REPORT/RECOMMENDATION TO THE BOARD OF SUPERVISORS
OF SAN BERNARDINO COUNTY
AND RECORD OF ACTION
July 26, 2022
FROM
LARRY AINSWORTH, Chief Information Officer, Innovation and Technology Department
SUBJECT
Title
Agreements with Red Hat, Inc. for Red Hat Enterprise Linux Server Support and Software
End
RECOMMENDATION(S)
Recommendation
1. Approve Enterprise Agreement, including non-standard terms, with Red Hat, Inc., for Red Hat Enterprise Linux server support and software for purchase amounts as authorized by County Policy, beginning on the earliest of the date of the last signature on the Agreement or an Order Form, online acceptance of the Agreement, or when access to a Red Hat Product is first received, and continuing until terminated by either party.
2. Approve End User License Agreement, including non-standard terms, with Red Hat, Inc., for Red Hat Enterprise Linux server support and software for purchase amounts as authorized by County Policy, beginning on the date of electronic acceptance and continuing until terminated by the County.
3. Designate the Chief Information Officer, Assistant Chief Information Officer, or IT Division Chief, to electronically accept the Enterprise Agreement and End User License Agreement with Red Hat, Inc. and electronically accept updates to the terms of the agreements, subject to review by County Counsel, provided that such updated terms do not substantively modify the terms of the original agreements accepted by the County.
4. Direct the Chief Information Officer to transmit printed copies of any updated terms to the agreements and any applicable licenses that are electronically accepted by the Chief Information Officer, Assistant Chief Information Officer, or IT Division Chief to the Clerk of the Board of Supervisors within 30 days of electronic acceptance.
(Presenter: Larry Ainsworth, Chief Information Officer, 388-5501)
Body
COUNTY AND CHIEF EXECUTIVE OFFICER GOALS & OBJECTIVES
Operate in a Fiscally-Responsible and Business-Like Manner.
FINANCIAL IMPACT
Approval of this item will not result in the use of Discretionary General Funding (Net County Cost). The Enterprise Agreement and End User License Agreement (Agreements) are non-financial in nature and do not commit the County to make any purchases. If future purchases are made under the Agreements, the Innovation and Technology Department (ITD) will adhere to County purchasing policies and return to the Board of Supervisors (Board) for approval, if necessary.
BACKGROUND INFORMATION
ITD utilizes the Red Hat Enterprise Linux operating system to run several applications for critical County functions such as web services, database services, Geographic Information System, infrastructure monitoring, and network management. ITD has maintained a Red Hat Enterprise Linux server support subscription since the early 2000s.
The Red Hat, Inc. (Red Hat) Enterprise Agreement (EA) is Red Hat’s standard commercial contract, which includes terms that differ from the standard County contract and omits certain County standard contract terms. RedHat is unwilling to negotiate these terms. The non-standard and missing terms include the following:
1. Governing law is the State of New York.
• The County standard contract requires California governing law.
• Potential Impact: The EA will be interpreted under New York State law. Any questions, issues or claims arising under the EA will require the County to hire outside counsel competent to advise on New York law, which may result in fees that exceed the total contract amount.
2. There is no provision in the EA addressing each party’s responsibility for paying attorneys’ fees.
• The County standard contract requires each party to bear its own costs and attorney fees, regardless of who is the prevailing party.
• Potential Impact: County Counsel cannot advise on, whether and to what extent, New York law may affect a party’s requirement to pay the prevailing party’s attorneys’ fees and costs in a legal action where no specific provision is provided in the contract.
3. Red Hat has the right to audit County’s use of the services to ensure compliance with the terms of the EA, and, if the audit reveals any underpayments of any fees payable under the Agreement by 5% or more, the County will reimburse Red Hat for the cost of the audit.
• The County standard contract does not permit Contractors to audit the County’s compliance.
• Potential Impact: If an audit determines that the County has underpaid for the services by 5% or more, Red Hat may demand reimbursement of audit costs, which will result in fees that exceed the total contract amount.
