University of California
Office of the President
Senior Vice PresidentóBusiness and Finance
Costing Policy & Analysis
Research Administration Office
Memo Operating Guidance No. 97-07

June 23, 1997

CONTRACT AND GRANT OFFICERS (CAMPUS AND LAB)*

Subject: State Department of Health Services Contracts, Fiscal Year 1997-98

For the past year, the OP Research Administration Office and the San Francisco campus Office of Research Affairs have been negotiating various contract clauses with the State Department of Health Services (DHS). Since none of the issues are finalized at this point, the purpose of this memo is to inform you of clauses which are no longer acceptable and should be deleted from FY 1997-98 DHS contracts. The attached letters to DHS staff, summarized below, explain which clauses are involved and inform DHS that campuses are now being advised to delete or modify these clauses individual contracts until DHS makes changes in their contract boilerplates.

Intellectual Property Clauses --

The January 16, 1997 letter to David Mitchell and Jeannette Smith provides the background of the modifications we requested. (Attachment I.) The April 7, 1997 letter to DHS Legal and Contract Management staff summarizes a meeting with them in which all the intellectual property clauses were discussed. (Attach. II.) To date, there has been no word from DHS about the summarized proposed changes. (Attach. III.) So, at this point, it is recommended that campus Contract and Grant Officers be familiar with the scope of work in a contract with this language (Ownership of Intellectual Property) and negotiate appropriate changes to that language, where necessary, if the scope of work includes use of databases or works for which the Principal Investigator already has ownership or the University wants to retain ownership.

In all cases, subparagraph J in the Ownership of Intellectual Property clause should be modified as described. This is the "warrantee" section. DHS Legal and Contract Management staff were informed in the January letter that the University needed it modified. The changes include modifying the first sentence to limit the University's liability by adding, "...to the best of the Contractor's knowledge..." or changing it entirely to state:

As a matter of contract performance as part of the deliverables, Contractor will make reasonable efforts to warrantee that....

The specific warrantee language in subparagraphs J.(3) and (4) must be deleted.

Subcontractor Clause and Exhibits A(F) and A(S) --

Both the DHS contract subcontractor clause and the Exhibits A(S) and A(F) clauses, Requirements Applicable to Subcontracts for Services, contain third party liability language. The March 27, 1997 letter to Jayna Querin outlines the changes we requested in these Exhibits. (Attach. IV.) The specific subparagraph (g) which contains the third party liability language in both the contract and the Exhibits states that

The Contractor is responsible for a subcontractor's actions or failure to take action in fulfilling the requirements of this contract.

This subparagraph must be deleted in both contract and the Exhibit in accordance with University Deputy General Counsel Lundberg's opinion dated March 11, 1997. (Attach. V.)

The June 17, 1997 letter to Jayna Querin was in response to her proposed draft changes to these Exhibits. (Attach. VI.) However, until these proposed changes are not finalized within DHS, each DHS contract will have to be modified individually.

Personnel Clauses --

Clauses governing the qualifications and salaries of a contractor's staff are becoming more problematic in DHS contracts. As with any sponsor, DHS has the right to agree on the Principal Investigator or Project Director. However, they may also include clauses stating that they must review job descriptions and even the qualifications of any new staff hired under the contract. This becomes problematic if they actually interfere with the University's hiring practices. They may also set salary limits which may have to be renegotiated if University personnel earn more than the limit.

It is important for the University campuses to approach DHS contracts with the issues so that we have more unity in negotiations. We realize the DHS contracts are always late and that attempting to negotiate language in them delays their final execution sometimes to the end of the fiscal year. We hope that working with them for acceptable boilerplate language can alleviate some of these delays. Please contact us if you have other issues to address in DHS contracts.

Refer: Samuela A. Evans
Subject Index: 02, 18, 21
(510) 987-9849
Organization Index: S-140

David F. Mears
Director, Research Administration

Attachments NOT INCLUDED ON-LINE