SECTION: PURCHASING INDEX: E-12

SUBJECT: CONTRACT ADMINISTRATION


POLICY

This policy was created to comply with Board of Regent Policy 57.01, 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 administration of contracts, executed on behalf of the University of Houston-Victoria for and on behalf of any unit of the University.   Excluding certain exceptions, this includes any contract that is binding upon the University and to which the University is a party or signatory in any capacity, regardless of the funding source, amount of funds expended or generated, and whether or not remuneration, either monetary or in kind, is involved.

• no person has the authority to bind the University contractually except in accordance with this policy
• all contracts shall have all applicable administrative and legal reviews completed and be signed by all parties prior to commencement of any services as set forth in the agreement
• contracts shall be legally binding on the University only upon the execution of the contract by the University official(s) with delegated contractual signature authority
• the originating unit assumes primary responsibility for a contract, from inception to completion, including monitoring and performance in accordance with contract provisions
• amendments, changes, extensions or renewals to non-standard contracts shall be processed in the same manner as the original contract.

DEFINITIONS

Approve as to form:  The UH Office of General Counsel’s (OGC) required review of non-standard contracts prior to execution and approval, for proper form and legality including compliance with applicable state law, constitutional requirements and Board and System policy.

Consulting services:  To advise or study and provide a written or oral report in regard to an existing operation or proposed project or other undertaking.   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 entered into by two or more parties.  Money does not have to be the consideration between the parties to create a contract.  

Execute:  Acceptance of the contract terms and conditions is evidenced by the signing of the contract by authorized individuals representing each party to the agreement. 

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/her 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, sub recipient agreements or sub-contract agreements with other entities, including outside consultants and other service providers.

Uniform or standardized agreement:  Contractual agreements that have been previously reviewed and approved as to form and legality by the Office of General Counsel, and denoted by OGC-S-XXX.   These uniform agreements, also referred to as standardized agreements, may be used by components without further OGC review and approval. 

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 sub recipient agreements, software licensing agreements, consortium agreements, job order contracts, letters of contract, professional services agreements and consulting agreements.  Contracts are classified as either standardized contracts or non-standard contracts.

• 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;
• Procurement of supplies, goods or equipment that are normally provided by the university Purchasing Department;
• Employee contractual agreements administered through the Human Resources department.

Internal Reviews Required

All contracts require institutional review from other than the originator.  This review includes at a minimum, review by the unit head and the Department of Business Services.  Other internal reviews may also be indicated.  

Legal Review Required of Contracts

Many legal documents impose binding obligations upon the University, some with significant liability and financial consequences.  Board Policy 57.01 requires that the Office of General Counsel (OGC or Counsel)  review and approve as to form all contracts before execution.  However, Counsel may approve uniform or standard contracts which, thereafter, may be used without additional review and approval, providing that no changes or alterations have been made to the contract and the contract does not require board approval.

Summary of Originating Unit Responsibilities

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

1. Reviewing the business terms and conditions to ensure that those terms are reasonable, proper, clearly defined and in the best interests of the university such that

• the scope of work should be detailed enough so that all expectations are clearly set forth
• the date(s) that services are to be performed or concluded need to be stated;
• the amount of payment and conditions for  partial payments, if any, explained
• reimbursables, if any, should be defined by type and amount for each
• the agreement should have a cancellation/rescheduling provision if appropriate

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

3. Preparing a contract coversheet and submitting appropriate documentation for each contract, regardless of the dollar amount or source of funds. Note: The Purchasing Department will prepare contract coversheets for contracts resulting from a purchasing process. 

• If an OGC pre-approved agreement will satisfy needs, complete and submit the online contract coversheet.  Business Services will prepare the appropriate uniform agreement.

• If the contractor’s agreement must be used, submit two original copies of the completed but unsigned agreement to Business Services with a contract coversheet.

