Contract Guidance

We have made an easy to read guide to our contract terms and conditions. Please click on the sections below to quickly navigate your way through them. If you want to see what an actual contract will look like please see the Contract Template Download section.

SECTION 1 - GENERAL

INTRODUCTION

1. This Guidance Note is issued as part of the MOD's Centre for Defence Enterprise (CDE) initiative and is intended to provide brief guidance on the nature of contracts issued in pursuance of the initiative, their business terms and the required format for proposals and prices quoted by tenderers in their proposals.

DEFINITION OF TERMS

2. The following convention in the use of “shall”, “should” and “will” is applied to the requirements contained in this Guidance Note to tenderers and the Contract document. This convention is to be followed by tenderers in their proposals

  • “shall” and “must” is used in instances where it is MANDATORY that the requirement is met;
  • "should" is used in instances where it is DESIRABLE that the requirement is met and tenderers shall fully justify their reasons for any intention not to meet the requirement;
  • "will" is used in instances where there is a statement of intent by the Authority.

3. The term “tenderer” denotes the organisation (or an individual) acting either on its own or as a Prime Contractor or as a Consortium, which submits a proposal in response to the CDE initiative.

4. The term “Contractor” denotes the legal entity (or an individual), acting either on its own as a Prime Contractor or as a lead for a Consortium, that is under a contractual obligation to provide equipment or services to the Authority.

5. The term “Authority” means the Secretary of State for Defence.

6. Where the terms “Company” or “Industry” are used they shall be taken to include Universities and individuals.

COMMUNICATIONS

7. Tenderers shall appoint one person who is to be responsible for all communications with the Authority and to whom the Authority will address any enquiries. Full details of the person appointed shall be notified to the Authority in proposal responses.

8. English shall be the official language for all means of communication between tenderers and the Authority in all matters relating to the CDE initiative and documents which are supplied as part of the tenderer's proposal.

9. All queries or points of clarification relating to the CDE initiative (or a specific proposal submitted as a result of this initiative) should be pursued through the CDE Office, based at Harwell - contact details as stated on the CDE Website.

10. Following the issue of a contract, as a result of a successful CDE proposal submission, all queries should be directed to either the technical or commercial points of contact detailed in the contract documentation.

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SECTION 2 - TENDER PROPOSAL

TENDERS

1. Tenderers are invited to submit innovative ideas for defence applications to meet CDE aspiration as defined in this website.

2. Tender Proposals shall respond fully and comprehensively to the technical and commercial requirements, as detailed on the CDE website, and should be segregated into two distinct parts to aid assessment - a Technical Proposal and a Commercial Proposal.

TECHNICAL PROPOSAL

The format and requirements of the Technical Proposal are detailed separately in the Submitting a proposal section. The Technical Proposal Template (therein) details the information required and is supported by full guidance on how to complete the form.

COMMERCIAL PROPOSAL

3. There are two key parts to the Commercial Proposal required.

Firstly, unequivocal acceptance of the proposed contract terms and conditions (as detailed in the Terms and Conditions Section of the CDE website), particularly those associated with Intellectual Property Rights (DEFCONS 531, 632, Condition 9 and either DefCon 705, shared funding or seed corn intellectual property rights provisions). See also Section 3 - Contract Terms and Conditions and Intellectual Property Conditions.

4. Secondly, a “fair and reasonable” (but keen) price for the research being offered.

TENDER RESPONSE

5. Tenderers shall submit responses by:

  1. Completing the Technical Proposal on the CDE Website.
  2. Selecting the appropriate Contract that best aligns with the programme of work being proposed - see Intellectual Property Conditions - and providing robust and comprehensive justification for the selection made.
  3. Checking the tick box to signify that you unequivocally accept the terms and condition of the Contract Template selected.
  4. Provision of any additional information e.g. case for Interim Payments - see Section 5, Payment

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SECTION 3 - CONTRACT TERMS AND CONDITIONS

Introduction

1. The CDE website contains three contract documents. The intent of these contract documents are that they be the form in which the Authority contracts with successful tenderers against CDE proposals which have been selected by the assessment process as deserving research studies under this initiative.

