A Closer Look at Contract Requests
A crucial component of the business world is understanding the many aspects of a contract request. The definition of a contract may be the legal context of an engagement but also the offer and acceptance of a proposed transaction, or an agreement between parties for terms of a desired arrangement. For example, if you are looking for a loan to buy a new home that has just been put on the market, you would need to offer the banker or other lending authority your proposal. From this interchange of proposed terms, the lender would issue the loan documents and/or the mortgage for acceptance upon negotiation of terms. This component is referred to as a contract request.
In its most basic form, a contract request is simply one party expressing a set of terms and other conditions to enter into a deal and for which the other party can accept, modify, or decline as a counter-offer. Contract requests are typically unilaterally initiated but can also be initiated and received between multiple parties. In the example above, the potential homebuyer would issue a mortgage request to the bank or lending institution . As an example of a multi-party contract request, a real estate agent would request terms from a seller to purchase a property on behalf of a potential buyer.
Contract requests are important for the business transaction because they initiate the terms and conditions of an arrangement to be negotiated and setup to protect all parties involved. The overall process of negotiating and then ultimately creating a signed contract is vital to each business transaction. A properly structured business contract will cover each party’s position and concerns once the other side has accepted. In this example of the mortgage request for the home purchase, the contract request would state the proposed amount of the loan and the client’s proposal for terms of repayment. It would also request the bank’s proposed terms for loan acceptance and approval. In the case of the real estate agent and the selling party, the contract request would list the terms and conditions of the proposed purchase by a potential buyer.
Key Components of a Contract Request
In any contract request, whether formal or informal, certain elements must be present in order to minimize the risk of a subsequent breach. The best way to avoid a costly mistake is to ensure that you have included all requisite aspects before sending the request.
The nature of your business will generally dictate what is important in a contract request; your specific industry will often determine how the terms of a contract are to be legally enforced. In many cases, regardless of your field of work, there are fundamental items that should always be present in any contract request:
- Clear definitions of all terms and parties involved in the contract
- The specific services, products, or expectations of service that are to be provided by the parties
- Information regarding payments, including amounts, when they are due, how they should be made, and specifics on the payment process
- Timeline for delivery of goods, services, and renumeration to all parties, including important milestone dates that all parties are expected to comply with
- Inclusions and exclusions pertaining to the contract
- Any and all relevant legal information, such as non-disclosure agreements, intellectual property rights, and liability clauses
- Steps for compliance monitoring, including a description of the compliance process should any party fail to adhere to the terms of the contract, and any subsequent steps required in order to bring the contract back into line with these requirements
- Information regarding the processes necessary to cancel the contract, if applicable, including the steps required to refund paid services, collection of delivered goods, and consequences for failure to adhere to the terms of the contract
A well-written contract request not only safeguards your interests, but it also serves to protect the other parties involved so that the entire process runs smoothly. The more prepared both sides are at the outset, the more likely it will be that the contract will run smoothly with few hiccups.
The Contract Request Journey
The most common contract request process starts with a department needing a contract, whether it’s a vendor for goods or services or another party requiring a binding agreement. The first step is often drafting and submitting a contract request to the proper department.
Submission of the request can occur via e-mail, and templates are commonly available. After a review by the responsible person or team, in most cases the contract request form is submitted to contract administration to initiate the review process.
If the request is for a new contract, contract administration will review it to determine if there is a pre-existing template in the contract repository that can be used or modified, or whether a request for a new or revised template be made.
Contract administration reviews the contract for legal and business issues. In many cases, the contract might also require approval by various stakeholders, including purchasing, accounts payable, data privacy, research and export controls, among others.
Contract administration will make mark-ups and/or provide comments for any necessary contractual changes. The resulting version will then be sent to the other party and generally will include a statement that no substantive changes have been made from the "original" version given to the other party. While this practice is common for speed and clarity, the original version should be preserved by contract administration for the purposes documented below. A track changes version can also be provided to the other party, with a disclaimer stating it is for demonstration purposes only.
The other party will respond, and any further changes will be reviewed. Once both parties have reached agreement on the final terms and conditions, a "clean" and "final" version without markups will be created for signature (unless an electronic signature application is used that generates its own "final" version).
Both parties sign the final version, providing copies for recordkeeping purposes. After the signatures, the contract is uploaded to the contract repository for the recordkeeping and reporting to the parent entity. In some organizations, a contracts database may be in place to manage these transactions.
How to Prepare an Effective Contract Request
Using our Contract Request or Proposal letter, take the time to spell out what you are looking for from a contractor. While not everything needs or should be in the contract request, including specifications or other important information, I highly recommend at least including some of the items below:
- Subject matter of the contract or the goods or services
- Proposed term or duration of the contract
- Timing for performance of work
- Pricing information, payments
- Any warranties or indemnity requirements
- Any confidentiality requirements
- Any insurance requirements
- Indicating which laws apply to the agreement and venue of any dispute resolution (perhaps the law of California).
When writing the request, be clear and concise. Provide the necessary information to the prospective contractor to allow them to determine whether or not they are interested in work under the terms you propose. Allow the contractor a reasonable amount of time to respond in writing with their proposal. It is also good practice to provide a time frame when you plan to select a contractor.
Once you receive either one proposal or multiple proposals, you should carefully review the proposals to determine which contractor best fits your business needs. Sometimes, it is best to schedule an in person meeting to discuss the proposal. There may be questions that need clarifying, and whilst you can do this over the telephone, an in-person meeting helps both parties obtain a better understanding of the scope of work to be performed.
