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CMS RFP Legal and Insurance Requirements
RFP Legal and Insurance Requirements
The RFP concludes with a section regarding the legal and insurance requirements of the proposed purchase. Typically, this section includes a version of the forthcoming contract prepared by the court with staff from the funding agency's law department. The section also should identify the chief negotiator, have clauses relating to confidentiality of all information, and specify various insurance requirements.
This section of the RFP is where the court should set out the terms and conditions of the project. See Terms and Conditions Example. Additionally, the court should provide a method for vendors to object to specific terms or conditions. See Vendor Exceptions Form Example also see CMS Contract Terms and Conditions, alternatively see Business Process Exceptions Example.
Many legal and insurance requirements for a RFP are specified by local rules. The requirements covered here are a recommended minimum and do not necessarily reflect the precise RFP requirements for any court. Courts should consult with the local purchasing department to learn what local legal requirements exist for RFPs.
At a minimum, the following items should be incorporated into the RFP's legal and insurance requirements:
Restrictions on Contact with Court Personnel-From the date of release of the RFP and until a determination is made regarding the selection of a contractor, and for the selected vendor until a contract is signed, all contacts with personnel employed by the court should be limited to the vendor liaison. During this period, no prospective vendor should approach personnel employed by or contracted to the court concerning possible employment, nor should the prospective vendor offer court personnel gratuities of any kind to obtain information relating to the proposed procurement. Violations of these conditions will be considered sufficient cause by the court to reject a vendor's proposal, irrespective of any other consideration.
In addition, vendors should be advised that only the acquisition team can answer questions, clarify issues, or render any opinion regarding the RFP. No individual team member, aside from the vendor liaison, should be empowered to make binding statements regarding the RFP.
Inclusion of Suggested Vendor Contract and Other Forms-Vendors should include sample contracts and forms for the sale or lease of equipment and the provision of services that contain their recommended maintenance agreements, warranties, provisions for training, and such other documentation that may be applicable to the RFP. This will aid the acquisition team as it begins contract negotiations. The court should provide a method for vendors to object to specific terms or conditions. See Vendor Exceptions Form Example.
Security of Information-Many court data files and documents are highly confidential. The vendor's employees should be allowed access to this information only as needed when responding completely to the specifications given in the RFP. The vendors should have positive policies and procedures for safeguarding the confidentiality of this data and should be cautioned that they may be liable under privacy legislation for negligent release or misuse of the information. Vendors should be encouraged to sign nondisclosure agreements included in the RFP materials.
Bidder Obligation to Understand RFP Specifications-When the bids are opened it should be understood via appropriate contract language that the vendor has read and understood all of the requirements and specifications of the RFP. In other words, after the responses are opened, any questions with respect to the RFP, including local operations, equipment configurations, and operating systems, should be presumed to have been already answered to the vendors' satisfaction. Each proposal should be accompanied by an Intent to Bid letter signed by an authorized representative of the respondent stating the vendor's understanding of this obligation.
Contingencies and Changes-The court should request that responses be firm and not made contingent upon uncertain events or on engineering that will not be performed until after the contract is awarded. Responses should be based upon prices in effect at the time the proposal is submitted. Changes to responses should be set down on an amendment page or pages.
Prohibition on Gratuities-If it is not already a criminal offense under current jurisdiction statutes, the RFP should make it clear that offering, promising, or giving anything of value or benefit to a person serving in the court's capacity with the intent to influence that person's exercise of discretion with respect to the proposed acquisition is grounds for unqualified rejection of the proposal.
Local Laws and Regulations-The court should specify any special business or professional licenses vendor's are required to posses to work in the state or locality.
Required Forms-The court should provide in the RFP any court or funding entity purchasing forms vendors will be required to complete as part of the proposal process, such as EEO affidavits. The RFP should include either copies of all forms the vendors are required to submit or information on obtaining the forms. The standard forms in the RFP should include a sample anti-collusion affidavit and a conflict of interest affidavit. Even if no formal form exists the court should require vendors to submit affidavits addressing these two issues. See Business Process Anti-Collusion and Business Process Conflicts of Interest (4.1.1.5) Example. Courts should require vendors comply with all federal, state, and local employment requirements, such as EEO and ADA.
Statutes and Local Rules that Apply-The RFP should identify the state (or other jurisdiction) whose laws will control the interpretation of contract terms. The RFP also should alert vendors that wherever differences exist between federal and state statutes or regulations affecting the procurement, contract interpretation will be in the direction of that which is most beneficial to the interests of the court. See Business Process Applicable Laws Example.