2. The contract documents have been deliberately drafted in as simple a form as is possible, to reflect the nature of the work envisaged, the likely total value and the participants we envisage undertaking these studies. Notwithstanding this, the Authority reserves the right to consider alternative or additional contractual provisions if individual circumstances dictate. Any alternative provisions will be mutually agreed with the relevant tenderer prior to contract award.

General

3. The standardised CDE contract templates call up a number of DEFCONs, the majority of which are relatively straightforward in their application. All have been issued following consultation between MoD and industry trade associations and are in common usage in MoD contracting. These templates also contain a number of narrative terms and conditions, including those relating to IPR for shared-funded work, which either replace DEFCONs or have been applied where no equivalent DEFCON exists. These narratives have been reviewed by representatives from industry trade associations and MoD in joint working groups. The industry trade associations themselves have been informed and are aware of the reasoning behind the narratives, but they have not endorsed their use and advise individual contractors to make their own decisions on their acceptability within any CDE contracts they enter into with MoD.

Key DEFCONS Include:

DEFCON 76 - Contractor's Personnel at Government Establishments

4. This DEFCON applies to a situation where the contractor may be required to carry out the work (or some portion of it) at a government establishment. If this should not be the case tenderers must explicitly advise the Authority, in their tender proposal, so that the Condition is excluded from the contract.

DEFCON 92 - Failure of Performance

5. Allows for termination of the contract if it is unlikely to be or has not been satisfactorily completed within the specified period, subject to payment of a fair and reasonable price (excluding profit) for authorised work and commitments. The Authority does not normally invoke this provision without first consulting the contractor on the relevant deficiencies and allowing an opportunity to correct those deficiencies or otherwise recover the programme of work.

DEFCON 127 - Price Fixing Condition for Contracts of Lesser Value

6. Where a contract has been let without competition and a price has not been agreed prior to the award of the contract, this Condition sets out information the contractor is required to provide to enable a fair and reasonable price to be agreed. The condition facilitates agreement of prices in contracts and for any subsequent amendments to the contract where pricing is normally below £250,000.

DEFCONS 529 & 530- Law (English) & Dispute Resolution (English Law)

7. Provides for the contract and dispute resolution (respectively) to be governed by English Law.

8. If a tenderer is registered in Scotland and would wish for Scots Law to apply then DEFCONs 529A and 530A (respectively) would apply instead. Tenderers must formally request the application of Scots Law in their tender proposals and provide evidence of their registration in Scotland.

DEFCON 607- Radio Transmissions

9. Requires the contractor to obtain a licence before making radio transmissions. The contractor must obtain approval from the acquisition team for the frequencies to be used in accordance with the Condition.

10. Tenderers should advise in their tender proposals if they intend making radio transmissions as part of the performance of the contract.

DEFCON 619A - Customs Duty Drawback

11. Provides that the contract price is to be inclusive of any UK Customs and Excise or other duty payable.

DEFCON 656 - Break

12. Allows MOD unilaterally to break the contract.

13. Whilst DEFCON 656 is not usually included in research and study contracts of low value and short duration, where there is no intention to extend those contracts, clearly the CDE initiative is likely to involve the award of contracts which are of a longer duration and higher value. The inclusion of this provision will be applied on a case-by-case basis and, whilst the Authority is prepared to consider representations from tenderers on the applicability (or otherwise) of the DEFCON to a CDE contract, the decision of the Authority is final.

14. If the Condition is included in contracts whose price is less than £250,000 it is to be exercised only when the customer has withdrawn the requirement.

15. The contractor is required to ensure that a termination right and period of notice that accords with the provisions of this DEFCON is included in his contracts with subcontractors/suppliers for the performance of the contract.

16. For further guidance on the specific DEFCONs listed above (and others applicable to the CDE Contract) see the DEFCON List and Conditions Guidance under the DEFCON tab on the following link: http://www.aof.mod.uk/aofcontent/tactical/toolkit/index.aspx

17. Tenderers' proposals shall clearly state their unequivocal acceptance of the terms and conditions contained in the CDE contract. If, for any reason, there are areas of non-compliance on this issue proposals must provide full supporting reasons, of the non-compliance, for the Authority's consideration.

