400: Contracts

Procurement and Contract Services Policy & Procedures Manual
Section 400: Contracts
Effective: 7/01/2010

 

Purpose

This policy is to provide information about the various types of contracts and how best to contract for a variety of goods and services for OSU. The purpose of having a written contract is to set forth a binding set of obligations and expectations for each party.  Any time OSU is committed to an action, commits to the acceptance of an action by another party, or agrees to pay for goods or services, some form of written contract is required. 

Applicability

All employees authorized to procure goods or services for OSU.

Policy

401: Contract Basics

Procurement and Contract Services Policy & Procedures Manual
Section 400: Contracts
Effective: 7/01/2010
Revised: 4/17/2012

 

401-001: Contracts Outside PaCS Purview:

The purchase and contract responsibilities  under PaCS purview do not include authority for processes managed by Real Property and Leasing, Inventory Control, Human Resources, Risk Management, Research Office, Office of Sponsored Programs, Technology Transfer, University Advancement or authority not allowed under ORS or OAR 580-042-0010.

 

401-002: Contract Form           

In order to acquire goods or services, the parties should enter into some form of a written contract regardless of the dollar value.  Written contracts may be in a variety of forms including but not limited to: Purchase Orders, Personal Services Contracts, Use Agreements, and Rental Agreements.  Contracts do not need to be labeled as such to be legally binding as interpretation is typically based on the content.  There are different types of instruments used to formalize the obligations and expectations of the parties. 

 

401-003: Oral Contracts

Oral contracts are not an acceptable form of contract and are not binding on the University. 

 

401-004: Contracting in Good Faith

OSU contracts in good faith.  It is our obligation to ensure that OSU contracts are enforceable, legal, fair, and represent terms and conditions under which OSU can agree. ORS, OAR and the Oregon Constitution contain certain restrictions which can obstruct or limit our ability to enter into agreements.  A contract must accurately represent the obligations, expectations and the time in which the contract is valid.

 

401-005: Independent Contractor

Contracts may only be issued to individuals or businesses that qualify as Independent Contractors.  An evaluation of the relationship between an individual and the University must be examined before determining independent contractor status.  Facts that provide evidence of independent contractor status fall into three categories: Behavioral, Financial and the Relationship of the Parties.  The degree of importance of each category varies depending on the type of work and individual circumstances.  An Independent Contractor Determination form must be completed whenever the university is contracting with an individual whether by PSC or other form of contract.

 

401-006: OSU as a Contractor

OSU may perform work as a Contractor to other entities only under certain conditions; the work must be consistent with OSU’s mission; and the fee charged must be approved and published in the OSU fee book.  Office of Sponsored Programs and Procurement both execute contracts on behalf of the University where the University acts as the contractor.  To determine whether PaCS or the Office of Sponsored Programs would handle the contract, refer to the Contract Type Characteristics matrix at http://oregonstate.edu/research/osp/submission/TestingAgreements_000.htm

 

401-007: Non-Negotiable Public Contracts

under construction

402: Contract Types

Procurement and Contract Services Policy & Procedures Manual
Section 400: Contracts
Effective: 7/01/2010

 

OSU will strive to be consistent in the naming and use of certain agreement types defined in these policies in order to maintain consistency and continuity within the university.  The agreements will be written in a manner that clearly establishes the roles, responsibilities and obligations of the parties involved.  Any financial obligations should be clearly detailed including amounts and terms.  The following are some of the types of contracts and their intended use.

 

402-001: Interdepartmental Agreements

Interdepartmental agreements are intended to document agreements between OSU departments.  Interdepartmental agreements can be processed and signed by the departments.

 

402-002: Interagency Agreements (IAA)

Interagency Agreements are intended to formalize agreements or understandings between State of Oregon agencies.  Interagency agreements require review, approval and signature by the Contracts Office.

 

402-003: Intergovernmental Agreements (IGA)

Intergovernmental Agreements are intended to be used between OSU and other governmental agencies when an Interagency Agreement isn’t applicable.  Intergovernmental Agreements with agencies outside the State of Oregon may require review to insure compliance with ORS Chapter 190.  Intergovernmental Agreements require review, approval and signature by the Contracts Office.

 

402-004: Memorandums of Understanding (MOU)

A Memorandum of Understanding (a.k.a Memorandum of Agreement and Letter of Intent) is a document describing an intended common line of action and does not create a legally enforceable contract.  These are informal and understood as precursors to a formal legally binding contract.  Memorandums of Understanding require review, approval and signature by the Contracts Office.

 

402-005: Purchase Orders (PO)

Purchase Orders are contracts and are issued for the purchase of goods or services.  Purchase orders are legally binding contracts.

