Contract BreachesContract Breaches

Assessment of Violations and Enforcement

General ProvisionsGeneral Provisions

• Government immunity• Not liable for tortious actions, except those

outside the scope of employment or wanton and willful actions

• Available funds• Can only pay on the contract to the extent we

have appropriated funds

General ProvisionsGeneral Provisions

• Billing procedures• Important to set a standard for billing/

invoices, and review for appropriate payment

• Intellectual Property• We own what we pay for, can/should get it

all back at the end of the contract

General ProvisionsGeneral Provisions

• Confidential information• Contracts are public documents,

documentation received from vendor likely public

• CORA exemption for confidential commercial, financial, or trade secret information

General ProvisionsGeneral Provisions

• Conflict of interest• Vendor can’t engage in conflicting

business• Must disclose

General ProvisionsGeneral Provisions

• Records maintenance, performance monitoring and audits• Vendor must keep all records and allow us

to inspect for up to (6) years following termination

• Can get all documents back at contact end

General ProvisionGeneral Provision

• Inspection and Acceptance of Services• Can inspect at any time• May require contractor to redo• Watch for acceptance deadlines in contract

• If have passed deadline for inspection, can’t later reject services/goods provided

• If unacceptable and can’t reperform• Require contractor to correct in future• Equitably reduce payment due

General ProvisionsGeneral Provisions

• Modifications• May need to adjust price, must be mutually

agreeable• All modifications must be in writing

• Annual Audits• Required for vendors expending $500,000

or more in federal funds – good source of information for potential performance issues

Special ProvisionsSpecial Provisions

• Controller’s Approval• Can’t begin work until received – statutory

violation for which the employee can be held responsible if payment rendered

Additional ProvisionsAdditional Provisions

• Customize your requirements• Timeframes for deliverables• If performance of later deliverables

contingent upon successful completion of earlier deliverables, so note this in the additional provisions and ensure that you adequately and timely inspect earlier deliverables for acceptance

Notice of BreachNotice of Breach

• Failure to timely complete a deliverable, or material breach of a term of the K• Missed a project deadline• Provides unsatisfactory deliverables• Bills inappropriately

• Double bills for services• Lacks adequate supporting documentation• Bills for services not included in SOW

Notice of BreachNotice of Breach

• Process• Notify in writing of alleged breach within

(10) business days of either date of breach or date you become aware of breach

• Contractor has (10) business days to respond

• Failure to respond entitles you to pursue any and all remedies

Notice of BreachNotice of Breach

• Contract allows for dispute resolution between parties to the K, to be elevated to senior management, then to the ED

• Breaching contractor liable for damages to the State

RemediesRemedies

• Withhold $ until satisfactory performance

• Correct future performance

• Require removal of incompetent or unacceptable employees of contractor

• Deny payment for unperformed services or services that have no value for State

RemediesRemedies

• Suspend performance pending corrective action – no contractor entitlement to cost adjustments

• Modify or recover payments to correct an error due to omission, error, fraud and/or defalcation

• Terminate the K

Stop Work OrderStop Work Order

• Written order by Controller’s delegee, telling the contractor to stop performing

• Must be for a specified period of time

• Contractor must take reasonable steps to minimize further costs

• If SWO is cancelled, contractor may be entitled to an amended delivery schedule and/or contract price

TerminationTermination

• Default (for cause)• Only reimburse for accepted work received

up to date of termination• Can withhold final payment until audit

completed• If ultimately found not to have defaulted,

termination converts to term for convenience

• Get your stuff back!!!

TerminationTermination

• Convenience• At any time, can terminate with (20) day

advance written notice• Should only be used when mutually agree to

terminate, or an outside, intervening event essentially makes performance impossible or renders the service wholly unnecessary

• Cannot use simply to get same services from another vendor at a lesser price

TerminationTermination

• Convenience• Contractor can submit a claim within (10)

days of termination for:• Costs of accepted work• Reasonable costs associated with preparing to

perform work that was later terminated• Reasonable profits on completed but undelivered

work• Settlement of claims by subs• Reasonable administrative costs

TerminationTermination

• Immediate• When health, safety or welfare is in

jeopardy• Fraud or other illegal acts• Funds not appropriated, or otherwise

become unavailable

EnforcementEnforcement

• Work with fiscal officers, contracts and purchasing, internal auditors, and legal affairs to determine steps necessary to cite for breach

• Can institute a SWO prior to notice of breach

• May need site visits to review documentation to support breach findings

EnforcementEnforcement

• Important to look throughout the Department for other programs with contracts with the same vendor

• Document, document, document!!!• Phone calls must be followed up with written

correspondence noting problems

• Stay on top of your monitoring obligations

• Set deadlines for corrective measure