Document Markings of Contract Deliverables To MOD

18. It is a requirement of DEFCON 705 (Clauses 17 & 18) that Technical Deliverables are marked in an appropriate manner to make clear ownership of IP rights, consistent with the Authority's rights of use. To ensure consistency of approach, a Document Marking Scheme has been suggested and included within the DEFCON 705 Contract Template within the CDE Website.

19. Tenderers shall ensure that similar but appropriate document markings are applied against the other CDE template contracts where used.

Technical Publications Clause

20. The fully funded and shared funded contract templates include a clause entitled “Technical Publications”. This clause is inactive unless specifically called up. It will be activated only if equipment support publications such as handbooks, user guides, user manuals, repair and maintenance manuals and the like are to be provided under the contract. Any such publications are to be listed in an Annex to the contract.

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SECTION 4 - PRICE

1. The Authority requires that all prices quoted for CDE proposals shall be on the basis that they are Firm (non variable). That is to say prices quoted are not subject to the effects of escalation or exchange rate variation.

2. Tenderers will appreciate that both technical merit, innovation and value for money will be amongst the deciding factors in selecting successful proposals under the CDE initiative. Technical merit will be determined by way of the Peformance Assement Framework detailed in the Proposal Guidelines Section of the CDE website. The overall proposal assessment process (again, as detailed in the Process Section of the CDE website) will, additionally, take into account value for money considerations.

3. To aid the consideration of 'value for money' prices must be supported by a full cost breakdown in the form of the table below:

CDE - Proposal Price Breakdown for non-competitive price proposals

figures in £ (VAT Excl)

  FY 08/09 FY 09/10 FY 10/11
Direct Labour effort (man-days)*      
Direct Labour costs (@ £… per man-day )*      
Travel & Subsistence (please specify if over 2% of total cost)      
Subcontracts [i.e. custom specified orders] (please specify)      
Bought-in Items [i.e. commercial supplies] (please specify)      
Other Costs (please specify)>      
Total Cost      
Profit      
Total Firm Price      

Add additional financial year (1st April to 31st March) columns as necessary

* If more than one grade of labour effort having different labour rates is applicable then Direct Labour effort and Direct Labour costs rows should be expanded to detail these separately

4. In all cases where a tenderer proposes a programme of work under a shared funding arrangement the tenderer shall complete the above table in a manner which includes the totality of all costs (i.e. both the elements to be funded by the MOD and the contractor) but shall clearly show the respective funding shares of both parties.

5. The Authority expects all quoted labour rates to be competitive in the market and, where a tenderer has agreed MOD rates, they should not exceed those rates agreed with the UK MOD Cost Assurance Services (CAS). Consequently, in the case of the latter, proposals shall be supported by evidence that they do not exceed labour rates already agreed with the UK MOD CAS. In addition, year on year escalation factors (used to generate future years labour rates) are to be detailed in tender responses, with supporting statements if they exceed the current normal levels assumed (of the order of 2% p.a.).

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SECTION 5 - PAYMENT

1. The Authority's normal policy is to make payment on the satisfactory completion of all work under a contract. In this respect, contracts awarded as a result of the CDE initiative are no different - see CDE Contract Condition No 5.

Further details are available in the AOF/Commercial Toolkit: http://www.aof.mod.uk/aofcontent/tactical/toolkit/content/topics/int_pay.aspx

2. The AOF/Commercial Toolkit goes on to state that the Authority is prepared to consider payment of advances against the contract price where the proposed contract is of a sufficiently long duration or high value that would put an unsustainable financial burden on the contractor. It indicates, as a guide, contracts in excess of 12 months or more than £250K in value.

3. However, the Authority is cogniscent of the nature of the work being solicited under this CDE initiative and the possible status of some of the tenderers who may provide proposals in response. In view of this, the Authority is prepared to consider requests for advances against the contract price, in cases which are below the above stated (12 months / £250k) thresholds, but only where there is a demonstrably stated financial case for so doing. Tenderers wishing to make such a case must provide thorough and comprehensive reasoning in their proposals.

