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When Is A Contract Needed?

This information is provided as a guide to assist end users in knowing when a contract is needed and why Purchasing requires a contract for certain types of purchases.

The use of a bi-lateral contract signed by both parties in addition to a purchase order depends on the parties involved, whether the purchase is for goods or services, and sometimes even the type of services.   

All bi-lateral contracts must be reviewed by General Counsel and signed by the President. 

Contracts available to SFA Departments.

 

CONTRACT IS NOT ACCEPTABLE
To limit the University’s liability and risk and/or comply with state law, the following circumstances are identified as ones in which the University should NOT be involved with either a bi-lateral contract or a purchase order.

Contracting with employees (services) – The University cannot contract with an employee to provide a service.  Contracting with the relative of an employee may not be allowed.

Contracts for Student Organizations – The University should be careful about signing a contract related to events hosted by student organizations as this may place the University in a position of liability because it promotes the appearance of approving or sponsoring an activity over which it does not have any control.

Contractor or Employee – Always consider whether processing a contract is or is not more appropriate than hiring an individual as a casual employee.  To assist in making this determination, review the work to be performed in light of the IRS 20-Question test.

 

BI-LATERAL CONTRACT REQUIRED
A bi-lateral contract serves as a check and balance that monitors procurement activity for improper relationships, fraud, conflict of interest issues, regulatory requirements, and international issues.  The contracting review and signature process provides for review by more than one individual which gives more opportunity to correct potential problems before a contract is executed. 

Contracting with individuals (including professional and consultant contracts) – A contract insures the individual is an independent contractor.  The University cannot contract with a University employee to provide a service. 
Note:  Officials provided by the Southland Conference for athletic events is an approved exception.

Contracting for professional and consulting services – Consulting work requires a project definition of services to be rendered and reports to be issued.  It also provides a mutual understanding of the scope of work and required deliverables. 

Contracting for services that include releasing confidential data on the part of the University – When the release of confidential data on the part of the University is involved, the contract will include clauses that spell out a mutual understanding regarding why the information is released, what can or can’t be done with the information, and the consequences for misuse of the information.

Contracting with another state agency or institution of higher education (InterAgency) – State law requires that certain provisions be addressed in contracts with these entities.  Sample contracts are available on General Counsel’s web-site.

Contracting with a political subdivision; i.e., city, county, school district, etc. (InterLocal) – State law requires that certain provisions be addressed in contracts with these entities.  Sample contracts are available on General Counsel’s web-site.

Hazardous Materials Removal – A contract is desired for these services to insure the University documents and maintains a paper trail for insurance, disposal, certifications, etc.  Hazardous products may include, but are not limited to chemicals, paint thinners, non-water based paint, radioactive materials, fluorescent lamps, incandescent lamps, pcb ballasts, bio-medical waste, asbestos, etc.

Insurance – The Environmental Health, Safety and Risk Management (EHSRM) office is responsible to secure SORM approval and will hold policies for insurance purchases. 

Lease and Lease-Purchase – Leases and lease-purchases are a specific type of commercial transaction that requires mutual understanding and agreement on the details of the transfer of ownership, vendor’s security interest, etc.
NOTE:  The University has executed a master lease agreement for lease-purchases. 

Maintenance  – If the maintenance is not provided by a sales and service facility, as in the case of copiers, etc., a bi-lateral contract will probably be needed, unless the specifications were clearly defined in a formal bid document and the formal bid number and opening date is referenced on the PO. 

Revenue sharing contract – A written contract is required to insure a mutual understanding of the services required and the method of revenue sharing.

Software License Agreements – Typically the software provider will require a signed license agreement.

Software (downloaded) – The individual who desires to download software should print the license agreement for review by General Counsel.  If changes have to be made, the end user or Purchaser will be responsible to communicate the desired changes to the company.  The purchase may be processed on a PO or paid by P-card.

Utilities/Infrastructure – Typically, the utility provider will require a contract to clearly set forth the terms of the agreement.  For purposes of contract needs, utilities/infrastructure is defined as electricity, natural gas, propane gas, water, telephone, cell phone service, pager service, internet services, web-site hosting, and television programming.

Formal RFP (Services) – When a formal RFP is issued, typically some terms and conditions are negotiated after the vendor is selected.  Therefore, a written contract for purposes of mutual understanding is required.

State Contracts (Services) – In the case of Term, DIR, TXMAS, CCG and SORM contracts, another agency of the State of Texas will have already executed a contract; therefore, only a PO referencing the contract source and number is sufficient.  However, some of these contracts may require that SFA sign an additional document specific to SFA’s use of the contract. 

Cooperative Contracts (Services) – A Purchase Order referencing the contract source and number is sufficient.  However, contracts that have been negotiated by a cooperative of which SFA is a member must be reviewed by the Director of Purchasing to insure that it does not include any provisions that SFA cannot legally accept due to being an entity of the State of Texas.  At the Director’s discretion, these contracts may be forwarded to General Counsel for further review and advice.