4. Allowing sufficient time for the contract to be reviewed and executed in a timely manner

5. Ensuring that services and/or delivery of goods do not start until the contract has been properly reviewed and executed

6. Adhering to normal payment terms, which are normally 30 days after receipt of services but not earlier than 10 calendar days after completion of services and presentation of a satisfactory invoice.  Although there are limited exceptions for paying contractors in advance, this is not good business practice and should be avoided

7. Setting the contractor up in PeopleSoft with  Vendor Payment Setup Form so that payments to the contractor will not be delayed

8. Signing a Contract Monitoring Acknowledgement Form, upon execution that accepts responsibility for monitoring contract performance through its completion

9. Reporting promptly any contractual non-compliance to the unit head and Business Services

10. Cooperating with auditors, providing requested information to internal and external auditors

Departmental responsibilities during the payment phase include

·         Ensuring that the terms of the contract have been met

·         Ensuring that the University has received the contracted goods and services for which payment is being sought and confirming this by printing and signing the PeopleSoft Receiving Report

·         Ensuring that the payment amount requested is according to the contractual terms. If this is not the first payment under the agreement, the department should run a PeopleSoft query listing all payments to date to that contractor

·         Ensuring that the payment voucher(s) states the amount of the total contract award and the amount paid-to-date to avoid overpayments.

Summary of Department of Business Services Responsibilities

The Department of Business Services responsibilities include

1. Advising, assisting and reviewing information  submitted by the department to help insure compliance with campus contract policy and procedures
2. Reviewing the business terms and conditions (not legal terms) for reasonableness, consulting as necessary with other departments, including Human Resources, Accounts Payable, the Office of General Counsel or other offices as appropriate
3. Preparing original contracts, amendments or addendums based upon the information and scope of work provided by the initiating department
4. Assigning an identification number to each contract
5. Maintaining a history and checklist for each contract routed through Business Services
6. Tracking the status of pending contracts through execution
7. Requesting reviews of all non-uniform agreements through the Office of General Counsel
8. Assisting in the preparation documents (cover sheets, duplication) when Board approval is required
9. Having a responsible individual in the initiating department sign off on the Contract Acknowledgement Monitoring form
10. 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)
11. Serving as the university repository for all original contracts and supporting documentation, excluding payment vouchers and invoices, and retaining per UH Records Retention Schedule requirements
12. Coordinating the execution of the agreement by all parties and then distributing the signed originals and 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

13. Maintaining a Contract Administration website as a resource for departments

14. Providing training or coordinating Contract Administration training as needed

Board of Regents Reviews and Approvals

In accordance with UH System Administrative Memorandum 03.A.05, the following contracts must be approved by the Board of Regents in an open meeting:

• Contracts for the purchase, gift or acquisition of real property;
• Contracts for the sale of real property or conveyance of any rights in real property, if the value of the property is more than $300,000;
• Real estate leases, lease renewals and extensions, whether as lessor or lessee, if the obligation of the lease is equal to or greater than the submittal threshold requiring Texas Higher Educations Coordinating Board (THECB) action;
• Banking and investment agreements;
• Any single procurement contract for any equipment, goods and services, not specified above, that is expected to exceed $1,000,000 in a fiscal year;
• Any extension, modification, or renewal of an existing contract that is expected to exceed $1,000,000 in a fiscal year;
• Any series of contracts that are initiated in the same department for the same goods or services with the same party within a fiscal year, that if combined in one contract, would require Board approval or reporting; and
• Any other contract the Board might designate as having significant importance to require Board approval.

In order to submit a contract for Board approval, the University must send the contract with a completed Board of Regents’ Agenda Cover Sheet to the Office of the Vice Chancellor for Administration and Finance.  Contracts requiring Board approval generally require a minimum 60-90 day lead time, depending on the date of the next scheduled Board meeting.  Consult with the Department of Business Services for assistance in preparing contracts for Board review and 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.  

Contractual Delegation and Signatory Authority

Contracts are legally binding on the System and/or its component universities only upon execution of the contract by the System and/or component university official with delegated contractual signatory authority.  In the absence of  specific written delegation by the President, employees do not have authority to execute contracts on behalf of the University.  Employees who do so can incur disciplinary action up to and including dismissal as well as personal liability and financial responsibility for costs resulting from unauthorized contract approval. 

The Chancellor must execute all contracts in excess of $500,000 including contracts for the sale of real property or conveyance of any rights in real property, if the value of the property is more than $300,000.  The Chancellor must also sign any lease agreement, lease renewal or extension, whether as lessee or lessor, and regardless of funding source or dollar amount.

The Chancellor has delegated  the President authority to sign certain contracts up to $500,000.  Contracts between $300,000 and $500,000 also require the signature of the System Vice Chancellor for Administration and Finance.