 

402-006: Personal Services Contracts

Personal Services Contracts (PSC) are used to contract for infrequent, technical or unique services performed by contractors with specialized, technical or scientific expertise of a professional nature.  Examples of professional services contractors include:

  • Accountants
  • Actuaries
  • Attorneys
  • Brokerage firms
  • Grant writers
  • Physicians
  • Public relations consultants
  • Recruiters

Personal Services Contracts must be issued when the dollar threshold will exceed $5000 cumulatively in one academic year for a department.  However, Personal Services Contracts may be used at any dollar level, and are highly recommended when detailed expectations or obligations are necessary.  The PSC must be used at any dollar level for Non Resident Aliens. 

Personal Services Contracts may not be issued to OSU Employees, OUS Employees, State of Oregon Employees or Federal Employees.

Contractors performing work on a PSC may not:

  • Supervise OSU personnel or other contractors; 
  • Be listed as an instructor of record for an OSU for credit course;
  • Be in contact with minors until contractor has passed a criminal background check as required in OAR 580-023;
  • Represent themselves as OSU or make promises on behalf of OSU;
  • Drive OSU vehicles; or
  • Transport students, unless specifically authorized to do so in the contract.  If authorized, contractor must meet OSU minimum driving standards in accordance with OAR 125-155.

 

402-007: Speakers and Entertainers

Under Devlopment.

 

402-008: Honoraria

Under Development.

 

402-009: Capital and Operating Leases

Equipment or real property leases can be very complex as there are various types of leases and OSU has strict rules it must follow in how leases are defined, structured, paid and reported.  The complexity of leases, even of minor, low dollar value equipment, is quite high.   For purposes of this Policy leases described herein apply to those leases in which OSU is the Lessee. 

There are two types of equipment leases, Operating Leases and Capital Leases.  OUS Policy .200 A. lists criteria that differentiates Capital Leases from Operating Leases:  http://www.ous.edu/cont-div/fpm/acco.05.281.php#.200

A Operating Lease (also called a Municipal or non-finance lease) is more like a fixed-term rental where the item has a residual value close to its market value at the end of the lease term.  OSU may enter into these types of leases at any dollar level.

A Capital Lease (also called a Finance lease) means that OSU will own the personal or real property which exceeds the $5,000 capitalization threshold at the inception of the date of the lease, with a minimal buy-out, at the end of the lease term.  OSU only has authority to enter into these types of leases up to $100,000.

Capital Leases exceeding $100,000 are particularly complicated and can take up to a year or longer to process.  Because of the associated complexities, necessary resources it takes to process and administrative costs involved, Capital Leases are highly discouraged.  Any Capital Lease exceeding $100,000 and meeting the following criteria shall be managed by the Oregon Department of Administrative Services and Oregon Department of Justice and must be reported to the Oregon University System: 

  • The agreement transfers ownership of property to OSU when the agreement ends.
  • The agreement contains a nominal or bargain purchase option.  A nominal or bargain purchase is a price less than fair market value at the time of purchase.
  • The term of the agreement is 75% or more of the economic useful life of the property.
  • The present value of the minimum payments under the agreement is at least 90% of the current fair market value of the property.  Minimum agreement payments include any penalty for terminating the agreement.

The OUS Fiscal Policy Manual states how all OSU lease accounting and fiscal management shall be managed:  http://www.ous.edu/cont-div/fpm/acco.05.281.php

The OUS Controller’s Division states how all leases shall be reported: http://www.ous.edu/cont-div/closing08_09/detailed_instructions.php#ci

Regardless of lease type, all equipment leases must follow the Property Management Policies and Procedures: 204: Lease Purchase, 205: Operating Lease and a copy of the final lease must be sent to Inventory Control to ensure the property is recorded on Banner records as required.

 

402-010:  Sponsorship Agreements

Sponsorship agreements are intended to document a vendor’s support of a specific event or activity.  In return the vendor typically received acknowledgement of the sponsorship and other benefits at the event.  The value of the sponsorship should be equivalent to or greater than the acknowledgement or other benefits received. 

403: Contract Content

Procurement and Contract Services Policy & Procedures Manual
Section 400: Contracts
Effective: 7/01/2010

 

403-001: Contract Length and Perpetual Agreements

Contract length should be no more than 5 years.  Contracts requested to be in excess of five years are at the sole discretion of PaCS.  The University does not contract in perpetuity.  All contracts must have a definitive end date. 

 

403-002: Scope of Work

The scope of work should include the expectations and obligations of both parties and should provide enough clarity that an individual not party to the contract could read it and understand. 

Areas that are typically included in a scope of work are as follows:

  • Description of the work to be done in detail
  • Location of the work
  • Period of performance or the allowable time for projects
  • Deliverables schedule describing what is due and when
  • Industry standards to be adhered to in fulfillment of the contract
  • Acceptance criteria to determine if the product or services are acceptable
  • Special requirements such as certifications or travel requirements

 

403-003: Compensation

Describes the agreed upon fees and conditions that Contractor will be paid, what method and when, and where invoices should be sent to.  The rate of pay can be linked to a quantifiable unit of measure such as hour or performance and completion of deliverables.  The rate of pay can be tied to performance milestones, percentage of completion, units of work, or by hour.  If the rate is hourly it may be looked at closer to determine if this contractor should really be an employee.  The “Not to Exceed Amount” should be the total amount that the contract cannot exceed and include amounts for any travel and reimbursable expenses allowable under the contract.