Immunity from Liability-The RFP should alert vendors that every court person or agency will be immune from liability for the vendor's activities that may arise from any procurement contract involving third parties. Additionally, the court should specify that the vendors must carry workers' compensation insurance coverage in amounts required by local law. The court must specify that neither the vendor, its employees, assignees or subcontractors shall be deemed employees of the court while performing services during the project. See Business Process Indemnity Example.
Federal, State, and Local Taxes-The RFP should inform vendors of the court's tax status and the tax burdens that the vendors will assume as a result of the forthcoming procurement contract. For example, the court should be exempt from federal excise taxes, and no payment will be made for any taxes levied on the wages of the successful vendor's employees. The court also should be exempt from sales and use taxes on the equipment and services supplied by the vendor. Therefore, vendors should not in corporate sales or use taxes into any bid. See Business Process Applicable Taxes Example.
If a vendor includes any refundable state or federal tax in a price, the vendor should be required to furnish proof showing that the court will be able to obtain a refund or credit. If an item is to be sold to the court free of federal or state tax, the vendor should not include the tax in the offered price and should furnish proof that the tax will not be imposed upon the court.
Conflicts Between Terms-The court should reserve the right to accept or reject any exception taken by vendors to the terms and conditions of the RFP. The court also should allow itself to negotiate a resolution of any exception.
Equal Employment Opportunities-Any selected vendor must comply with the provisions of federal, state, and its own EEO regulations to ensure that no employee or applicant for employment is discriminated against because of race, religion, color, sex, national origin, age, or handicap. The court also should request that the selected vendor create an affirmative action plan and provide the appropriate state or federal agencies with reports to ensure compliance with equal employment legislation and regulations, if requested. See Business Process Equal Employment Requirements Example.
Patent, Copyright Protection, Trademark, Trade Secret, or Proprietary Information Protection-The court should require vendors to defend at their expense any suit that may be brought against the court based on a claim that the systems, services, or products furnished infringe on a United States patent, copyright, trademark, trade secrecy or other proprietary information. The court also should ensure that the vendor pays the costs and damages finally awarded against the court in any such suit.
The court should give the vendor prompt written notice of the infringement claim and the full right and opportunity to conduct the defense with full information and all reasonable cooperation.
Other Delays-If the delays are caused by the default of a subcontractor, and the default arises out of causes beyond the control of the parties, the court should agree not to hold the vendor liable for damages, unless the supplies or services to be furnished by the subcontractor are obtainable from other sources in sufficient time to permit the court or the vendor to meet the required performance schedule.
The following topics apply to equipment or software acquisitions and should be considered for inclusion in these types of RFPs.
Proposal Guarantee-Depending on the size of the acquisition, the court should request that vendors include a bid proposal guarantee consisting of a bond, certified check, or similar instrument drawn on a solvent bank, or a bond issued by a surety company authorized to do business in the court's state. The bid proposal guarantee (perhaps 5 percent of the contract price for the first year) acts as a guarantee of good faith and a firm bid from the proposal-opening date to the execution of the contract.
If the successful vendor fails to enter into a subsequent contract, the parties should agree that the bid guarantee will be forfeited up to an amount that is the difference between the bid selected by the court and the bid that is finally accepted from another vendor.
The successful vendor should submit a certified check or performance bond for 10 percent of the contract price for the first year. The certified check, cashier's check, or performance bond should be renewed annually in an amount equal to 10 percent of the contract for each succeeding year.
Upon receipt of the proper certified check or performance bond, the court should return the bid guarantee; all other bid guarantees will be returned to the vendors upon execution of a contract with the selected vendor.
Warranties-One of the most important legal issues in commercial contracts is the warranty. Ordinarily a vendor will make informal warranties either through brochures, published specifications, oral representations, or demonstrations. In addition, it is usually assumed that the vendor has made a warranty of title to any software it markets. Vendor standard contracts, however, generally disclaim all of these implied warranties of merchantability and fitness for purpose in favor of specific repair or replace warranties that give little or no recourse to the court. The problem, therefore, is to either reinstate the implied warranties or avoid the vendor's implied warranty disclaimers by devising a format that exchanges vendor disclaimers for specific express warranties.
