220-RICR-30-00-8
220-RICR-30-00-8. Contracts (version Technical Revision, 07/11/2011 to 01/18/2012)
STATE OF RHODE ISLAND
PROCUREMENT REGULATIONS
SECTION 8 - CONTRACTS
Amended regulations adopted June 20, 2011
Division of Purchases
Rhode Island Department of Administration
One Capitol Hill, Second Floor
Providence, Rhode Island 02908
Tel: (401) 574-8100
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The following amended State of Rhode Island Procurement Regulations were adopted by
me, as Director of the State of Rhode Island Department of Administration, on the
_______ day of June 2011.
________________________________________
Richard A. Licht, Director
State of Rhode Island
Department of Administration
One Capitol Hill
Providence, Rhode Island 02908
Date of Public Notice:
May 5, 2011
Date of Public Hearing:
June 8, 2011
End of Comment Period: June 8, 2011
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SECTION 8 - CONTRACTS
8.1 DEFINITIONS ------------------------------------------------------------------------------- 8-4
8.2 FUNDAMENTAL REQUIREMENTS AND PRINCIPLES
FOR STATE CONTRACTS-------------------------------------------------------------------- 8-5
8.3 GENERAL CHARACTERISTICS OF STATE CONTRACTS----------------------- 8-7
8.4 THE PURCHASE ORDER CONTRACT------------------------------------------------ 8-9
8.5 MULTI-YEAR CONTRACTS------------------------------------------------------------- 8-9
8.6 LETTER OF AUTHORIZATION--------------------------------------------------------8-11
8.7 CHANGES TO PURCHASE ORDERS -------------------------------------------------8-12
8.8 TERMINATION OF CONTRACT-------------------------------------------------------8-13
8.9 TYPES OF PURCHASE ORDER CONTRACTS -------------------------------------8-14
8.10 PRINCIPLES FOR SELECTION OF TYPE OF
PURCHASE ORDER CONTRACT----------------------------------------------------------8-16
8.11 SELECTION OF METHODS OF CONSTRUCTION
CONTRACTING MANAGEMENT ---------------------------------------------------------8-20
8.12 CONTRACT ADMINISTRATION ----------------------------------------------------8-26
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SECTION 8 - CONTRACTS
8.1 DEFINITIONS
8.1.1 [37-2-7(7)] "Change order" shall mean a written order signed by the purchasing
agent, or the contractor directing or allowing the contractor to make changes which the
changes clause of the contract authorizes the purchasing agent or contractor to order
without the consent of the contractor or purchasing agent.
8.1.2 [37-2-7(5)] "Contract" shall mean all types of agreements, including grants and
orders, for the purchase or disposal of supplies, services, construction, or any other items.
It shall include awards, contracts of a fixed price, cost, cost-plus-a-fixed-fee, or incentive
type; contracts providing for the issuance of job or task orders, leases, letter contracts,
purchase orders and construction management contracts. It also includes supplemental
agreements with respect to any of the foregoing. With respect to the procurement
regulations set forth herein, "contract" shall not apply to labor contracts with employees
of state agencies.
8.1.3 [37-2-7(6)] "Contract Modification" shall mean any written alteration in the
specifications, delivery point, rate of delivery, contract period, price, quantity, or other
contract provisions of any existing contract, whether accomplished by unilateral action in
accordance with a contract provision, or by mutual action of the parties to the contract. It
shall include bilateral actions, such as change orders, administrative changes, notices of
termination, and notices of the exercise of a contract option.
8.1.4 "Contract Addendum" shall mean an alteration in the terms and/or scope of an
agreement accomplished by mutual action of the parties, permissible under emergency
purchases, construction work, sole source procurement, and otherwise where competition
is not required.
8.1.5 [37-2-7(7)] "Contractor" shall mean any person having a contract with a
governmental body.
8.1.6 An "independent contractor" shall mean a person (individual or firm) who, in
various degrees and/or combinations:
8.1.6.1 is available to the general public on a regular and consistent basis; and
8.1.6.2 is free to work when and for whom he/she pleases; and
8.1.6.3 is employed by more than one person or company at a time; and
8.1.6.4 makes a significant investment in facilities not typically maintained by an
employee; and
8.1.6.5 can realize a profit or loss as a result of providing services or products.
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8.1.7 In accordance with [37-2-15(1)] "cost-reimbursement contract" shall mean a
contract under which the state reimburses the contractor for those contract costs, within a
stated ceiling, which are allowable and allocable in accordance with cost principles
established by the Chief Purchasing Officer herein, and a fixed fee.
8.1.8 "Prime contractor" shall mean a contractor who engages subcontractors in the
course of satisfying the requirements of fulfilling a contract.
8.1.9 In accordance with Chapter 37-13-1 "Public works contract" shall mean a contract
for grading, clearing, demolition, improvement, completion, repair, alteration or
construction of any public road or any bridge, or portion thereof, or any public building
or portion thereof, or any heavy constructions, or any public works projects of any nature
or kind whatsoever.
8.1.10 "Punitive Termination" shall mean termination at the discretion of the state for
failure of the contractor to perform with no liability on the part of the state.
8.1.11 "Renegotiation" shall mean deliberation, discussion, or conference to change or
amend the terms of an existing agreement.