The President has further delegated written contract signatory authority, by position and within an employee’s specific areas of operational responsibility:

1. Each Vice President has the authority to execute certain contracts up to $300,000;

2. Unit Heads, when specifically indicated,  have authority to execute contracts up to $15,000;

3. Contracts over $15,000 also require the signature of either Vice President or the President,  in addition to the departmental signatory authority. 

These delegations do not waive the need  for internal reviews, OGC review,  Board approvals and/or Chancellor’s execution when required, as set forth in Board, System or campus policies.

Historically Underutilized Businesses (HUB)

The University will comply fully with the letter and spirit of Chapter 2161 of the Texas government Code (refer to Board Policy 57.04 and System Administrative Memorandum 03.B.02).  It is the originating unit’s responsibility to be mindful of campus Historically Underutilized Business goals and make a good faith effort to utilize HUB vendors for contractual services whenever possible.  Unit heads should work with the campus HUB Coordinator, the Purchasing Agent in Business Services, to meet these goals.

Designation of Central Contract Repository and Records Retention

Original contractual agreements and  all supporting documentation will be retained in accordance with the state approved UH Records Retention Schedule.  The Department of Business Services will serve as the central repository for original executed agreements with the exception of employee personnel contractual agreements which will be retained by the Department of Human Resources. 

Although original and signed contracts are required by this document, certain limited situations exist, i.e., contracting parties located overseas, etc. that may require facsimile copies of the contract and contract signatures so that contract performance may begin. In these rare and limited situations, original signed agreements (not facsimiles) must be forwarded to the originating unit within 10 business days from the date the contract facsimile is received.  Notwithstanding the above, all personnel responsible for contracts within the originating units should anticipate the time needed to receive fully signed originals and plan accordingly so that contract facsimiles are the rare exception.

Contractual Amendments, Extensions and Renewals

Amendments, changes, extensions or renewals to an original non-standard agreement must be processed in the same manner as the original contract and require OGC review.  A copy of the original contract must be included with the amendment, change, extension, or renewal at the time the documents are processed for approval.

Amendments, changes, extensions or renewals to standardized agreements shall use the OGC approved standardized amendment/extension form and do not require OGC review. 

In some instances, use of an institutional Purchase Order in lieu of a contract for the delivery of goods or services may be preferable.

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

Competitive Procurement Requirements are as follows:

Certain contracts may require bidding or have other procurement requirements.  The department should consult with the Purchasing Department if there are questions in this regard.  Upon receipt of a contract coversheet, Business Services shall consult with Purchasing as necessary to determine if other procurement requirements apply.

The University may acquire goods or services by various methods including best value, competitive bidding, competitive sealed proposals, catalogue purchases or purchases through membership in a purchasing coop or other group purchasing program, or through State open market contracts.

Recommendation for Award Form - All contracts that are $15,000 or greater (including renewals and extensions) and awarded as a result of competitive bidding or other Purchasing Department procurement process,  must include a completed Recommendation for Award showing the basis by which the award was recommended.

Leasing of Space

The Chancellor must approve all leases, regardless of the cost or source of funding.

The Texas Building and Procurement Commission (TBPC) has delegated authority to the University of Houston System to execute lease agreements. An originating unit that desires to lease space will work through the Department of Business Services.  Business Services will work with the UH System Office of Contracts Administration as a facilitator during the process.

Allow a minimum of four months prior to the proposed effective start date for a lease agreement to be executed for existing space.  Adequate time is required to develop and advertise lease specifications, evaluate bids or proposals and then finalize an appropriate lease agreement.

Consulting or Professional Services Contracts

Consulting Services

• All consulting services, regardless of state or local funds or dollar amount, require a consulting agreement.
• Refer to Texas Government Code, Section 2254  for statutory information and the Contract Administration website for detailed instructions.
• When a contract involves a mix of deliverables, it is considered a consulting contract only when consulting services are a majority of the services provided.
• When possible, the standardized consulting agreement will be used.
• For consulting contracts over $15,000, numerous state reporting requirements apply.  The originating unit shall work with the Department of Business Services and allow sufficient time for any required publication and notice requirements.  Failure to comply with these state requirements will render the contracts void.

