SECTION: PURCHASING INDEX: E-12

SUBJECT: CONTRACT ADMINISTRATION


POLICY

This document was created to comply with Board of Regent Policy 47.01, UH System Administrative Memorandum 03.A.05, and applicable state and federal statutes, regulations and directives.  The purpose of this policy is to provide guidance and procedures for the proper execution and administration of contracts that are

It is university policy that

DEFINITIONS (for purposes of this policy)

Approve As To Form:  The UH Office of General Counsel’s (OGC) required review of non-standard vendor contracts prior to execution for legality, proper form, language and compliance with applicable state and university requirements.

Consulting Services:  To advise or study and provide a written or oral report.  The practice of studying an existing or a proposed operation or project and advising the University with regard to the operation or project.   In this context, consulting services do not include services connected with the routine work necessary to the functioning of the University’s programs or certain professional services defined in Texas Government Code, Section 2254.  A consultant generally does not provide any finished product other than an oral or written report.  

Contract:  A legally binding written agreement usually of a business or administrative nature executed (signed) entered into by two parties. Contracts may be required by law or may be prudent and necessary because the terms and conditions are not appropriate for an institutional purchase order.  Money does not have to be the consideration between the parties to create a binding contract.  

Execute:  The acceptance of the contract terms and conditions is evidenced by the signing of the contract by authorized individuals representing both parties.  Once a contract has been executed (signed), the work or services can proceed.  

Professional Services:  Those within the scope of the practice of accounting, architecture, optometry, medicine or professional engineering or those performed by any licensed or professional engineer in connection with his professional employment or practice.  Professional Services are defined fully in Texas Government Code 2254.

Sponsored Activity:  Includes research and development projects which usually involve the preparation of specialized contracts such as grants, subrecipient agreements, and sub-contract agreement with other entities, including outside consultants and other service providers.  These agreements are usually entered into with federal or state agencies,   local government entities or private foundations.  These contracts frequently result from the submission of a project proposal describing the work to be performed, and generally requires periodic technical and/or fiscal reporting during the life of the project.  The sponsor is usually referred to as the grantor and the receiving institution is the grantee.  

Uniform or Standardized Agreements:  Uniform agreements are those agreements that have been previously prepared, reviewed and standardized for general use by the Office of General Counsel.  These standardized agreements may be used   without further OGC review and approval as to form.  However, if the standardized form of the agreement has been altered, such as adding or deleting contract language, OGC review is required.  A listing of frequently used standardized agreements can be seen on the campus Contract Administration web.

 

Procedures

Common Types of University Contracts

University contractual agreements include but are not limited to interlocal agreements, lease/rental agreements, cooperative agreements, memorandums of understanding, interagency contracts, grants and grant subrecipient agreements; software licensing agreements, consortium agreements, job order contracts, letters of contract, professional services agreements and consulting agreements.  Contracts may be either standard or non-standard.  Note:  This document does not cover contracts for consulting or outside employment entered into by a university employee where the university employee acts as an independent consultant or contractor; contracts pertaining to sponsored projects, programs, activities for research and/or intellectual property which are funded by grants or other external funding sources; or procurement of supplies, goods or equipment that are normally provided by the university Purchasing Department.

Internal Reviews Required

All contractual agreements requiring the signatures of two or more parties require institutional review including, at a minimum, review by the originating department head and the Department of Business Services.  Other reviews may be required.  

Legal Review Required of Certain Contracts

Board Policy 47.01 requires review and approval as to form by the Office of General Counsel of all non-standard contracts prior to execution.  Staff from the Office of General Counsel will advise and offer assistance regarding the most appropriate contract form for the purpose specified and related legal contractual issues.  All non-standard contracts are to be forwarded via the Department of Business Services to the OGC Executive Director for Contract Administration for this review.  Contracts designated by the OGC as “standard” do not require further OGC review and approval as to form, as long as the standard form of the agreements have not been altered.

Board of Regents Reviews and Approvals

In accordance with UH System Administrative Memoranda, certain contracts must be approved by the Board of Regents in an open meeting.  Consult with the Department of Business Services for assistance in preparing contracts for Board review and approval.  Contracts requiring Board approval generally require a minimum 90 day lead time (to place on an upcoming agenda, get signatures, etc), therefore it is recommended to plan well ahead of need.  The following contracts currently require Board approval:  

  1. Contracts for the purchase, sale, or conveyance of real property, which include the conveyance of any rights in real property.

  2. Real estate leases and lease renewals and extensions, whether as lessor or lessee, if the annualized amount of the lease exceeds $50,000.

  3. Contracts for new construction, contracts for repair and rehabilitation, or contracts for furnishings and equipment related to new construction or repair and rehabilitation when the expenditure is expected to exceed $300,000.