8.1.12 "Subcontractor" shall mean any person undertaking part of the work under the
terms of the contract, by virtue of an agreement with the prime contractor, who, prior to
such undertaking, receives in writing the consent and approval of the state.
8.1.13 [37-2-7(7)] "Supplemental Agreement" shall mean any contract modification
which is accomplished by the mutual action of the parties.
8.2 FUNDAMENTAL REQUIREMENTS AND PRINCIPLES FOR
STATE CONTRACTS
A contract shall mean a promise, or a set of promises, for breach of which the law gives a
remedy, and the performance of which the law recognizes as a duty.
8.2.1 [37-2-54(3)] No purchase or contract shall be binding on the state or any agency
thereof unless approved by the Department [of Administration] or made under general
regulations which the Chief Purchasing Officer may prescribe.
8.2.1.1 The terms and conditions of a valid Purchase Order and its supplements, as issued
by the Office of Purchases and signed by the Purchasing agent or his designee, shall
constitute the primary contractual instrument of the state.
8.2.1.1.1 Unless specifically established by law, regulation or procedures published by
the Chief Purchasing Officer, no other instrument shall constitute a state purchasing
contract.
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8.2.1.1.2 Oral Agreements - Any alleged oral agreement or arrangements made by a
bidder or contractor with any agency or an employee of the Office of Purchases may be
disregarded and shall not be binding on the state.
8.2.1.2 "Purchasing Contract Authority" shall mean the authority to act on behalf of the
state to commit funds, enter into binding agreements or contracts, dispose of state
property, or in any other manner control procurement or obligate the State.
8.2.1.2.1 No state agency official shall have the right (capacity) to exercise purchasing
contract authority through written or oral agreements or contracts or, in any other way,
financially or otherwise obligate the State without the express written consent of the
Chief Purchasing Officer.
8.2.1.2.2 No state agency may place orders or negotiate with suppliers or potential
suppliers without the participation or express approval of the Chief Purchasing Officer.
8.2.2 [37-2-13(4)] No state purchasing regulation shall change in any way a contract
commitment by the state nor of a contractor to the state which was in existence on the
effective date of the regulation.
8.2.3 [37-2-13(5)] The provisions of state purchasing regulations shall be considered to
be incorporated by operation of law in all state contracts.
8.2.4 [37-2-13(6)] Contract provisions and contracts entered into in violation of state
purchasing regulations shall be void "ab initio" [from inception].
8.2.5 Supplemental Principles of Law - Obligation of Good Faith.
8.2.5.1 [37-2-3(1)] Unless displaced by the particular provisions of this chapter [37-2],
the principles of law and equity, including the uniform commercial code, the law
merchant, and the law of contracts, including, but not limited to, agency, fraud,
misrepresentation, duress, coercion, mistake, and bankruptcy, shall supplement these
provisions.
8.2.5.2 [37-2-3(2)] Every contract or duty under this chapter shall impose upon both parts
the obligation of good faith in its performance and/or enforcement. "Good faith" shall
mean honesty in fact in the conduct or transaction concerned and the observance of
reasonable commercial standards of fair dealing.
8.2.6 In accordance with Chapter 37-2-9(p), contractors must comply with state and
federal Equal Opportunity requirements for all contracts for supplies and services
exceeding ten thousand dollars ($10,000). Failure to comply will be considered a
substantial breach of contract subject to penalties prescribed in regulations issued and
administered by the State Equal Opportunity Office and set forth herein.
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8.2.7 [37-2-41] Contractor's Bonds. - The provisions of chapter 37-12 of the general laws
shall apply to all construction contracts awarded under this chapter.
8.2.7.1 "Performance Bond" shall mean a contract of guaranty executed subsequent to
award by a successful bidder to protect the state from loss due to contractor inability to
complete a contract.
8.2.7.2 Chapter 37-12 requires that every person awarded a public works contract shall
furnish to the state good and sufficient surety (performance bond) not less than fifty
percent (50%) and not more than one hundred percent (100%) of the contract price
conditioned that the contractor, principal in said bond, the person's executors,
administrators or successors, shall keep and perform the covenants, conditions and
agreements in the contract. However, provided that good cause is shown, the Director of
the Department of Administration may waive the requirements for contracts not in excess
of fifty thousand dollars ($50,000).
8.2.7.3 In accordance with Chapter 37-13-14 a contractor's performance bond required
for contracts exceeding one thousand dollars ($1000) under 37-12 must be furnished by a
surety company authorized to do business in the state.
8.3 GENERAL CHARACTERISTICS OF STATE CONTRACTS
8.3.1 General Terms and Conditions - The Office of Purchases shall develop and make
available to potential suppliers and state officials a document stating the general terms
and conditions applicable to all quotations and state purchasing contracts. The General
Terms and Conditions shall (1) be referenced and made a part of all solicitations for
proposals and quotations; all state purchase orders, contracts, and letters of authorization;
and bidder registration documentation and (2) provide notice to bidders that contract
award may be subject to the bidder signing an affirmation (certification) regarding certain
legal requirements or restrictions relating to foreign corporations, goods produced in
South Africa, disadvantaged business enterprises, labor rates, local product preference,
etc., as required by the Purchasing Agent.
8.3.2 When a contract has been entered into between the state and another party, neither
party shall have the legal right to add new terms or conditions without the consent of the
other, unless the contract so specifies.
