Legal Aspects of Purchasing How to Navigate the Jungle Presented by:

91st Annual Meeting & ExpositionApril 1 – 4, 2012

Anaheim, California


Anaheim, California

Legal Aspects of PurchasingHow to Navigate the Jungle

Presented by:Bramby Ann Tollen, C.P.M.,CPPO, CPSM, CPSD

Director, Purchasing & WarehousingClark County School District

Las Vegas, Nevada


Anaheim, California


Anaheim, California

Legal Aspects of Purchasing

Overview

• Purchasing Law-Navigating the Jungle• Staying on Solid Ground with Terms & Conditions• Avoiding Quicksand• Surviving the Swamp• Going Forward with Sturdy Footing• Using Life Lines• Time for Questions


Anaheim, California


Anaheim, California


The Jungle-Purchasing Law-Can you Navigate it?

1. Purchasing competes requirements because:a) We are naturally competitive people.b) We enjoy the extra paperwork. (Not!)c) We like to torture our customers with anticipation.d) It is a good business practice and those pesky State

statutes and Board policies require that we do so.


Anaheim, California


Anaheim, California



2. State statutes and Board regulations are usually created in response to :

a) Legislative whimsy.b) Divine inspiration.c) The need for more red tape.d) Actual incidents of fraud, waste, and abuse.


Anaheim, California


Anaheim, California



3. It is okay to accept gratuities from suppliers when:a) The supplier is your uncle Bob.b) You have never played golf at Pebble Beach and

this is a great opportunity.c) You are really hungry and you do not have any

cash for lunch.d) Never


Anaheim, California


Anaheim, California



4. Conflict of Interest arises when:a) You want to go to an action movie and your spouse wants

to see a romantic comedy.b) You have to choose between wearing the paisley green &

orange sweater your mom gave you or the plaid purple & yellow sweater your grandma gave you.

c) You have the opportunity to spend the mortgage money on a great deal on a really cool motorcycle.

d) You need to purchase volleyballs for the athletic department and your uncle sells them and offers you a personal rebate.


Anaheim, California


Anaheim, California



5. The reason indemnification is important is:a) The airports require a picture id to get on the airplane.b) The lawyer is paid by the word and he has not billed you

the full contract amount yet.c) Letters look better when paragraphs are indemnted.d) Funds are better spent on textbooks than injury, loss, or

damage caused by suppliers.


Anaheim, California


Anaheim, California


Staying on Solid Ground with Terms & Conditions

Lions, Tigers and Small Print…..

1.Assignment of Contract only with Agency Consent Should not be unreasonably withheld

2.Attorney Fees Paid by Each Party American Rule vs. Equitable Remedies

3.Conflict of Interest Duty of Loyalty


Anaheim, California


Anaheim, California




4. Cooling Off Period Separated Employee-similar work? Earning maximum?

5.Dispute Resolution Process Written issues of non-compliance Informal Mediation Arbitration and/or Litigation

6. Fiscal Fund Out


Anaheim, California


Anaheim, California




7. Four Corners Rule Overall intent rather than individual words

8. Full Disclosure Employee Buyer Authorizing Official Governing Body Supplier


Anaheim, California


Anaheim, California




9. IndemnityMandatory requirement?

10.Insurance Work with Risk Management Department Provide certificate of insurance with agency named. Working with students? Insurance should include coverage for abuse, molestation, and corporal punishment…normally a part of, or an endorsement to, a commercial liability policy.


Anaheim, California


Anaheim, California




11.Payment Tied to Performance Pay for items delivered or performed

Lock in firm pricing for maintenance and increased based on index Allow increases & decreases based on market

12. Prevailing Law & Jurisdiction Your paper, your rules!


Anaheim, California


Anaheim, California




13. Sub-contracting Not unless defined and approval in advance.

14.Supplier Defines “Team” & Project Manager Do not allow “Bate and Switch” Define account/project managers Define who is responsible for each task/deliverable

15.Termination for Convenience


Anaheim, California


Anaheim, California


Avoiding Quicksand-Terms to Avoid

• Anti-Trust• Collusion• Conflict of Interest

o Current Employeeso Relatives & Friendso Work Day & Responsibilities

• Credits• Favors


Anaheim, California


Anaheim, California



• Gratuities• Limited Time Offer or Special Deal “Just for You”• Nepotism• Oral Agreements• Perceived Advantage

o Advance Knowledgeo Incumbent Supplier

• Prepayments


Anaheim, California


Anaheim, California



• Rebates• Split Purchases• Suppliers-Arms Length Principle• Vendor’s Contract/Agreement/Paper• Verbal Representations


Anaheim, California


Anaheim, California


Surviving the Swamp

• Prepackaged software licenses• Software & equipment maintenance• Subscription services• Speaking engagements• Musicians & other performers• Other low risk ventures that do not include on-site

services nor interacting with students


Anaheim, California


Anaheim, California


Going Forward with Sturdy Footing

• Full Disclosure• Use your own “paper”• Indemnity• Point of Contact/Responsible Party

o Supplier & Buyer• Deliverables defined with time frame and payment• Acceptance and rejection process• Project management or communication process


Anaheim, California


Anaheim, California



• Competitiono Consumption or Purchase Estimates

• Right to negotiate if quantities increase or decrease by 25%

o Warranty & Specifications• Take advantage of UCC

o Balance of Line Discount• Discount for future unidentified requirements• Must equal discount for identified bid items

o Question & Answer Phase• No pre-bid conferences• All information sent out via addenda


Anaheim, California


Anaheim, California



Top Five Reasons to Compete1. Despite the offers of free lunches and trinkets, suppliers’ best

interests rarely coincide with the buyers.2. Our Legal and Risk Management Departments are not sitting around

idly in eager anticipation of liability claims due the actions of uninsured suppliers.

3. Our Superintendent stubbornly clings to the notion that the budget is limited and insists that we get the best value for our money.

4. Contracting with relatives may get you a better holiday present, but ask for a sweater. It gets cold in the unemployment line.

5. State statutes are not suggestive in nature.


Anaheim, California


Anaheim, California


Using Life Lines

• NAEP• Legal Department• Suppliers• GSA & Cooperatives• Other Purchasing Agencies• Internet Search• Friends & Contacts


Anaheim, California


Anaheim, California


Summary

• Questions?• Thank you!

• Contact Information: Bramby Tollen

[email protected]

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