  4. Professional service or consulting contracts when the expenditure for compensation and expenses is expected to exceed $50,000. All such contracts in excess of $10,000 must be reported to the Board. Professional service or consulting contracts are those that meet the qualifications set forth in the Professional Services Procurement Act, Government Code, Section 2254.

  5. Any series of contracts as described in paragraph 4 above which are initiated in the same department for the same goods or services with the same fiscal year, that, if combined in one contract, would require Board approval or reporting.

  6. Banking and investment agreements.

  7. Any single procurement contract for any equipment, goods or services, not specified above, which is expected to exceed $300,000.

  8. contracts with commercial enterprises which provide revenue to the component of guaranteed income and/or commissions which are anticipated to generate $300,000 or more during the period of the contract and/or $100,000 in a single fiscal year, excluding gifts, intellectual property or sponsored research grants and contracts, which are addressed in other sections of Board policies and bylaws.

  9. Extensions, modifications or renewals of contracts which require Board approval.

  10. Any other contract as the Board might designate as having significant importance to require Board approval.

Length of Contracts

The duration of any contractual transaction should not extend beyond a cumulative period of five consecutive years, including all renewal terms.  Business Services will consult with the Executive Director for Contract Administration for exceptions.   

Contractual Delegation and Signatory Authority

Contracts are legally binding on the University only upon their proper review and execution by the university official(s) with delegated contractual signatory authority.  The Chancellor has delegated the President authority to sign certain contracts.  However, the Chancellor must sign all contracts in excess of $500,000 and all leases of real property regardless of dollar amount.

Annually, the President further delegates contract signatory authority.  However, any contract over $5,000, excluding institutional purchase orders and contracts requiring Board approval or the signature of the Chancellor, also require the signature of both Vice Presidents or the President and one Vice President in addition to the departmental signatory authority.  

In the absence of a specific written delegation by the President, employees do not have authority to sign contracts on behalf of the University.  Employees could incur personal liability and be held financially responsible for costs resulting from unauthorized contract execution.

Historically Underutilized Businesses (HUBS)

The University will comply fully with the letter and spirit of Chapter 2161 of the Texas government Code (refer to Board Policy 47.04 and System Administrative Memorandum 03.B.02).  It is the originating unit’s responsibility to make a good faith effort to utilize HUB vendors for contractual services whenever possible.

Designation of Central Contract Repository and Records Retention

The Department of Business Services will serve as the central repository for original executed agreements with the following exceptions:  

Contractual Amendments

Amendments to the original contract generally have to follow the same procedures as the original agreement.  All amendments require the review of the Office of General Counsel.  The individuals who signed the original contract should sign the amendment.  A copy of the original contract should be included with the amendment, change, extension or renewal at the time the contract documents are processed for approval.

Audit Clause Required for Certain Contracts

All revenue-generating contracts and all contracts where payment by the University is contingent upon records processed and maintained by another party to the contract shall contain an audit clause.  This clause shall give the University the right to access and audit any and all documents pertaining to the contractual relationship held by any party to the contract.

Special Contracting Requirements

    A.    Competitive Procurement Requirements

    1. Certain contracts may require bidding.  Upon submission of the Contract Coversheet, the Department of Business Services will consult with the Purchasing Office to determine if bidding is a requirement.
    2. The University may acquire goods or services by the method that provides the best value, including competitive bidding; competitive sealed proposals; a catalogue purchase; a group purchasing program; or, an open market contract. The following criteria may be considered in determining best value: the purchase price; the reputation of the vendor and of the vendor’s goods or services; the quality of the vendor’s goods or services;, the extent to which the goods or services meet the institution’s needs; the vendor’s past relationship with the institution; the impact on the ability of the institution to comply with laws and rules relating to historically underutilized businesses and to the procurement of goods and services for persons with disabilities; the long-term cost to the institution of acquiring the vendor’s goods or services; any other relevant factor that a private business entity would consider in selecting a vendor; and, the use of material in construction or repair to real property that is not proprietary to a single vendor unless the institution provides written justification in the request for bids for use of the unique material specified.
    3. Recommendation for Award Form:  All contracts $15,000 or greater, including renewals and extension, must be submitted for processing with a completed Recommendation for Award form showing the basis by which an award is recommended.  The Recommendation for Award form must provide information pertinent to all of the following: which procurement method used (see paragraph A above); price tabulations outlining the price acquisition process; prices obtained in arriving at best value to the University; basis for best value to the University; and the name of the preferred vendor.