8.3.3 All contract pricing shall be firm and fixed unless contract language provides for
reconsideration.
8.3.4 Issuance of purchase orders shall not be made on the basis of "advise pricing" (or
"pricing to be determined") agreements. All commitments shall be on the basis of
estimated prices with a "not to exceed" maximum authorization when firm, fixed pricing
agreements are not possible.
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8.3.5 Changes in scope, price, and length of contract period shall require contract
amendments which are specified in writing.
8.3.5.1 Unanticipated changes may be considered with the express consent of both
parties.
8.3.5.2 The issuance of a Purchase Change Order in accordance with the provisions of the
contract and other requirements specified herein shall be considered a binding contract.
8.3.6 Termination - As appropriate, state contracts shall include clauses which address
special conditions/procedures for termination of contract not contained in the state's
General Terms and Conditions; e.g., provisions for penalties or forfeitures for contract
noncompliance may be included; a convenience termination clause which permits the
state to terminate, at its own discretion, the performance of work in whole or in part, and
to make a settlement of the vendor's claims in accordance with appropriate regulations
and applicable contractual conditions.
8.3.7 Mutual Agreement - The agreement shall consist of an offer by one party, called the
offeror, and an acceptance by the other party, called the state.
8.3.7.1 When a purchase order is issued which does not differ from the bid submitted by
an offeror, mutuality shall be assumed.
8.3.7.2 In accordance with the General Terms and Conditions which notify offerors that
the Purchasing Agent reserves the right to make partial bid awards, mutuality shall be
assumed when a purchase order does not differ from the elements of a bid submitted by
an offeror.
8.3.7.3 Any offer, whether in response to a solicitation for proposals or bids, or made
without a solicitation, which is accepted in the form of an order made by the Purchasing
Agent, or a state official with purchasing authority delegated by the Purchasing Agent,
shall be considered a binding contract.
8.3.8 Consideration - Although consideration to support a contract may assume other
forms, generally it shall mean the agreement to pay a sum of money for the delivery of
the desired item or services rendered. It shall not be essential that the consideration be of
a substantial consequence, but shall have some value. Compensation shall be specified
and shall include but not be limited to: (a) terms of payment for partial delivery or
completion; (b) unit of cost (hourly rate, per report rate), if appropriate; (c)
frequency/conditions for payment - weekly, monthly, upon completion of percentage of
work, etc.; and (d) retainage, when appropriate.
8.3.9 Capacity of Parties - The contracting parties shall have the legal authority to enter
into contracts.
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8.3.10 Competence of Parties - The contracting parties shall be of legal age and of sound
mind.
8.3.11 Length of contract period shall be specified.
8.3.12 A state official (or position) from whom the contractor shall obtain direction shall
be named and/or a format for written authorization to deliver (e.g., request for delivery
form for master pricing agreement) shall be specified.
8.3.13 Public Works/Construction Contracts shall provide for the following additional
considerations:
8.3.13.1 Certificates of insurance to protect the general public or state property from
injury or loss arising from actions or inaction of the contractor during the progress of a
contract.
8.3.13.2 Each contractor shall be responsible for providing satisfactory evidence of
complete coverage of all insurances, permits, and licenses required by state, city or town
statutes, ordinances, and/or regulations.
8.4 THE PURCHASE ORDER CONTRACT
8.4.1 "Purchase Order" shall mean a document issued by the Purchasing Agent to
formalize a purchase transaction with a vendor. The purchase order shall contain
statements as to the quantity, description, and price of the goods or services ordered,
applicable terms as to payment, discounts, date of performance, transportation, and other
factors or suitable references pertinent to the purchase and execution by the vendor.
Purchase orders shall include blanket orders, master pricing agreements, and utility
purchase orders.
8.4.2 The entire agreement with the supplier shall, at all times, reside solely in the
purchase order and its referenced supplements.
8.4.3 Purchase Order Supplements shall consist of all of the following documents:
8.4.3.1 The state's General Terms and Conditions;
8.4.3.2 The state's request for quotations or proposals, including specifications;
8.4.3.3 The contractor's offer which is responsive to the solicitation; and/or
8.4.3.4 As appropriate, additional contract provisions.
8.5 MULTI-YEAR CONTRACTS
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8.5.1 [37-2-33(1)] Unless otherwise provided in the statute making appropriations
therefore, multi-year contracts for supplies and services may be entered into for periods
not extending beyond the end of the biennium in which the contract was made, if funds
for the first fiscal year of the contemplated contract are available at the time of
contracting. Payment and performance obligations for succeeding fiscal years shall be
subject to the availability of funds therefore.
8.5.1.1 "Biennium" shall mean a period of time equal to two fiscal years.
8.5.1.2 "Fiscal year" shall mean a period of time beginning on the first day of July in one
calendar year and ending on the last day of June of the subsequent calendar year.
8.5.1.3 Multi-year contracts which extend beyond a biennium shall be permitted
provided that:
8.5.1.3.1 funds for the first year of the biennium have been appropriated; and
8.5.1.3.2 contracts shall contain a standard clause which states that implementation of the
contract beyond the first fiscal year shall be subject to the availability of funds; and
8.5.1.3.3 a written justification is placed in the purchase order file or the category of
procurement has by regulation or policy been identified by the Chief Purchasing Officer
as appropriate for multi-year contracting, e.g., property leases.
