f09 six contract clauses you should be watching

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Six Contract Clauses You Should Be Watching

Breakout Session # F09

Robert Jones, Left Brain Professionals

Melanie Burgess, Burgess Consulting, LLC

Date: July 28, 2015

Time: 4:00-5:15 pm




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Session Objectives

• Critically think about contract clauses, terms, and conditions

• Understand 6 critical clauses• Learn reporting requirements,

flow down requirements, and negotiation possibilities for these clauses

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Positive Share

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Safety Check

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Understanding Your Contract• We all read our contracts, but

do we understand them?• How do you review a contract –

read it like a book or jump around?

• Hidden clauses• Terms in your subcontract

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Complying with Your Contract• Now that we understand the

requirements, how do we comply?

• Monitoring contract changes and modifications

• Staying up to date with regulatory changes

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Six Contract Clauses

• Termination for Convenience• Counterfeit Parts• Cybersecurity• Conflict Minerals• Intellectual Property• Liquidated Damages

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Termination for Convenience• Unique government right to

terminate a contract at will– Not addressed in the UCC

• Prime should flow down some form of this requirement to subcontractors

• If the clause is incorporated by reference or unaltered, the prime has the unilateral right to terminate the subcontract at will

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Termination for Convenience, cont’d.• What to watch for

– Clause incorporated by reference– Clause allowing prime to

terminate at will

• What to negotiate– Subcontract term should limit

prime’s right to the extent that the prime contract is terminated for convenience

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Counterfeit Parts

• What are they?– Unauthorized copy or substitute part– Item misrepresented as coming from a legal

source– An item from a legally authorized source

that is misrepresented as meeting performance requirements

• Brokers and unauthorized distributors are highest risk for selling counterfeit parts

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Counterfeit Parts

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Counterfeit Parts, cont’d.

• Small businesses may be exempt from DOD rule

– Only exempt if prime– Flow down requirements when prime is subject

to rule

• Reporting requirements– Self identifying and reporting when counterfeit

parts are discovered

• What to watch for– DFARS 252.246-7007 Contractor Counterfeit

Electronic Part Detection and Avoidance System

– Tough requirements for inspection of parts throughout the supply chain 13




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Counterfeit Parts, cont’d.

• More things to watch for:– Rework costs due to counterfeit

parts are Not allowable– Counterfeit parts procedures part

of purchasing system audits– Potential for penalties for

supplying counterfeit parts and/or not reporting counterfeit parts

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Cybersecurity

• The protection of computers and computer systems against unauthorized attacks or intrusion.

• Risk areas, to name a few:– Email– Social media– Cloud storage– Online accounts– Mobile devices– Corporate networks– Intellectual property– Proprietary data– Personal identification data– Classified military data– Homeland Security 15




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Cybersecurity, cont’d.

• Reporting requirements– Notify Government of cyber

intrusions or incidents within 72 hours

• What to watch for– DFARS clause 252.204-7012– Technical data governed by ITAR may

not be stored in the cloud– Flow down requirements – small &

commercial businesses are not exempt

– Conflicting rules and requirements16




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Cybersecurity, cont’d.

• Consequences of non-compliance– Breach of contract– Termination– Suspension or debarment– Negative past performance

• Use the NIST Framework to setup compliance system

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Conflict Minerals

• Dodd-Frank Act of 2010– Holds publicly traded companies

accountable– Requires SEC reporting– The real requirement – elimination of

use

• What are they?– Tantalum (columbite-tantalite, coltan)– Tungsten (wolframite)– Tin (cassiterite)– Gold

• How we use conflict minerals18




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Conflict Minerals, cont’d.

• Reporting requirements– Due diligence throughout the supply

chain

• What to watch for– Delivery of “conflict free” products

• What to negotiate– Due diligence procedures– SEC reporting compliance– Not certifying to conflict free items

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Intellectual Property

• Most valuable asset any company owns

• What is it– Recipes, Drawings, BoMs,

Processes & Methods, Trade Secrets

• Spectrum of rights– Restricted/Limited to Unlimited

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Intellectual Property

• What to watch for– Specific license agreements for

property purchased under government contracts

– Contract requirements that don’t match the buyer’s need

• What to negotiate– Everything

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Liquidated Damages

• Effectively a penalty for late delivery• Usually stated in terms of a % • What to watch for

– How the damages are calculated– Applying liquidated damages in the

Small Business Subcontracting Plan

• What to negotiate– Limit the % of damages and how they

are applied– Grace period– Maximum penalty amount

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Contact Information

Robert E. JonesLeft Brain Professionals [email protected]

Melanie BurgessBurgess Consulting, LLCmelanie@burgessconsulting-llc.comwww.burgessconsulting-llc.com

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f09 six contract clauses you should be watching

Business

level termination

level complying

level counterfeit parts

master title style

level session objectives

level positive share

level safety check

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