Typical Pitfalls in Contract Requests
The bane of the contracting officer’s existence is the poorly or improperly prepared contract request. Too often, the pitfalls in preparing the contract request are not apparent: they are seen after the fact to be poor drafting, "wishes" by the user, or plainly impractical. And, it is tempting to "stage your own intervention" by inserting these items in the SOW. However, flying under the radar like this often comes back to haunt both the requester and the contractor. Here are some common mistakes in contract requests, and how to avoid them.
Over-Specifying
The customer is often tempted to prescribe exactly what he wants, leaving nothing to chance. This can lead to over-specification and unnecessary cost, since the contractor has limited opportunities to innovate or offer its own preferred solutions. Procurement professionals often have to talk users down and convince them to stop over-specifying things that may not be necessary to meet their needs or may be easily obtained at a lower cost to the government.
Under-Specifying
Depending on the scope of work, either the customer or a source selection evaluator may later claim the contract was improperly awarded to a non-preferred vendor because the awardee does not have a specific set of experience. So, split the baby. Draft the contract request with specifications that require the supplier to demonstrate a certain level of experience, but so generalized that it is not obvious that one particular vendor has relevant experience.
Competing Requirements
The governmental procurement process allows for competing requirements that frequently leave a bidder to determine whether to provide a quote against one requirement or multiple ones . The problem is this process often ends up pitting the bidders against each other when they are all providing quotes on the same solicitation but only competing on one portion of the requirement. If you think that could never happen, you’re probably right. Instead, unless the requirements are clearly accomplished by clearly separate technical or price approaches, you should make it explicit requirements are not competing so as to preclude this practice in the acquisition.
Overlapping Requirements
Simultaneously, the government appears to have developed an insatiable need for redundant requirements. These overlap unnecessarily complicate the procurement process, confuse the bidders, and result in multiple awardees unnecessarily having to work together (and requiring government oversight). Not to mention the increased cost of administration for the government.
Technical Terms
The government is probably the only remaining customer in the world that still uses Imperial measures and temperature measurements. It is left to the user to convert everything to metric before publishing. The same goes for acronyms and other agency preferred terms of art. That is not so difficult to be alone, but when you mix agencies together, it becomes a whole lot tougher! Really, the government should just decide to bite the bullet and start measuring everything by meters and Celsius. It wasn’t that long ago that the rest of the world did the same thing.
Failure to Standardize
If you totally disregard the above, it is critical that you require the contractors to conform to a standard procurement system. There are plenty of good procurement systems out there that you can adopt. Although not perfect, they will create a level of standardization for the other agencies involved. One of the best systems available, and it’s free and flexible for most small requirements, is Open Air.
Contract Requests Software and Tools
In the rapidly evolving landscape of business, companies are turning towards automation to streamline their processes and enhance efficiency. The contract request process is no exception. A multitude of tools and software have surfaced to assist legal and business teams in managing contract requests effectively. These technologies encompass document management, automation, and workflow management systems, all designed to minimize the inefficiencies typically associated with email threads and manual revisions.
Document management systems are central to organizing, storing, and sharing contracts within an organization. By creating a centralized repository, organizations can efficiently categorize and retrieve contracts, ensuring that all relevant documents are accessible to team members who need them. Many document management systems also integrate with other business applications such as Customer Relationship Management (CRM) or Enterprise Resource Planning (ERP) systems, providing a seamless interface for contract management.
Automation software has been a game changer for managing contract requests. With the use of templates and approval queues, organizations can standardize the contract request process and ensure that every request is vetted promptly. These solutions use conditional logic to automatically route requests to the right approver, eliminating the need for manual follow-up and reducing the potential for bottlenecks.
In conjunction with automation, workflow management systems help to track the progress of contract requests and identify delays in the process. This visibility can lead to more informed decision making and enable organizations to respond quickly to changing business needs. Some workflow systems have built-in tools for collaborating with internal stakeholders, maintaining a single source of truth during contract negotiation.
Other tools for contract request management include customer portals, eSignature solutions, and contractual analytics platforms. A customer portal streamlines the contract request submission process for customers, while eSignature solutions enhance the final steps of the contract lifecycle, providing a fast, paperless execution process. Applications using analytics optimize contract terms and contracts lifecycle itself, ensuring more favorable outcomes for the organization.
Successful contract request management requires a combination of the right processes and tools, each of which provides distinct advantages when used in tandem with one another.
Legal Aspects of Contract Requests
Through the myriad of contract requests received, attention must be paid to the disastrous implications that could arise when a company is not in compliance with the law. Depending on the nature and severity of the violation, the ramifications could stop you from doing business with one of the most fundamental pieces of the company – the suppliers. In this section we will discuss some common legal issues that can affect contract requests and they ways you can prevent and/or manage them accordingly.
The Department of Defense (DOD) Procurement Integrity Statute prohibits DOD employees from knowingly disclosing procurement information that is marked as proprietary or source-selection sensitive, or discussing this information during and after a procurement. A contractor who knowingly obtains this information from a DOD employee has the burden of proving that it was obtained from sources other than a DOD employee .
The Foreign Corrupt Practices Act is a US federal law that prohibits corrupt practices by applicable persons with the purpose of obtaining or retaining business or any other improper advantage for or with any person. In addition to the statute, there are additional accounting requirements that are set forth in the Act.
The Privacy Act is a federal law passed in 1974 that governs the use and storage of personal or private information by agencies of the federal government. The Act prohibits the disclosure of personal information to outside persons without the express written consent of the individual whose information is to be disclosed (who then has to be notified of the disclosure and its purpose). This statute is very much an offense issue for the agency involved, however, unlike many other statutes, a violation leaves the government agency open to a civil lawsuit.