8.5.1.4 Multi-year contracts shall specify the annual costs and total value of each
contract.
8.5.2 [37-2-33(2)] Prior to the utilization of a contract as described in subsection 37-2-
33(1), it shall be determined in writing by the Chief Purchasing Officer:
(a) That estimated requirements cover the period of the contract and are reasonably firm
and continuing; and
(b) That such contract will serve the best interests of the state by encouraging effective
competition or otherwise promoting economics in state procurement.
8.5.2.1 The Chief Purchasing Officer may delegate to the Purchasing Agent all or a
portion of the responsibility and authority to make such determinations.
8.5.3 In accordance with [37-2-33(3)] when funds are not appropriated or otherwise made
available to support continuation of performance in a subsequent year of a [multi-year]
contract, the contract for such subsequent year may be cancelled and the contractor shall
be reimbursed for the reasonable value of nonrecurring costs incurred but not amortized
in the price of the supplies or services delivered under the contract. The cost of
cancellation may be paid from:
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(a) Appropriations currently available for performance of the contract; or
(b) Appropriations currently available for procurement of similar supplies or services and
not otherwise obligated; or
(c) Appropriations made specifically for the payment of such cancellation costs.
8.5.4 Multi-year contracts shall be appropriate purchasing instruments for transactions for
which the nature of the goods and services will remain relatively stable over time; and for
which potential changes in price can be predicted and agreed to in advance, including
provisions for mandated escalation requirements, such as:
8.5.4.1 Lease and lease-purchase agreements for equipment, real property, and facilities;
8.5.4.2 Maintenance and repair of specialized equipment;
8.5.4.3 Special licensing agreements (computer, communication);
8.5.4.4 Special services for which the contract award is based on a request for proposals,
such as residential treatment programs;
8.5.4.5 Supplemental services, the approval of which is based upon the recommendation
of the State Architectural, Engineering and Consultant Selection Committee and selection
by the Chief Purchasing Officer; and
8.5.4.6 Any other contractual relationship where it has been determined in writing by the
Chief Purchasing Officer that a long-term agreement shall be the most cost effective
method of procurement.
8.5.5 User agencies shall specify on requisitions and shall submit justification whether
multi-year contracts should be considered by the Purchasing Agent for the supply or
service requisitioned.
8.6 LETTER OF AUTHORIZATION
When the Chief Purchasing Agent determines in writing that it is absolutely essential that
the vendor be given a binding commitment so that work can be commenced immediately
and that negotiation of a definitive contract cannot be accomplished in sufficient time, the
Purchasing Agent may issue a Letter of Authorization.
8.6.1 A Letter of Authorization (LA) shall mean a written instrument binding only when
signed by the Purchasing Agent, which authorizes immediate commencement of
implementation of the delivery of supplies or the performance of services.
8.6.2 Such instrument shall:
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8.6.2.1 Represent a preliminary authorization subject to the subsequent issuance of a
Purchase Order.
8.6.2.2 Be superseded by a definitive contract at the earliest practicable date not later than
the greater of the following: (1) the expiration of 180 days from the date of the LA or
delivery of 40% of the contract.
8.6.2.3 Be specifically negotiated and shall address the following contractual
requirements that:
8.6.2.3.1 The vendor will proceed immediately with performance of the contract,
including procurement of necessary materials;
8.6.2.3.2 the extent and method of payments in the event of termination for the
convenience of the state or for default;
8.6.2.3.3 the vendor is not authorized to expend monies or incur obligations in excess of
the maximum liability of the state as set forth in the letter contract;
8.6.2.3.4 the type of definitive contract contemplated;
8.6.2.3.5 as many definitive contract provisions as possible;
8.6.2.3.6 the vendor shall provide such price and cost information as may reasonably be
required by the state; and
8.6.2.3.7 the vendor and the state shall enter into negotiations promptly and in good faith
to reach agreement and execute a definitive contract.
8.7 CHANGES TO PURCHASE ORDERS
8.7.1 All agreements and changes to scope of work, price, or other terms shall be
incorporated into purchase orders via "change order" documents incorporating contract
amendments.
8.7.2 Change Orders issued by the Office of Purchases shall be the only binding
documents which may create a change in a purchase order.
8.7.3 Personnel shall not commit the state to technical/contractual changes to purchase
orders without first securing all necessary approvals.
8.7.4 All discussions of potential changes (oral or written) may be disclaimed as not
being binding on the supplier or the state until formally incorporated in the purchase
order.
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8.7.5 In general, change orders shall be issued by the Office of Purchases following
receipt of quotations and discussions of price and delivery with the supplier. If
circumstances preclude immediate issuance of a formal change order, interim direction to
the supplier may be made via a letter of authorization signed by the Purchasing Agent.
8.8 TERMINATION OF CONTRACT
8.8.1 If required bidder certifications are determined to be invalid, the Purchasing Agent
shall declare the purchase order void.
8.8.2 Notice of termination by either party shall be submitted in writing to the other party
in accordance with the termination clause of the contract.
8.8.3 Cancellation of a Contract by the State
8.8.3.1 Cancellations of Purchase Order Contracts or Master Pricing Agreements shall
require the signature of the Purchasing Agent or his designee.
