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Commercial contract considerations for Further and Higher Education Establishments

The procurement of goods and services by further and higher education establishments such as colleges and universities are a constant necessity for their effective operation, often through entering into commercial supply agreements and contracts. Billions are spent each year on purchasing the supply of everyday goods and services.

The types of contracts which might be entered into are varied and cover the supply of key services and goods such as:

• Books, stationary and educational resources;
• CPD and learning;
• Legal services;
• Governance support;
• Educational standards support and inspections;
• Catering services;
• Cleaning & hygiene services;
• Waste management;
• Construction and maintenance;
• Furniture;
• Consultancy services;
• Utilities;
• Events, activities and trips; and
• ITC & computer hardware.

Commercial contracts are extremely important in relation to the smooth running of further and higher education providers. They are particularly important to the maintenance of proportionate budgets and good financial control. They outline the who, why, what and cost and although relationships can exist without a formal written contract in place, it is always more beneficial, for all parties, to have the relationship formalised in such a document. This way, issues and disputes over core terms of contracts such as exactly what obligations exist and for how long, can be avoided.

A well-formed contract outlines clearly and concisely the goods or services, processes, procedures, expected standards, cost, term of contract, termination provisions, renewal, timings and most importantly of all, what happens when things go wrong!

It is therefore important to ensure that you are fully aware of all the contracts you have in place, their term and how you can bring them to an end if required. It is similarly important to ensure that contracts are regularly reviewed well in advance of the termination date to enable sufficient time to identify any potential changes needed and to negotiate a renewal or alternative supplier if needed.

Some contracts you may have 'inherited' as part of a merger process, under a previous leadership or perhaps because they have simply rolled over and never been properly reviewed. So, it is important you create and maintain a contract register, which contains all the information you have on what contracts are in place, who is supplying the goods or service that they relate to, when they are due to end and post-termination obligations. The contracts register should be reviewed on an annual basis as a minimum and the information shared with your governing boards and/or trustees as required.

Communication between the parties is vital, particularly when issues arise in relation to the contract. The contract will outline the dispute management process, which will need to be followed, along with a clause setting out how, worst case scenario, the contract can be terminated. There may also be other clauses in the contract, such as those dealing with mediation, or arbitration, which will need to be considered before taking legal action. These types of provisions are often known as Alternative Dispute Resolution provisions and their aim is to enable the parties to try to settle their differences and avoid Court proceedings.

Disputes with suppliers can be incredible frustrating, impact on efficiency, be a drain on budgets and time-consuming to resolve. They commonly revolve around issues such as:

• A failure to provide a service or product;
• A defective service or product;
• Unreliability in terms of the standard and quality of the goods or service being supplied;
• A failure to deliver on time; and
• A product delivered which is not is described/advertised.

Of course, these issues can also cause serious follow-on problems; for example by impacting on standards including the ability to provide a safe working and learning environment, the delivery of an effective curriculum, managing reputations and ultimately the academic standards being produced.

One area which frequently arises in contract disputes is the issue of termination. Sometimes, a contract will automatically terminate however in other instances they might automatically renew. Disputes can arise over whether a contract has been terminated properly and in accordance with the terms of the contract, what post-termination obligations may continue as well as scenarios which may involve the termination of the contract where the supplier has failed to observe its obligations and thereby caused a breach of contract. It is critical in our view to take legal advice when considering terminating a contract to ensure that you understand all the implications, how to terminate effectively and lawfully and ensure that you have followed and exhausted the correct processes.

You also need to bear in mind that those further and higher education establishments which are classed as public sector bodies must also have regard to public procurement law, along with freedom of information legislation.

The key tip to take away is to review, review, review! Plan well in advance and determine:

• Who is the contract with?
• What is being supplied/provided?
• Is the service standard being achieved?
• Are you and the recipients of the goods/works/services satisfied with what is being delivered?
• How long is left of the term?
• Should the contract be terminated as you no longer need that good/service, or it is no longer value for money?
• If a dispute arises - take advice sooner rather than later on your options
• Ensure your contracts are future proof - have them reviewed and ensure they are fit for purpose - don't just accept what is offered!

Remember, you are accountable for the provision of education and that means taking effective and efficient responsibility for the entering into, management of and termination of commercial contracts as required to ensure that delivery is being maintained.

For more information contact Stephen McArdle in our Education department via email or phone on 0333 207 1142. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

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