    B.   Leasing of Space

    1. The Chancellor must approve all leases, regardless of the source of funding.
    2. Use of Local or State Funds

    C.    Consulting or Professional Services Contracts

  1. Refer to Government Code, Section 2254 for statutory information. Note:  This document does not cover contracts for consulting or outside employment entered into by a university employee where the university employee acts as an independent consultant or contractor.
  2. Consulting Services
  1. Professional Services
  1. State Agency Reporting
  1. Yearly Reporting to the Board of Regents

    D.      Revenue Generating Contracts

  1. All contractual transactions for which revenues will be generated for the University and/or any originating unit, must comply with requirements set forth in this policy.  Revenue agreements may require consultation with the UH Office of Tax Compliance and/or UH Office of Contract Administration.  University units are authorized to arrange for contractual opportunities that generate revenue if the transaction is directly related to furthering the University’s educational, research, extension, public service, or campus support functions.

  2. All revenue-generating contracts shall contain an audit clause giving the University the right to access and audit any and all documents pertaining to the contractual relationship held by any party to the contract.

    E.      Contracts for Legal Services  

  1. Originating units cannot initiate contracts for legal services.  All contracts for legal services are initiated only by the Office of General Counsel and only after approval has been obtained from the Office of the Attorney General for the State of Texas (refer to SAM 01.D.02, Employment of Outside Legal Counsel).

    F.       Contracts for Major Information Systems

  1. The University is required by law (Government Code §2054.008) to provide written notice to the LBB, not later than the 10th day after the date on which the University enters into a contract for a major information system. A “major information system” includes one or more computers that, in the aggregate, cost more than $100,000; a service related to computers, including computer software, that costs more than $100,000; and a telecommunications apparatus or device that serves as a voice, data, or video communications network for transmitting, switching, routing, multiplexing, modulating, amplifying, or receiving signals on the network and costs more than $100,000.  The Department of Business Services will comply with notice requirements.

    G.      Contracts Awarded to Non-Resident Bidders

  1. During January and July of each year, the University must file a report with the LBB that identifies each non-resident bidder (one who does not maintain a permanently staffed full-time office in Texas and as defined by Texas Government Code, Title 10, Subtitle D, Section 2152.064) to whom the University awarded a contract that has a value of $25,000 or more for the purchase of supplies, materials, services, or equipment during the six calendar months preceding the month in which the report is filed, if the University awarded such a contract during the reporting period.  For contracts with a value of $250,000 or more, the University must include an explanation for the need to use a non-resident bidder.
  2. By the first day of January and July, the Purchasing Agent shall make a report of non-resident bidders awarded contracts during the prior six months to the LBB on behalf of the University.

     H.      Contracts for Leased Space

    1. The Office of Contracts Administration compiles and maintains information regarding delegated leases pursuant to delegated authority from the Texas Building and Procurement Commission (TBPC).
    2. On a quarterly basis, OGC Executive Director of Contracts Administration updates this information and then prepares and submits a report to the Vice Chancellor for Administration and Finance. In turn, the Vice Chancellor for Administration and Finance forwards the report to the TBPC.  
    3. The Department of Business Services will provide local campus delegated lease information to UHS Executive Director for Contract Administration quarterly upon request.  

    I.         Texas Electronic Marketplace

  1. The University may post notification on the Texas Electronic Marketplace of procurements for which the agency expects to pay more than $25,000, regardless of the funding source. The Texas Electronic Marketplace can be accessed at http://www.texas-one.org/home.htm.  The Department of Business Services will provide Texas Electronic Marketplace postings when required, with the assistance of the originating unit.  

    J.        Vendor Standing, Vendor Indebtedness and/or Tax Delinquencies

    1. The Finance Department, Account Payable, shall report to the Texas Office of the Comptroller each vendor who is indebted to the State or has a tax delinquency.  The report must contain information and be submitted in a manner and frequency required by the Comptroller’s Office.
    2. The originating department is responsible for verifying that a prospective vendor is in good standing with the State of Texas prior to forwarding a contract to Business Services.  The contracting unit must obtain the needed vendor information by accessing the Texas Office of the Comptroller at http://ecpa.cpa.state.tx.us/vendor/tpsearch1.html.
    3. The Originating Unit will print a copy of the vendor standing form and include with the Contract Coversheet to Business Services.

    K.     Agreements With Other State Agencies and Institutions

    1. The University may contract with another state agency for the provision of necessary and authorized services and resources by Interagency Agreement.
    2. Statutory authority for interagency agreements can be found in Texas Government Code, Chapter 771. The originating unit shall work with Business Services in the preparation of the agreement.   Whenever possible, Business Services will use the standardized Interagency Agreement approved for use by the Office of Contract Administration.