8.8.3.2 A contract may be cancelled or annulled at the contractor's expense upon
determination by the Purchasing agent that a condition of nonperformance exists.
8.8.3.3 "Nonperformance" shall mean lack of compliance with the contract specifications
and/or terms and conditions.
8.8.3.4 Cancellation by the Purchasing Agent for nonperformance shall be subject to the
following rules:
8.8.3.4.1 A formal complaint of nonperformance or unsatisfactory performance shall be
submitted by an authorized state official to the Purchasing Agent. Such complaint shall
provide a description of and justification for the complaint.
8.8.3.4.2 The Purchasing Agent shall direct the complaint to the Standards and Inspection
Unit (SIU) of the Office of Purchases.
8.8.3.4.3 The SIU inspector, in conjunction with the Office of Purchases official (buyer)
responsible for the contract, shall be authorized to attempt to resolve the problem to the
satisfaction of the user agency.
8.8.3.4.4 The inspector and buyer shall report in writing to the Purchasing Agent whether
the problem requires formal action, and if the problem has not been resolved, the
Purchasing Agent shall notify the contractor in writing that he/she is not in compliance
with the contract. Such notice of nonperformance shall: (1) specify the nature of the
complaint, (2) direct the contractor to take corrective action, (3) direct the contractor to
respond in writing to the notice of nonperformance within a specified time period, and (4)
notify the contractor that failure to respond as directed may result in cancellation of the
order.
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8.8.3.5 If a contractor fails to take corrective action and/or respond to a notice of
nonperformance, the Purchasing Agent may issue a change order canceling the contract.
8.8.3.6 If, after reviewing the contractor's response, the Purchasing Agent determines that
the contractor is not out of compliance with the contract requirements, he shall so notify
the user agency and the contractor in writing, providing a rationale for his decision.
8.8.3.7 If the Purchasing Agent determines that valid extenuating circumstances out of
the control of the contractor have prevented compliance with the contract requirements,
he shall so inform the user agency and may amend the contract to provide for a
reasonable opportunity for the vendor to perform the contract, if necessary.
8.8.3.8 If the Purchasing Agent believes that a contractor's action or lack thereof presents
a clear and immediate danger to the public interest, he may request in writing that the
Chief Purchasing Officer authorize immediate termination of the contractual relationship.
8.8.3.9 Copies of all communications with a contractor regarding nonperformance shall
be sent to the contractor's bonding company, power of attorney and the Department of
Administration legal counsel.
8.8.3.10 If the Purchasing Agent determines that a contractor is unwilling or unable to
perform a contract, he shall:
8.8.3.10.1 direct the contractor's bonding company to assume responsibility for the
performance of the contract if a performance bond has been issued; and
8.8.3.10.2 so notify the user agency and contractor; and
8.8.3.10.3 notify the contractor whether he/she has been temporarily suspended or
permanently debarred from the state Bidders List and shall be responsible for any costs
incurred by the state in the completion of the contract.
8.9 TYPES OF PURCHASE ORDER CONTRACTS
8.9.1 Fixed Price (FP)
8.9.1.1 The Firm Fixed Price (FFP) contract shall mean one which provides for a price
which is not subject to any adjustment by reason of the seller's cost experience in the
performance of the contract. This type of contract should be used when the price is based
on credible cost data for the completion of the order.
8.9.1.2 The Fixed Price with Economic Price Adjustment (FP W/EPA) contract shall
mean one which provides for the upward or downward revision of the stated price upon
the occurrence of certain economic conditions which are specifically defined in the
contract. These conditions are limited to those beyond the control of the seller.
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8.9.1.3 A Fixed Price Redeterminable (FPR) contract shall mean one which permits
reconsideration of price at a stated time after contract initiation when the only supplier
capable of performing a job cannot quote a fixed price with full assurance that it will be
fair and reasonable.
8.9.1.4 The Fixed Price Incentive (FPI) contract shall mean one which provides for the
adjustment of profit (fee) and price according to a sharing arrangement based on the
relationship which final negotiated total cost bears to the negotiated target cost.
8.9.2 Cost Reimbursement
8.9.2.1 A Cost No Fee (CNF) contract shall mean one under which the seller receives no
fee.
8.9.2.2 A Cost Sharing (CS) contract shall mean one under which the seller not only
receives no fee but is reimbursed for only an agreed upon portion of its allowable costs.
8.9.2.3 A Cost Plus Fixed Fee (CPFF) contract shall mean one which provides for the
payment of a fixed fee to the seller. The fixed fee negotiated does not vary with actual
cost, but may be adjusted as a result of any subsequent changes in the work or service to
be performed under the purchase order.
8.9.2.4 A Cost Plus Incentive Fee (CPIF) contract shall mean one which provides for a
fee which is adjusted by formula in accordance with the relationship which total
allowable costs bear to target costs, a target fee, a minimum and maximum fee, and a fee
adjustment formula. Upon completion of the order, the fee is determined in accordance
with the established formula as an incentive for performance efficiency; however, there is
no ceiling price specified and the seller is under no obligation to complete the order once
the funds obligated have been exhausted.
