading a number of efforts in the area of Relational Contracting - which is gaining great uptake as a collaborative approach to contracting.
A key contract component in the Relational Contracting portfolio in known as the Relational Charter. The Charter enables the parties to focus on the key areas in a relationship such as communications, continuous improvement, problem solving, setting mutual objectives, etc.
If you are interested in speaking with some of those in DMO who are leading on these projects, we can certainly make an introduction.
My guess is that this is the equivalent of your Limitations of Liability clause. That is, you state the maximum liability that your firm/company will accept with any exclusions/carve outs.
• -True Balance Coaching
Here is what the Canadian govt asks for in its major procurements. This could be offered with a limitation inserted so that the risk is reasonable for both parties.
The Contractor is liable for any damage caused by the Contractor, its employees, subcontractors, or agents to Canada or any third party. Canada is liable for any damage caused by Canada, its employees or agents to the Contractor or any third party. The Parties agree that no limitation of liability or indemnity provision applies to the Contract unless it is specifically incorporated in full text in the Articles of Agreement. Damage includes any injury to persons (including injury resulting in death) or loss of or damage to property (including real property) caused as a result of or during the performance of the Contract.
• Rolls-Royce North America
These can be complex provisions that are impacted by a variety of factors, such as which law governs the agreement(s), whether you are offering goods or services, whether your customer is a private or a public entity, etc. Your question also leaves open whether the client is seeking a statement of your limitation of liability (including exclusion of certain types of damages), or an affirmative statement of acceptance of risk and liability, potentially including a promise to indemnify the client for third party liability resulting from your acts, errors or omissions.
How you respond to this will depend on how these and other questions are answered, and how much risk you want to assume in pursing this business opportunity. I would strongly encourage you to seek legal advice in preparing a response to this request to fully understand the relevant implications.
We are a small non-profit organization and we depend on law student interns during the summer and fall. We currently have a structure in place where we will have the intern review contracts and work with the relevant department to negotiate any language. However, the overall approval would come from our In-House Counsel. She would sign off on our internal approval form. I hope this helps!
• SAP (UK) Ltd
I recruited a law graduate last year to review over 1000 legacy contracts, record key terms in a master spreadsheet and identify any requiring renewal/ amendment etc. He refers to a draft template created by Legal to prepare the addendum for each contract (he customises each document to reflect the changes required). The graduate also liaises with regional legal teams to push through these contract amendments.
I have recently decided to shift the role to be more of a paralegal function and he will shortly begin negotiating changes to low-risk agreements such as NDAs, test account agreements etc.
He has also been instrumental in reviewing supplier agreements to ensure these meet the minimum standard of industry codes of conduct.
• Babcock International Group
This was how I started with my current company. I began with reviewing documents and flowing comments and proposed changes back through the contract owner to inform their negotiations/approvals processes. Occasionally I would be invited to shadow the owner during reviews or negotiations and my role grew organically from there in terms of the level of independent working.
I would say that you need to realistically consider your function. Whilst legal graduates will be able to offer expertise in terms of appropriate terminology and possibly some of the boiler plate matters they will need support on company/industry specific governance, common practice and standards. This can be achieved through clear lines of reporting, documented policies and processes. If your department is not in a position to provide that you may find their value is limited and that they may choose to move on quickly - graduates will inevitably seek roles with opportunities for development and advancement.
This is an interesting question; we will circulate to the public sector community of interest and ask for input.
USA Department of Homeland Security (DHS) and the Scottish Government shared their experiences with IACCM:
DHS uses wiki as their social media vehicle. It is only used for pre-award activities and not post award contract communications. Some specifics:
• The wiki page will contain the entire history of an acquisition prior to award.
• Vendors can post questions or concerns on the wiki page.
• All communications for the acquisition will use the page but the government issues written communications as a follow-up as well.
• The page is centrally controlled by the acquisition program manager.
• Feedback from the vendor community is very positive.
• It is optional for use - not mandatory; currently being piloted.
• Platform was built by GSA for GWAC vehicles.
• DHS does not use linked in, twitter or Facebook.
DHS also blogs on their own IT platform (the DHS connect page) but this is at a much higher level - more for high level strategy and organization direction for their mission; not for specific acquisitions.
Response from the Scottish Government:
We use Twitter (@scotprocurement) to put out news, as well as our regular newsfeed and my monthly e-bulletin on the Scottish Government website www.scotland.gov.uk/Topics/Government/Procurement
The e-bulletin goes to just over 8000 subscribers, and we have just over 900 followers on Twitter, being regularly retweeted by linked organisations like the Supplier Development Programme. Feedback's pretty rare - the tweets tend to be announcements conveying information rather than seeking input, although we did use social media to encourage contributions to the consultation exercise on the Procurement Reform Bill. We don't know, though, how many of the consultation responses were as a result of the tweets. Within the Scottish Government, we use Yammer as a social media forum, although we've not yet developed a procurement section on that.