Professional Services

• “Professional Services” are those services directly related to the professional licensed practices such as accounting, architecture, landscape architecture, land surveying, medicine, optometry, professional engineering, real estate appraisal, or professional nursing.  Services provided by professionals outside the scope of their profession, e.g., management-consulting services provided by accounting firms, are not considered professional services for the purposes of this policy.
• State law requires that selection and award of contracts for professional services be based on the professional’s demonstrated competence and qualifications for the type of services to be performed, and a fair and reasonable price rather than on the basis of competitive bids.
• The originating unit must work with the Department of Business Services when these services are required, using the standardized Professional Services contract agreement when possible.

Contract Reporting Requirements

The University is required to report certain contracts.  Reporting requirements follow:

• Contracts over $14,000 - The University is required by the Legislative Budget Board (LBB) to provide written notice to the LBB not later than the tenth day after the date on which the University enters into expenditure contracts if the amount of the contract, including any amendment, modification, renewal, or extension of the contract, exceeds $14,000.  This includes but is not limited to: contracts for construction projects (Government Code §2166.2551); contracts for professional services (Government Code §2254.006);  contracts for consulting services (Government Code 2254.0301); and contracts over $100,000 for major information systems (defined as computers, services related to computers, computer software, voice or data telecommunications devices or services or video communication network equipment or services.
• Quarterly Delegated Lease Summary – Quarterly, a summary of all active and expired leases for the preceding three months is to be forwarded to the System Contracts Administration and Compliance.  Contract Administration and Compliance will then forward a combined report to the Texas Building and Procurement Division on behalf of all UH components.
• Yearly Report to the Board of Regents - Following the end of each fiscal year, a report shall be submitted to the board listing all professional service or consulting contracts where total compensation from system wide sources to a single entity exceeded $250,000 during the fiscal year (refer to Board Policy 57.01.4).

The Department of Business Services shall be responsible for filing these reports.

Revenue Generating Contracts

• 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.  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.
• Revenue agreements may require consultation with the UH Office of Tax Compliance and/or System Office of Contract Administration and Compliance.
• 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.

Contracts for Outside Legal Services Prohibited

The University cannot initiate or approve 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).  

Texas Electronic Marketplace

When there is an opportunity for competitive bids, and the expected procurement will be $25,000 or more, regardless of funding source, the University will post a notification on the Electronic State Business Daily (ESBD) for a minimum of 14 days. The Purchasing Agent will facilitate required ESBD postings.

Contractor Standing, Indebtedness and/or Tax Delinquencies

The originating department is responsible for verifying that a prospective contractor is in good standing with the State of Texas prior to forwarding a contract to Business Services.  As confirmation, a copy of the state comptroller’s vendor standing form must be included with the contract coversheet to Business Services.   If a contractor is not in good standing, a contract cannot proceed.  The originating department can advise the contractor that they are not in good standing with the state but it is the contractor’s responsibility to correct any problems. 

Interagency Agreements  (agreements between two or more state agencies)

The University may contract with another state agency for the provision of necessary and authorized services and resources by Interagency Agreement.  Statutory authority for interagency agreements can be found in Texas Government Code, Chapter 771.  The originating unit shall work with  Business Services,  who shall prepare the agreement.  Whenever possible, the OGC standardized interagency agreement will be used.

Interlocal Agreements (agreements with local governmental entities)

The University may contract with other local governmental entities such as community colleges, city or county government and other types of local governmental entities  for the provision of necessary and authorized services and resources by interlocal agreement. Statutory authority for interlocal agreements can be found in Texas Government Code, Chapter 791.  The originating unit shall work with Business Services in the preparation of the agreement.  The standardized interlocal agreement form will be used whenever possible.

Agreements Associated with Sponsored Research Activities

Agreements associated with grants or other sponsored funding are to be coordinated through the  Research Administrator, Research and Program Development Department, either using standardized agreements or non-standard agreements approved as to form and legality by the UH Office of Contracts and Grants or the System Office of Contract Administration and Compliance.

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

Texas Government Code

Board of Regent Policy 57.01

UHS Administrative Memorandum 03.A.05

Timely Contract Submissions

State of Texas Vendor Status

Texas Marketplace

UHV Contract Administration Website

President's Letter of Delegation

Chancellor's Delegation to President

UH Records Retention Schedule 

Approved:

Signature obtained		1/09/07

Tim Hudson, Ph.D.   	Date                   

President

Next review date:  January 2009

Origination: Business Services Department