8.9.2.5 A Cost Plus Percentage of Cost (CPPC) contract shall mean one which provides
for a fee which is adjusted by percentage formula in accordance with the relationship to
total cost. The percentage formula may be fixed, but fee paid may be adjusted as a result
of any subsequent changes in the work or service to be performed under the purchase
order.
8.9.2.6 A Time and Materials (T/M) contract shall mean one which provides for the
purchase of supplies or services on the basis of (1) direct labor hours at specified fixed
hourly rates (which rates include direct and indirect labor, overhead and profit) and (2)
material at cost. Material handling costs may be included to the extent they are clearly
excluded from any factor of the charge computed against direct labor hours (L/H).
8.9.3 A To Be Determined (TBD) contract shall mean one which enables the buyer and
the seller to enter into a relationship with no predetermined terms at the initiation of the
contract.
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8.9.4 A Blanket Order shall mean an arrangement under which a purchaser contracts with
a vendor to provide the purchaser's requirements for an item(s) or a service, on an as-
required and often over-the-counter basis. Such an arrangement sets a limit on the period
of time it is valid and the maximum amount of money which may be spent at one time or
within a specified period. (Usually, but not always, the funds for agency blanket orders
will be encumbered.)
8.9.4.1 A Pricing Agreement (PA) shall mean a special blanket order which establishes
the terms and conditions under which a specific item or a specific category of items in an
indefinite quantity, are to be purchased for a specific period of time, usually one year.
8.9.4.2 A Master Pricing Agreement (MPA) shall mean a pricing agreement which has
been established on behalf of more than one entity. (Usually, funds for MPA contracts are
not encumbered.)
8.9.4.3 A "Term Contract" shall be synonymous with an MPA contract.
8.10 PRINCIPLES FOR SELECTION OF TYPE OF PURCHASE ORDER
CONTRACT
The selection of the appropriate type of contract is a matter which requires the exercise of
judgment in order to obtain fair and reasonable prices in accordance with the
circumstances of the procurement.
8.10.1 In determining the type of contract to be used, consideration shall be given but not
limited to such factors as:
8.10.1.1 Type and complexity of the item or scope of work to be performed;
8.10.1.2 Urgency of the requirement;
8.10.1.3 Prospective period of contract performance;
8.10.1.4 Degree of competition present;
8.10.1.5 Extent of completion of baseline and detail design; which in turn may influence
other considerations as the adequacy and firmness of specifications, and the availability
of relevant historical pricing data and prior experience;
8.10.1.6 Availability of comparative price data, or lack of firm market prices or wage
levels;
8.10.1.7 Prior experience with the supplier;
8.10.1.8 Extent and nature of subcontracting contemplated;
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8.10.1.9 Assumption of business risk;
8.10.1.10 Supplier technical capability and financial responsibility;
8.10.1.11 Administrative costs;
8.10.1.12 Adequacy of the supplier's accounting system; and
8.10.1.13 Other concurrent contracts.
8.10.2 [37-2-32] Approval of Accounting System. - Except with respect to firm fixed
price contracts, no contract type shall be used unless it has been determined in writing
that the proposed contractor's accounting system will permit timely development of all
necessary cost data in the form required by the specific contract type contemplated and
that the contractor's accounting system is adequate to allocate costs in accordance with
generally accepted accounting principles.
8.10.2.1 The firm fixed price contract shall be used in applications and under limitations
hereinafter set forth, unless the use of another type of contract is more appropriate.
8.10.3 [37-2-31] Subject to the limitations on entering into cost plus percentage of cost
and cost reimbursement contracts set forth herein, any type of contract which will
promote the best interests of the state may be used.
8.10.4 Cost Reimbursement Contracts.
8.10.4.1 [37-2-29] The Cost Plus a Percentage of Cost (CPPC) contract is prohibited.
8.10.4.2 [37-2-30(1)] No contract providing for the reimbursement of the contractor's
cost plus a fixed fee (cost reimbursement) may be made through negotiation or in sole
source or emergency procurements unless it is determined in writing by the Chief
Purchasing Officer that such contract is likely to be less costly to the state than any other
type of contract, or that it is impracticable to obtain supplies or service of the kind or
quality required except under such a contract.
8.10.4.3 [37-2-30(2)] Each contractor under a cost reimbursement type contract shall
obtain consent from the Chief Purchasing Officer, as provided for in the contract, before
entering into:
(a) a cost reimbursement subcontract; or
(b) any other type of subcontract involving more than ten thousand ($10,000) or ten
percent (10%) of the estimated cost of the prime contract[whichever is greater].
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8.10.4.4 [37-2-30(3)] All cost reimbursement contracts shall contain a provision that only
costs recognized as allowable, in accordance with cost principles set forth in regulations
issued by the Chief Purchasing Officer will be reimbursed.
8.10.5 When a FP W/EPA contract is employed, provisions shall be included for
downward adjustment of the contract price in those instances where the prices or rates
may be expected to fall below the base price agreed to by contract.
8.10.5.1 Types of economic adjustments shall include but shall not be limited to:
8.10.5.1.1 Price Adjustment - a modification of the base purchase order price on the basis
of increases or decreases in published or established prices of specific items.
8.10.5.1.2 Labor and Material Adjustment - a modification of the contract base price on
the basis of increases or decreases of wage rates, specific material costs, or both, using
agreed upon standards or indices.