4. The EA does not require Red Hat to indemnify the County, as required by County Policy 11-07, including for intellectual property infringement claims.
• The County standard contract indemnity provision requires the Contractor to indemnify, defend, and hold the County harmless from third party claims arising out of the acts, errors or omissions of any person. The standard contract provision for intellectual property indemnity is: Contractor will indemnify, defend, and hold harmless the County and its officers, employees, agents and volunteers, from any and all third party claims, costs (including without limitation reasonable attorneys’ fees), and losses for infringement of any United States patent, copyright, trademark or trade secret (Intellectual Property Rights) by any goods or services.
• Potential Impact: Red Hat has no obligation to defend, indemnify or hold the County harmless from any claims, including indemnification for claims arising from Red Hat’s negligent or intentional acts and intellectual property infringement. If the County is sued for any claim, including intellectual property infringement based on its use of Red Hat’s software or services, the County may be solely liable for the costs of defense and damages, which could exceed the total contract amount. County Counsel cannot advise on whether and to what extent New York law may allow the County to require Red Hat to defend or indemnify it absent an express provision in the contract.
5. The EA does not require Red Hat to meet the County’s insurance standards as required pursuant to County Policy 11-07.
• County Policy requires contractors to carry appropriate insurance at limits and under conditions determined by the County’s Risk Management Department and set forth in the County standard contract.
• Potential Impact: The County has no assurance that Red Hat will be financially responsible for claims that may arise from the County’s use of the software, which could result in expenses to the County that exceed the total contract amount.
6. Red Hat’s maximum liability to the County is limited to the fees for the particular Red Hat product giving rise to the liability under the most applicable ordering document during the 12 months immediately preceding the event giving rise to the claim, without exception or exclusions.
• The County standard contract does not include a limitation of liability.
• Potential Impact: Claims could exceed the liability cap and the contract amount leaving the County financially liable for the excess. County Counsel cannot advise on, whether and to what extent, New York law may limit or expand the exclusion of limits to the extent prohibited by applicable law.
7. Payment is due Net 30 days from date of Red Hat invoice.
• County standard payment terms are Net 60 days with no interest or late payment penalties.
• Potential Impact: County standard processing time is 60 days or more. Failing to pay within 30 days of Red Hat’s invoice will result in a material breach of the EA, which would allow Red Hat to terminate the EA and seek other legal remedies, which could exceed the contract amount.
8. The term of the EA is indefinite beginning on earliest of (a) the date of the last signature on the EA or an Order Form; (b) the County’s online acceptance of the EA; or (c) when the County first receives access to a Red Hat Product, and continuing until termination by either party. In addition, each order has a service term, which automatically renews until the County provides notice of non-renewal thirty days before the term renews.
• County Policy 11-06SP does not permit indefinite term or automatically renewing contracts unless approved by the Board.
• Potential Impact: There is no end term to the EA and the County is indefinitely bound to the terms and conditions of the EA until terminated.
9. There is no termination for convenience while any service term is still in effect.
• The County standard contract gives the County the right to terminate the Contract, for any reason, with a 30-day written notice of termination without any obligation other than to pay amounts for services rendered and expenses reasonably incurred prior to the effective date of termination.
• Potential Impact: Upon any termination by either party regardless of cause, the County is required to pay all outstanding service fees, which could result in payment liability where no funds are available due to lack of allocation or loss of funding.
10. Venue is in the state or federal courts in Wake County, North Carolina.
• The County standard contract requires the venue for disputes be the Superior Court of California, County of San Bernardino, San Bernardino District.
• Potential Impact: Having a venue in Wake County, North Carolina may result in additional expenses that exceed the amount of the contract.
The Red Hat End User License Agreement (EULA) is Red Hat’s standard commercial contract, which includes terms that differ from the standard County contract and omits certain County standard contract terms. The EULA is a non-negotiable clickwrap accepted upon download of the software. The non-standard and missing terms include the following:
1. Governing law is the State of New York.
• The County standard contract requires California governing law.
• Potential Impact: The EULA will be interpreted under New York State law. Any questions, issues or claims arising under the EA will require the County to hire outside counsel competent to advise on New York law, which may result in fees that exceed the total contract amount.