At a minimum, the court should ensure that the vendor's warranty incorporates the following:
- Implied Requirements - Although it is unlikely that the vendor will surrender its disclaimer, the court should at least attempt to get the implied warranty into the final procurement contract.12 The court should inform the vendor that it is a material breach of contract, with the vendor assuming liability to the court, if the vendor-supplied hardware, software, and services needed to implement the complete system described in the RFP are not merchantable and fit for the purpose as described in the introduction and technical specifications. The vendor also should agree that any products and services not specifically listed in the RFP, but required to provide the functional capabilities described by the vendor to meet the court's requirements, are included in the total dollar amount of the bid.
- Operation in Accordance with Manufacturer's Specifications - The court should ask the vendor to warrant that the supplied applications software will operate in accordance with the manufacturer's commercial specifications.
- Repair or Replace Remedies - The court should require that if any software defects occur within the warranty period, the vendor will repair or replace the software at no detriment of service or cost to the court. The court also should inform the vendor that nothing will be construed as limiting the rights or remedies otherwise available to the court by law or in equity.
- One-Year Warranty Prior to Contractor Maintenance - The court should require the vendor to warrant all workmanship and the successful operation of all hardware and software for a period of one year from date of final acceptance of the whole work unless indicated for a longer period of time. If any defect or malfunction occurs within one calendar year after the date of acceptance, the vendor should repair or replace the defective software at its sole cost and expense and at no cost to the court for labor or any other charge. Vendor-supplied maintenance should commence at the end of the one-year warranty period.
- Exceptions, Force Majeure - Except with respect to defaults, the court and the vendor should agree that neither is liable for payment or implementation delays that arise Out of causes beyond the control and without the fault or negligence of the court or the vendor. Such causes may include acts of God or the public enemy, fires, floods, epidemics, quarantine restrictions, strikes, or freight embargoes. In every case, the delays must be beyond the control and without the fault or negligence of the court or the vendor.
Warranty Service Locations-The vendor should agree to maintain at least one warranty service location within the state. This is more an issue for hardware where parts and on site service may be needed where as software can be maintained, modified or updated, remotely. See CMS Example of service requirements.
Imperfections in Design-The vendor should guarantee that the supplied software is free from imperfections in design or construction that would create either operating difficulties or failure to meet specified performance quality.
Software Acceptance-The hardware, operating system, and applications software system should not be accepted for operational use, and payment should not be authorized, until the RFP's standard of performance, as negotiated and tested, is achieved.
Termination if Standard of Performance Is Not Met-In the event that the module undergoing tests has not achieved the negotiated standard of performance, the court should terminate the test and, at its option, initiate one of the following corrective actions:
- Terminate the Contract with the Vendor and invoke Manufacturer's Guarantee-The court may terminate the contract with the vendor in its entirety without recourse. At this point, the manufacturer's guarantee and any other contractual and legal remedies may be invoked, including bond forfeitures.
- Continue the Test-Notwithstanding the option to terminate, the court should have the option of continuing the test until the test period is completed successfully. Require Replacement Equipment-The court may require the vendor to repair or replace each purchased item that has failed to achieve the required standard of performance, at no cost to the court.
- Notification and Testing of Replacements-If the court chooses repairs or replacements instead of contract termination, a new acceptance test should commence upon notification that the vendor has replaced all defective equipment. The notification should contain the name and revision number of any installed software cross-referenced to that of the replacing software.
Ownership of Contractor-produced Software-All applications software developed and installed by the vendor for the court should become the exclusive property of the court unless the vendor specifically states otherwise.
This RFP clause raises the important issue of source code ownership. A clause outlining the court and vendor's rights in software is important because, in many instances, the software represents the principal advantage the vendor has over its competitors, and the vendor will be reluctant to relinquish it or place it in the public domain.
Three problems that arise when the vendor keeps the source code and delivers only the object code to the court:
- the court may need the source code to avoid relying on the software vendor for support and maintenance should the system not perform
- the vendor may go out of business
- auditors may need access to the source code to perform required audits
To solve these problems, a source code escrow account can be created whereby a trustee, typically a bank, has control over a copy of the vendor's source code. In the event the vendor goes bankrupt, the trustee is authorized to distribute the software to all of the vendor's existing customers. If the software is protected by trade secret or intellectual property law, then a confidential information clause should be included in the contract to specify who among the court employees will have access to the source code. Reports from the trustee should be required to ensure that the latest versions of program source code are held.
Ownership of Court Information-The court should clearly define ownership and use of court data. The court should retain ownership of court data and condition how vendors use the data, such as data access and a proscription against the sale of court data. This is particularly an issue in data conversion and application service provider situations. Court data is an important resource for the court and is valuable to outside organizations, particularly in electronic form.
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