8.10.5.2 This type of contract may be appropriate where valid doubt exists as to the
predictability of economic conditions which will exist during a multi-year contract
period. Price adjustment provisions shall not be used to provide protection to contractors
against contingencies which arise from inaccurate estimates of the quantities of labor or
materials required for completion of a contract.
8.10.6 When FPR contracts are employed the basis for adjustments shall be established
when the contract is negotiated and a cost baseline shall be established.
8.10.6.1 The following data shall be secured from each source before placing a re-
determinable order: number of estimated hours and method used in arriving at hours;
direct labor rates per hour; material cost, including both quantities and unit prices;
overhead rates (categorized by element); profit, any other data deemed pertinent for
analysis of the prices quoted.
8.10.6.2 The establishment of a re-determinable type of contract shall require the written
authorization of the Chief Purchasing Officer. Upon analysis conducted jointly by the
user agency and the Purchasing Agent, a request and justification for considering re-
determinable pricing provisions shall be submitted in writing by the Purchasing Agent to
the Chief Purchasing Officer.
8.10.7 When FPI contracts are employed:
8.10.7.1 There shall be an initially negotiated firm target cost, a target profit, a price
ceiling and a final profit and price adjustment formula. After completion, a final cost
shall be negotiated and a final price established in accordance with the predetermined
formula.
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8.10.7.2 The circumstances must be such that targets are reasonably free of contingencies
and provided that a fair and reasonable incentive formula can be established at the time of
initial contract negotiation and the contract is of sufficient duration to permit achievement
of substantial cost reductions.
8.10.7.3 The same supplier cost data shall be required as for a re-determination contract.
8.10.8 A CNF contract may be used for research and development work – particularly
with nonprofit organizations and educational institutions.
8.10.9 A CS contract is suitable for:
8.10.9.1 Jointly sponsored research and development with educational institutions or
other nonprofit organizations or
8.10.9.2 Other research and development work where the results of the contract may have
commercial benefit to the seller.
8.10.10 A CPFF contract is suitable when:
8.10.10.1 The scope and nature of work cannot be definitely specified.
8.10.10.2 Definite specifications exist but the seller lacks a valid basis for estimating
costs because the supplies called for are not items regularly manufactured, or the services
called for have not been previously performed, or partial experience will not reveal a
proper pricing basis for the remainder of the contract.
8.10.10.3 Specifications are not complete or major changes substantially affecting the
scope of production or construction work are expected.
8.10.10.4 Work is to be performed in a state-owned facility with the use of state-owned
equipment, materials, or personnel.
8.10.11 A T/M contract shall include the establishment of a cost limitation which the
seller may not exceed (except at his/her own risk). A T/M contract shall be used only in
situations when:
8.10.11.1 It is not possible at the time of placing the order to estimate the extent of the
work or to anticipate final costs with any reasonable degree of accuracy such as: (1)
engineering and design services, (2) certain repair, maintenance or overhaul work, (3)
emergencies.
8.10.11.2 Provision is made for appropriate surveillance by state personnel during
performance.
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8.10.12 L/H contracts based solely on labor hours shall be considered a subcategory of
T/M contracts, subject to the same restrictions as the T/M contract and shall be used only
after the Purchasing Agent has determined that no other type of contract is suitable for
meeting the needs of the requisitioner.
8.10.13 Employment of TBD contracts shall be prohibited.
8.10.14 Considerations for use of a MPA contract:
8.10.14.1 The MPA shall specifically state the term and probable volume consideration
of the agreement.
8.10.14.2 The seller shall be authorized to ship to the state only those items specified by a
delivery request (on a form to be provided) issued under the authority of the Master
Pricing Agreement. The state is obligated for payment only to the extent of the specific
quantities set forth in the delivery request or for express considerations applicable to the
contract itself.
8.10.14.3 The specific category of items to be purchased may be listed in a catalog
prepared specifically for the agreement, a catalog of items offered for sale by a supplier, a
national catalog published by a catalog publishing firm, or such other lists of items as
may, from time to time, be determined as being a legally sufficient description of the item
or items being purchased.
8.11 Selection of Methods of Construction Contracting Management
8.11.1
Construction Contract Management. The intent of Rule 8.11 is to specifically
identify alternative methods of management of construction and the criteria to
be used in selecting such methods. In addition, the intent of this Rule is to
clarify that the method of source selection used to award a state contract for a
particular construction project shall continue to be governed by all the
applicable provisions of chapter 2 of title 37, entitled “State Purchases”, also
referred to as the “State Purchases Act”. These provisions include but are
not limited to sections 37-2-17 “Methods of source selection”; 37-2-18
“Competitive sealed bidding”; 37-2-19 “Competitive negotiation”; 37-2-20
“Negotiations after unsuccessful competitive sealed bidding”; 37-2-21
“Noncompetitive procurements”; 37-2-22 “Small purchases” and 37-2-59
“Professional services – Architectural, engineering, and consultant services –
Committee”. Provided, however, the provisions of Rules 8.11.3 and 8.11.4
shall not apply to road, bridge and heavy construction projects which are
funded in whole or in part by federal funds.