2. There is no provision in the EULA addressing each party’s responsibility for paying attorneys’ fees.
• The County standard contract requires each party to bear its own costs and attorney fees, regardless of who is the prevailing party.
• Potential Impact: County Counsel cannot advise on, whether and to what extent, New York law may affect a party’s requirement to pay the prevailing party’s attorneys’ fees and costs in a legal action where no specific provision is provided in the contract.
3. The EULA does not require Red Hat to indemnify the County, as required by County Policy 11-07, including for intellectual property infringement claims.
• The County standard contract indemnity provision requires the Contractor to indemnify, defend, and hold the County harmless from third party claims arising out of the acts, errors or omissions of any person. The standard contract provision for intellectual property indemnity is: Contractor will indemnify, defend, and hold harmless the County and its officers, employees, agents and volunteers, from any and all third party claims, costs (including without limitation reasonable attorneys’ fees), and losses for infringement of any United States patent, copyright, trademark or trade secret (Intellectual Property Rights) by any goods or services.
• Potential Impact: Red Hat has no obligation to defend, indemnify or hold the County harmless from any claims, including indemnification for claims arising from Red Hat’s negligent or intentional acts and intellectual property infringement. If the County is sued for any claim, including intellectual property infringement based on its use of Red Hat’s software or services, the County may be solely liable for the costs of defense and damages, which could exceed the total contract amount. County Counsel cannot advise on whether and to what extent New York law may allow the County to require Red Hat to defend or indemnify it absent an express provision in the contract.
4. The EULA does not require Red Hat to meet the County’s insurance standards as required pursuant to County Policy 11-07.
• County Policy requires contractors to carry appropriate insurance at limits and under conditions determined by the County’s Risk Management Department and set forth in the County standard contract.
• Potential Impact: The County has no assurance that Red Hat will be financially responsible for claims that may arise from the County’s use of the software, which could result in expenses to the County that exceed the total contract amount.
5. Red Hat’s maximum liability to the County is limited to the amount paid by the County to Red Hat for the media provided under the EULA.
• The County standard contract does not include a limitation of liability.
• Potential Impact: Claims could exceed the liability cap and the contract amount leaving the County financially liable for the excess. County Counsel cannot advise on, whether and to what extent, New York law may limit or expand the exclusion of limits to the extent prohibited by applicable law.
6. The term of the EULA is perpetual beginning upon download of the software and continuing until termination by either party.
• County Policy 11-06SP does not permit indefinite term or automatically renewing contracts unless approved by the Board.
• Potential Impact: There is no end term to the EULA and the County is indefinitely bound to the terms and conditions of the EULA until terminated by the County.
7. There is no stated venue in the EULA.
• The County standard contract requires venue for disputes in the Superior Court of California, County of San Bernardino, San Bernardino District.
• Potential Impact: Having no express venue in the EULA means that venue could be applied anywhere that the parties have substantial contacts, which may result in additional expenses that exceed the amount of the EULA.
ITD recommends approval of the Agreements, including the non-standard terms, for the continued use of the Red Hat Enterprise Linux operating system as well as future updates and patches related to security and performance issues to ensure County applications perform as needed.
PROCUREMENT
The Agreements, including non-standard terms, will be used to accompany future purchase orders to be approved, as necessary, per County Policy 11-04 Procurement of Goods, Supplies, Equipment and Services, provided that Red Hat does not substantively modify the terms of the Agreements.
REVIEW BY OTHERS
This item has been reviewed by County Counsel (Bonnie Uphold, Deputy County Counsel, 387-5455) on July 8, 2022; Purchasing (Tevan Stremel, Buyer III, 387-2098) on June 29, 2022; Risk Management (Victor Tordesillas, Director, 386-8623) on June 30, 2022; Finance (Ivan Ramirez, Administrative Analyst, 387-4020) on July 11, 2022; and County Finance and Administration (Paloma Hernandez-Barker, Deputy Executive Officer, 387-5423) on July 11, 2022.