4. If advances against the contract price in the form of Stage Payments are agreed for the purposes of a CDE contract then:

  1. the following additional DEFCON applies:
    "DEFCON 649 (Edn 07/99) - Vesting"
  2. the following Stage Payments Condition (in place of the existing Condition 5 - Payment) applies:

    "5 STAGE PAYMENTS

    5.1 The Authority shall, subject to the following provisions of this Condition, make to the Contractor advances against the Contract Price payable for Item 1 in accordance with the Stage Payment Scheme set out in Annex E to the Contract.

    5.2 The Contractor shall be entitled to advances against the Contract Price, to be requested in accordance with DEFCON 522, in respect of the satisfactory completion or performance of each stage under the Stage Payment Scheme. The Contractor shall have satisfactorily completed or performed each stage under the Stage Payment Scheme when:

    5.2.1 the Contractor has completed all work comprised in the stage for which the stage payment is sought; and

    5.2.2 the stages have been completed sequentially unless otherwise agreed between the parties; and

    5.2.3 the Contractor shall have complied with all his contractual obligations that impinge on progress of the work covered by the Stage Payment Scheme including, where required under the Contract, the provision of information required by the Authority for the purposes of assessing contractual performance; and

    5.2.4 provided that the Authority shall not be obliged to make a stage payment to the Contractor in respect of a completed stage if the Authority shall have reasonable cause to believe that the Contractor will be unlikely to render complete performance of his obligations in respect of Item 1 of the Contract.

    5.3 Where the Authority intends to rely on Clause 5.2.4 as the basis for rejecting any claim for an advance against the Contract Price which the Contractor may make, the Authority shall give to the Contractor notice in writing of his intention together with the Authority's reasons for the rejection.

    5.4 The appropriate forms for claiming payments under this Condition are detailed in DEFFORM 522A included as Annex C to the Contract."

  3. the following "DEFFORM 522A Payment Annex" will apply (in place of the existing Annex C):

    "ANNEX C TO CONTRACT NO RT/COM/.RELEVANT FORM DETAILS FOR DEFCON 522 PAYMENT CONDITION

    Line Item plus further description if necessary Relevant Form Representative of the Authority
    Item 1 - For stage payments, other than for the last stage payment AG Form 210 RD [name] (see Box 2 of the Appendix to Contract)
    Item 1 - The last stage payment AG Form 173 RD [name] (see Box 2 of the Appendix to Contract)

    Note: All claims for payment shall initially be sent to RAO Finance, HG 8, Hackett Building, Shrivenham, Wiltshire SN6 8JU who will arrange for certification by the representative of the Authority

    With regard to Clause 3 of DEFCON 522, the Contractor shall submit all claims for payment to the Bill Paying Branch using a properly completed DAB Form 10."

  4. iv. the following Stage Payments Annex (appropriately completed and agreed) shall apply:

    "ANNEX xxx TO CONTRACT NO RT/COM/...

    STAGE PAYMENTS
    Milestone Number Description Due DateT0 +months Payment (£)
    1      
    2      
    Etc      
    Etc      
    Etc Satisfactory completion of all work under the Contract   20%

    Tenderers, requesting advances against the contract price, must explicitly state their unequivocal acceptance of the above contract conditions and annexes in addition to that given in response to Section 2, paragraph 5.

5. In addition, tenderers must propose a stage payment plan supported by a detailed expenditure profile in tabular form i.e. effectively breaking down the financial year totals provided in the Proposal Price Breakdown (detailed at Section 4, paragraph 3) into projected monthly expenditure figures. The stage payment plan must provide clearly defined and achievable work stages and payments, by which satisfactory progress can be measured and confidence of timely and satisfactory completion progressively built up. Payment related milestones should be key activities leading to achievement of the programme and should ideally be on the critical path of the programme. In addition, tenderers shall propose dates (in the form X months from start of contract (T0)) for when the stage payments could be expected to fall due, given satisfactory performance under the contract. If agreed by the Authority, these stages and payments will be used to populate the proposed Annex xxx (above).

