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Purchasing Supplies at CERN
Legal aspectsContract execution and follow-up (who does what)
Lucie Pocha DG-LS
Adam Horridge IPT-PI
Outline
Legal aspects
1. CERN contracts
2. General Conditions of CERN Contracts (GCC)
Contract follow up
1. When? Why? How? Who?
2. Case study no. 3
2
1 CERN contracts
Legal aspects: CERN contracts
Purchasing process
Selection of contractor
Formalization of
commercial arrangement
Legal aspects: CERN contracts
Specific clauses
General terms
Contract
between
CERN and contractor
“Tailor-
made”
contract
Legal aspects: CERN contracts
Specific clauses
purchase order (≤ 200k CHF) or standard contract (> 200k CHF)
General terms
General Conditions of
CERN Contracts
(GCC)
2General Conditions of CERN
Contracts (GCC)
Why GCC?
Right to issue its own rules
as necessary for its functioning
(as opposed to the application of national law)
Independent functioning
Intergovernmental Organization
composed of Member States
CERN’s own rules
Procurement: tendering
process and GCC
Labour:
Staff Rules and
Regulations
Safety:
CERN Safety rules
Utility of the GCC
Pre-approved, autonomous language (E and F)
Address standard situations
Reflect long procurement experience at CERN
Cover supplies as well as services
Application of the GCC
Stipulate applicability in purchase order/ contract
Default provisions, apply where pertinent
Complement or modify by contract-specific clauses
Documents comprising
the contract
All relevant documents
Hierarchy between documents established
Avoid contractor’s own general conditions to maximum extent
Priority between documents
Purchasing Supplies — Legal Aspects & Contract Follow-up 13
terms of the contract
service level agreement
delivery schedule
technical specification
other annexes of the contract, excl. invitation to
tender and GCC
invitation to tender, excl. GCC
GCC
contractor’s bid
Confidential information
GCC: contractor as recipient
Modification: mutual disclosure
Mark as confidential!
Intellectual property: GCC
CERN discloses IP to contractor
License for contractor to use CERN IP, without warranty by CERN
License for CERN to use contractor IP for the use of supplies/services, with warranty by contractor
IP freshly generated belongs to CERN
Intellectual Property:
reasonable modifications possible
CERN contractor
Owns generated IP
Provides no warranty
Disclosure of IP
Owns generated IP
Provides warranty
No disclosure of IP
Delivery
DATE
PLACE
• As set out in contract
• Responsibility of contractor
• Good shape
• Modification by CERN
compensation
• Receipt ≠ acceptance
Delivery: when it goes wrong…
Late delivery
Foreseen: refusal and termination of contract if it has lost purpose (wedding cake clause)
Penalties / termination if maximum penalties reached
Notify IPT
Damage or incorrect delivery
Foreseen: refusal and termination of contract if it has lost purpose
Refusal on the basis of actual damage or incorrect delivery
Notify IPT
After delivery:
acceptance procedure
Written notification of acceptance
within 3 months
CERN recognizes
that delivery is correct via:
Payment in full
Tacit acceptance if no action
for 3 months
What to do within 3 months of
delivery?
Carry out detailed inspection
Notify non-conformity in writing;
=> remedial measures by contractor
No payment of non-conforming deliveries
Penalties
Termination of contract if loss of purpose of goods/services due to delay for remedial measures
Warranty: Duration
GCC: 2 years after acceptance
Modifications possible
GCC exception: longer legal warranty
Warranty: purpose
Remedy of existing non-conformities by contractor
Remedy to supplies likely to suffer same non-conformity
No remedy measures by CERN or 3P at contractor’s expense
Extension or renewal of warranty
Termination:
when it goes really wrong…
Gross negligence
or willful misconduct
By CERN or
contractor
Bankruptc
y
insolvenc
y
Breach not
remedied timely
Bankruptcy insolvency
Breach not remedied
timely
Termination:
what to do?
Notify IPT before taking any termination measure!
Avoid serious financial and legal consequences
3 Contract follow-up - Who does what
Contract follow-up
Procurement process
Selection of contractor
Formalization of commercial arrangement
Contract follow-up
When?
Technical aspects are discussed during
“clarification” phase
• Planning established
• Equipment to be used defined
• Raw material to be purchased
• Etc.
Purchasing Supplies — Legal Aspects & Contract Follow-up 27
Purchasing Supplies — Legal Aspects & Contract Follow-up 28
Why? Power in the Purchasing Process
How?Follow-up meetings with
contractor
Periodicity
Participants
To be defined
Establish minutes of meetings
draft by CERN technical responsible
review by procurement officer
approval by contractor
If no comments within 8 days minutes are approved
Purchasing Supplies — Legal Aspects & Contract Follow-up 29
How?
Use contractual tools in case of
problems with contract execution
Purchasing Supplies — Legal Aspects & Contract Follow-up 30
• Failure to deliver or late delivery (wedding cake clause) Other breaches (delivery of docs, non compliance with laws.. )
• Problems with warranty
• Non-conforming supplies
• Late delivery, failure to deliver
Penalties No acceptance
Execution by third party
Termination, bank
guarantee
Purchasing Supplies — Legal Aspects & Contract Follow-up 31
How ?
The technical officer shall:
Communicate in writing with the contractor
Involve the procurement officer asap in case of problems
Keep track of any relevant correspondence or communication with contractor (minutes, e-mails, technical reports, etc.)
NEVER commit CERN without the approval of the procurement officer.
Purchasing Supplies — Legal Aspects & Contract Follow-up 32
How?
The procurement officer will:
Draft correspondence with contractual consequences, i.e.: application of penalties, notice + request for remedial measures, non acceptance of supplies, drawing on bank guarantees, termination of contract
Interact with the Legal Service and other services (invoice office), if necessary
Purchasing Supplies — Legal Aspects & Contract Follow-up 33
Joker Case Study No. 3
“ Contract follow-up for the Supply
of 15 Tons of Magic Powder ”
Case study 3
Your task
• Case analysis (30 minutes):
• Make three groups: two CERN technical
officers and two CERN commercial officers
• Read the background
• Answer to the questions
• Group presentation and case synthesis (30
minutes):
• Each group makes its presentation
Contract Procurement Management Training Supplies– 20 September 2011 35