      L.   Agreements With Local Government Entities

    1. The University may contract with other local governmental entities such as Junior Colleges, City Governments, County Governments and others   for the provision of necessary and authorized services and resources by Interlocal Agreement.
    2. Statutory authority for interagency agreements can be found in Texas Government Code, Chapter 791 .
    3. The originating unit shall work with Business Services in the preparation of the agreement.  Whenever possible, Business Services will use the standardized Interlocal Cooperation Agreement  

      M.   Agreements Associated with Sponsored Research Activities

    1. This policy does not cover contract pertaining to sponsored projects, programs, activities for research and/or intellectual property which are funded by grants or other external funding sources.
    2. Agreements associated with grants or other sponsored funding are to be coordinated through the Grant's Coordinator, Finance Department using standardized agreements approved as to form by the UH Office of Contracts and Grants. 

Summary of Originating Unit Responsibilities

The originating unit assumes primary responsibility for a contract, from inception to completion, and is responsible for

  1. Preparing a Contract Coversheet for all contracts, regardless of dollar amount or source of funds including an accurate and detailed scope of work to be performed; 

  2. Seeking required internal reviews and providing all necessary documentation and information prior to the start of any services to the Department of  Business Services, allowing sufficient time for the contracts to be reviewed and executed in a timely manner;

  3. Insuring that no services begin until the contract has been properly reviewed and executed by all parties;

  4. Adhering to normal payment terms, which is normally 30 days after receipt of services and an invoice but not earlier than 10 calendar days after completion of services unless approved by the Finance Department.  Do not agree to pay the contractor before services or goods are provided;

  5. Checking the vendor status with the State of Texas prior to contract execution.   If the vendor is not in good standing with the State, contract processing will be delayed until when and if the status is cleared.  The originating unit may choose to contact the contractor directly to make them aware of the problem;

  6. Setting the vendor up in PeopleSoft with the UHS Accounts Payable and Purchasing Setup Form so that payments to the contractor will not be delayed;

  7. If a standard agreement will satisfy needs, complete and submit the online Contract Coversheet to Business Services for preparation of the appropriate standardized agreement;

  8. If a non-standard agreement must be used, submitting two original copies of the completed but unsigned agreement to Business Services with a Contract Coversheet;

  9. Upon execution, signing a Contract Monitoring Acknowledgement Form accepting responsibility for monitoring contract performance through completion of services;

  10. Reporting any contractual non-compliance to the unit supervisor and the Department of Business Services;

  11. Because contract funds are encumbered through the Purchase Order process, the department must sign a receiving report.   It is the department’s responsibility to contact Finance Central Receiving to obtain and sign off on a receiving report;

  12. Ensuring that contractor payments are processed in a timely manner.  (Refer to the Contract Payment section in this policy for more information about payments.)

  13. Upon audit, providing requested information to the auditors.

Summary of Department of Business Services Responsibilities

The Department of Business Services contract administration responsibilities include

  1. Advising, assisting and reviewing information submitted by originating unit in areas of contract policy and procedure, consulting as necessary with the department, Human Resources, Accounts Payable or other campus or system officials;
  2. Preparing original contracts, amendments or addendums based upon information and scope of work provided by the initiating department;
  3. Assigning an identification number to the contract;
  4. Maintaining a checklist for each contract routed through the department;
  5. Tracking the status of all pending contracts through execution;
  6. Requesting reviews of all non-standard agreements through the UH Contract Administration Office, consulting as necessary with OGC;
  7. Assisting in the preparation documents (cover sheets, duplication) when Board approval is required;
  8. Having a responsible individual in the initiating department sign off on the Contract Acknowledgement Monitoring form, indicating they have reviewed the agreement and will be responsible for monitoring it, and will see that the contract services are provided and that the contractor is paid in a timely manner according to the terms and conditions;
  9. Coordinating the execution of the agreement by all parties and then distributing the signed originals/copies, including:  

--- one original to Business Services repository,
--- one original to the contractor(s)
--- one copy to the Office of General Counsel (non-standard contracts)
--- one copy to the originating unit;
 --- one copy to the Purchasing Department for cost center encumbering, when required; and

  1. Fulfilling statutory and/or regulatory requirements for certain types of contracts (LBB notifications of certain contracts over $14,000, Texas Marketplace postings, Findings of Fact from the Governor’s Office, Publication in the Texas Register, etc).

Processing Contractual Payments

Originating unit responsibilities during the payment phase include

Deviations From Policy

Any deviation from this policy and procedures, where it does not conflict with law, board or UHS policy, must be approved on an individual basis by either the President or the Vice President  for Administration and Finance.  

REFERENCES

UHV Contract Administration Website 

Approved:
 


Signature obtained 	 	    9/15/04
Tim Hudson, Ph.D.		     Date
President

Next review date:  September 2006
Origination: Business Services Department