6. In generating their Milestone Payment Proposals tenderers shall comply with the following:

  1. The Authority will not pre-fund any expenditure. Consequently, all milestone payment claims must not include costs that have not been incurred by that point in time.
  2. No more than 4 to 6 Milestone Payments are to be proposed per annum.
  3. The last payment, entitled "Satisfactory completion of all work under the Contract", shall be 20% of the total quoted Firm Price.

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SECTION 6 - GOVERNMENT FURNISHED ASSETS

1. Government Furnished Assets (GFA), whether they be Government Furnished Equipment (GFE), Government Furnished Facilities (GFF), Government Furnished Information (GFI) or Government Furnished Resources (GFR), are government owned assets which are loaned (on a free of charge basis) to a contractor to assist in the completion of the contract. The provision of GFA, by the Authority, is not granted lightly and is only undertaken where there are substantial and pressing reasons for so doing (e.g. where financial or quality benefits would accrue as a result of utilising GFA).

2. With this in mind, the Authority does not believe that GFA is likely to be a requirement for a CDE contract. That said, if a tenderer has a demonstrable need for GFA this should be detailed in the proposal. If the case for GFA is accepted by the Authority, additional contract conditions such as DEFCONs 611 and 694 will be required and can be negotiated with the tenderer prior to contract award.

Further details can be found in the AOF/Commercial Toolkit:

http://www.aof.mod.uk/aofcontent/tactical/content/topics/gfa.aspx

http://www.ams.mod.uk/ams/content/docs/toolkit/gateway/guidance/gfa.aspx

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SECTION 7 - ADDITIONAL INFORMATION

1. DEFFORM 111, attached as an Appendix to the contract template, provides further useful information, in particular contacts (both technical and commercial) and DBA Bills, to whom claims for payment should be sent following certification by the Authority's authorising officer.

2. In addition to the further guidance on DEFCONs mentioned at paragraph 30 above the MOD Website also provides guidance on some DEFFORMs and a number of Guidelines for Industry. Guidelines for Industry No 7 is particularly useful as it offers guidance on usage and interpretation of DEFCONs. Guidelines for Industry No 10 - Intellectual Property Rights DEFCONs, will also be of interest.

3. Hard copies of all DEFCONs, etc may be obtained from:

Ministry of Defence
Forms and Pubns Commodity Management
PO Box 2
Building C16
C Site
Lower Arncott
Bicester
OX25 1LP

Fax: 01869 256824 E-mail: formsandpubs@qcis.mod.uk

By post - A self-addressed label should be sent with each application.

4. The attention of Tenderers is drawn to the agreements that have been reached by the MOD/Industry Commercial Policy Group (CPG) on Codes of Best Practice, CPG Guideline No 5. The Codes of Practice are intended to demonstrate a commitment by the MOD and its suppliers to the establishment of better working relationships in the supply chain, based upon openness and trust. The opportunity also exists for Tenderers to advertise any sub-contract valued at over £40,000 in the MOD Contracts Bulletin and further details can be obtained directly from:

Business Information Publications Ltd

Web address: http://www.modcontractsuk.com

Adrienne Somerville: 0141 270 7329

Any queries on the Codes of Practice should, initially, be referred to DTIC Commercial.

5. Tenderers should note that any contract, awarded as a result of this CDE initiative, shall be classified "RESTRICTED-COMMERCIAL" once fully populated and issued to the successful tenderer(s).

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SECTION 8 - TENDER SUBMISSION

1. Tender proposals shall comprise:

  • covering letter containing any additional information not provided elsewhere
  • completed Technical Proposal Template
  • nequivocal acceptance of the terms and conditions of one of the CDE Contract Templates

2. Tender proposals, against the CDE initiative, are to be addressed to:

DTIC Commercial
Hackett Building
Defence Academy
Shrivenham
Wiltshire
SN6 8JU

3. Tenderers should submit their tender proposal (both technical and commercial) through the CDE portal.

Tender Validity

4. Tenders Proposals shall remain valid and open for acceptance, by the Authority, for a period of at least two MONTHS from the date of Tender Proposal to allow for the assessment and contract award process timescale.

Tender Evaluation

5. Proposals submitted to the CDE will be assessed and processed in accordance with the Submitting a proposal section.

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