 

403-004: Contacts

Identify Key Persons (persons key to performing the work), contract administrators, and to whom notices should be sent for both Contractor and OSU.

 

403-005: Contract Insurance Requirements

Under Development.

404: Contract Processing

Procurement and Contract Services Policy & Procedures Manual
Section 400: Contracts
Effective: 7/01/2010

 

404-001: Department Review & Input Prior to Submittal

Departments will first review the contract to be certain the department and contractor are in agreement with the expectations or obligations in the contract.  If they cannot comply then they should discuss this and come to a mutual agreement articulated in the scope of work. 

 

404-002: Contract Submittal and Routing

Departments should submit the contract to their Business Center who will forward to PaCS for review and execution.  PaCS will coordinate all other necessary reviews.  PaCS may also work with the vendor and provide them with an OSU contract or negotiate the vendor’s contract terms and conditions.  Copies or electronic images of the contract are acceptable.

 

404-003: Contract Review

Under Development.

 

404-004: Signature Prior to Commencement:

Contracts must be signed by an OSU person with contract signature authority prior to commencement of work.  Contracts not signed prior to commencement will be considered unauthorized.

 

404-005: Electronic Signatures

Signatures on contracts must be inscribed on paper by hand.  Electronic signatures are not acceptable. 

 

404-006: Signatures prior to PaCS Review

Contracts which arrive already signed by the contractor without prior PaCS review, might not be accepted. PaCS advises against departments accepting agreements that have been signed prior to review. 

 

404-007: Signatures after PaCS Review

Generally the agency responsible for drafting the contract or agreement should sign the document last.  This allows the other agency time to review, negotiate and make changes with the drafting agency before execution.

 

404-008: Contract Amendments

Contract amendments may be made pursuant to OAR 580-061-0065. 

 

404-009: Amendment of Expired Contracts

Contracts should be amended or extended in advance of the expiration of the contract. Extension of an expired contract will be at PaCS discretion.

 

404-010: Certificate of Insurance Processing

Requests for Certificates of Insurance (COI) will only be processed when there is a contract in existence that has been reviewed by PaCS, executed by someone with contract signature authority and the contract document requires proof of insurance.  Requests for Certificates of Insurance must be made to Risk Management.

405: Contract Administration

Procurement and Contract Services Policy & Procedures Manual
Section 400: Contracts
Effective: 7/01/2010

 

405-001: Contract Administration

Contract administration involves those activities performed after a contract has been awarded to determine if the requirements and specifications of the contract were met. It encompasses all dealings between OSU and the contractor from the time the contract is awarded until the work has been completed and accepted or the contract terminated, payment has been made, and disputes have been resolved.  The level of contract administration necessary is dependent on the nature of the work, type of contract and experience and commitment of the personnel involved.  Good contract administration assures that the end users are satisfied with the product or service being obtained under the contract.

PaCS will perform contract administration for University-wide contracts.  Departments will perform contract administration for departmental contracts.  Departments will notify PaCS immediately in the event any of the following situations arise:

  • Contract modifications or amendments;
  • Irresolvable invoice or billing discrepancies Unsatisfactory/unacceptable work product;
  • Non-performance of work; or
  • Breach of the contract.

Duties involved in contract administration should include all of those duties listed below. 

 

405-002: Contract Monitoring

Contract monitoring should include the following:

  • Contract orientation meeting
  • Authorization of orders placed under the contract
  • Adherence to the scope of work and terms and conditions in the contract
  • Review and acceptance of deliverables
  • Monitor key dates throughout the entire term of the contract to ensure any necessary actions happen prior to these dates. 

 

405-003: Contract Documentation

Once the contract is in place, documentation of the contract should be maintained by the contract administrator.  Documentation should include:

  • Fully executed contract
  • Contract amendments/renewals
  • Solicitation (if done by the contract administrator)
  • Meeting notes
  • Orders placed under the contract
  • Performance issues or deficiencies
  • Written receipt of deliverables
  • Invoices

Contract documentation should be clear and discernable so that anyone reviewing the contract file can understand the history of the contract, current status, and all outstanding issues.

 

405-004: Contract Invoice Review

The contract administrators recommended approval of an invoice implies that to the best of their knowledge, the nature, type, and quantity of effort or materials invoiced are in general accord with the progress of work under the contract.  Invoices should be reviewed for:

  • Reasonableness of costs  
  • Vague references or ambiguity
  • Mathematical accuracy