Objective:
To simplify the process of establishing contracts and reduce risk to the organization
Definition
Boilerplate contracts and key legal principles are a standard set of contract terms and conditions used for all normal purchases. These terms and conditions address all the legal and commercial matters pertaining to the relationship between the organization and supplier. Boilerplate text is widely used in the legal profession, where phrases, paragraphs and clauses can be used repeatedly in contracts with little or no modification. The organization should also create standard contract templates for key expenditure categories such as capital, IT, services and commodities, reflecting the specific requirements of each.
Rationale
Boilerplate contracts and key legal principles enable organizations to consistently apply legal diligence to multiple similar contracts. This improves the effectiveness of the contracting process, reduces unnecessary repetition, and reduces the need for costly legal advice.
Benefits
Financial Stewardship
The use of boilerplate contracts and key legal principles minimizes the use of expensive legal resources by reusing standard templates.
Process Efficiency
Using standard contract templates reduces the time required for the supply chain department and legal experts to draft, review and manage contracts.
Risk Management
Standard contract templates reduce the organization’s exposure to unknown and unnecessary contractual risks by establishing standard clauses that state all legal, regulatory, tax, insurance, Health and Safety (H&S) or Central Sterile Reprocessing (CSR) obligations between the organization and supplier to protect both parties.
Supplier Relationships
Boilerplate contracts and key legal principles maintain consistent terms and conditions in contracts with suppliers and establish standard expectations in contractual responsibilities between the buyer and supplier.
Related Metrics
1.1 Percentage of Active Items under Contract
2.3 Operating Costs as a Percentage of Expenditures
5.1 Percentage of Invoices Paid within Due Date
5.2 Supplier Performance
6.1 Voluntary Turnover
Guiding Principles
Boilerplate contract clauses and standard contract templates should be approved by the organization’s legal representatives. Additional approvals should also be provided by departments with relevant specialized expertise, as well as taxation and health and safety.
Standard contract templates should be aligned with the amount of commercial risk involved, and not unduly restrict suppliers from competing for the organization’s business or restrict continuous improvement.
In addition to providing legal protection to both parties, contract templates must clearly communicate the commercial principles and intent of the agreement in question.
For complex contracts, the appropriate specialists in numerous departments should be consulted such as patient care, legal, taxation, auditing, technology, and health and safety. The processes for establishing contracts and using the templates should be included in the Purchasing Policies and Procedures.
Key Components
Typically, organizations will have at least one set of contract clauses for purchase of goods and another for purchase of services. Organizations may also consider establishing separate contract templates for common expenditure categories, such as capital and information technology.
Some examples of the types of boilerplate clauses that would be in a contract template include:
- Scope
- Price, payment terms, and invoicing
- Force majeure
- Conflict of interest
- Order of precedence of documents
- Termination
- Notices
- Law and jurisdiction
- Insurance
- Liability and indemnity
- Confidentiality
- Assignment and subcontracting
- Intellectual property rights and licenses
- Warranties
- Supply and delivery
- Performance incentives and penalties
- Contract changes
Province-Wide Common Tendering and Contract Management
Even greater efficiencies can be gained by developing and standardizing contract clauses and templates across organizations. The Province is working with organizations and suppliers and gathering existing documents to develop a common contract document.
The Province will be publishing a two-part Common Tendering and Contract Management document. Part I, the Common Tendering framework, will outline the process for a common approach to tendering. Part II, Contract Management, will provide the terms, conditions and specific legalities to support this framework. The framework and associated standard contract terms and conditions will facilitate the contracting process for all broader public-sector (BPS) organizations, including hospitals, and create consistency across the Ontario BPS.
Implementation Challenges
Challenges:
- The clauses and principles may occasionally not be applicable. Best efforts should be made to use the standard templates. If material changes are required, the supply chain department should consult legal and other experts.
- Boilerplate contracts and key legal principles may become less relevant over time. Periodic reviews of the clauses and principles should be performed to remain current.
- The standard clauses may not be accepted by suppliers. If a supplier demands material changes, legal representatives from both organizations should be consulted to resolve the issue. Providing the standard contract template in the RFP may reduce such changes.