8.11.2
Road, Bridge and Heavy Construction Projects. The provisions of Rules
8.11.3 and 8.11.4 shall not apply to road, bridge and heavy construction
projects that are managed by the Rhode Island Department of Transportation
and are funded in whole or in part by federal funds. Road, bridge and heavy
8-21
construction projects are subject to the methods of management of
construction contracting, including the criteria for selecting such methods, that
are set forth in applicable federal law, including but not limited to 23 U.S.C.
112(b)(i) as amended, and regulations promulgated there under.
8.11.3
Construction Contract Management Methods and Criteria. For all other
construction projects not included in Rule 8.11.2, the methods below, along
with the criteria for each method, are the alternative methods of construction
contract management deemed feasible by the Chief Purchasing Officer. The
methods below are not mutually exclusive and may be combined on a project.
8.11.3.1
General Contractor Method. The general contractor method is
typified by one business, acting as a general contractor,
contracting with the State to timely complete an entire
construction
project
in
accordance
with
drawings
and
specifications provided by the State. Generally the drawings and
specifications are prepared by an architectural or engineering
firm under contract with the State. Further, while the general
contractor may take responsibility for successful completion of
the project, much of the work may be performed by specialty
contractors with whom the general contractor has entered into
subcontracts.
The general contractor method is the generally preferred method
of construction work and may be selected for a project when it is
determined that the following criteria will be met:
(a)
the project requires timely completion of the construction
work in accordance with drawings and/or specifications
provided by the State and/or the State’s agent.
(b) the project work may be performed by specialty sub-
contractors under the control and supervision of a general
contractor.
(c) the project does not require direct supervision or coordination
between the contractor and project engineering/design
professionals other than as normally performed by State
employees.
(d) the construction project is estimated to cost in excess of ten
thousand dollars ($10,000).
(e) sufficient time exists to complete the design, bid the project
and construct the work by the desired occupancy date.
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8.11.3.2
Multiple Prime Contractors. Under the multiple prime contractor
method, the State or its agent contracts directly with any number
of contractors, often representing different trades, to complete
portions of the project in accordance with the State's drawings
and specifications. The State and/or its agent shall have primary
responsibility for successful completion of the entire project.
The multiple prime contractor method may be selected for a
project when it is determined that the following criteria will be
met:
(a)
the State or its agent is able to coordinate job site activities
of any number of contractors and/or subcontractors with
varying areas of construction expertise to complete portions
of the project in accordance with the State's drawings and
specifications, and the State or its agent will contract
directly with such contractors and/or subcontractors.
(b)
the State and/or its agent is able to assume primary
responsibility for successful completion of the entire
project.
(c)
the construction project is for the rehabilitation or
renovation of a building or buildings.
(d)
the contract(s) for the rehabilitation or renovation of any
building(s) in the aggregate are estimated to cost less than
two million dollars ($2,000,000).
8.11.3.3
Design-Build. In a design-build project, a person or firm contracts
directly with the State to meet the State's requirements as described
in a set of design or engineering specifications, bridging
documents, or scope of work. Final design and construction are
both the responsibility of the design-build contractor. This method
can include projects where the design-build contractor supplies the
site as part of the design-build package.
The design-build method may be selected for a project when it is
determined that the following criteria will be met:
(a)
the State does not have the ability to prepare the requisite
design or engineering specifications, bridging documents,
or scope of work.
(b)
the State cannot manage or supervise the work of specialty
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trade contractors and it is not in the State’s best interest to
contract directly with such specialty contractors.
(c) the State determines that it is in its best interest for a design-
build firm to assume responsibility for both final design
and construction of the project.
(d) due to time constraints and the need to complete the project
on an expedited basis, it is in the State’s best interest to
select a design-build contractor rather than a general
contractor for the project.
(e)
construction work on the project has an estimated cost
equal to or greater than two-million five-hundred thousand
dollars ($2,500,000).
(f) the State desires to have a single firm responsible for both
design and construction.
8.11.3.4
Construction Manager at Risk. A Construction Manager at Risk
is a person or firm experienced in construction that has the ability
to evaluate and to implement drawings and specifications as they
affect time, cost, and quality of construction and the ability to
coordinate the construction of the project, including the
administration of change orders. Without limitation, the
construction manager at risk shall guarantee that the project will
be completed on time and will not exceed a specified maximum
price, and/or may obtain subcontractors through the issuance of
multiple competitively negotiated bid packages as the design is
developed. The construction manager at risk may provide for any
and all services as deemed necessary by the state which may
include, but not be limited to, construction services, management
services, accounting services, design services and, the
employment of specialty subcontractors to the construction
manager at risk as deemed necessary to successfully complete
the project.
The Construction Manager at Risk method may be selected for a
project when it is determined that the following criteria will be
met:
(a)
the State lacks the resources to evaluate and implement
drawings and specifications as they affect time, cost, and
quality of construction and lacks the ability to coordinate
the construction of the project, including the administration
of change orders.
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(b)
the
State
requires
professional
assistance
in
the
development of a cost effective design (also known as the
construction document phase) for the project.
(c)
it is in the State’s best interest to hire a construction
manager who can guarantee that the project will be
completed on time and will not exceed a specified
guaranteed maximum price for construction for the scope
of the work, as defined by the drawings, specifications, and
other pertinent information known at the time the
guaranteed maximum price was set.
(d)
it is in the State’s best interest not to retain the services of a
general contractor for the project and not to directly hold
contracts with subcontractors, but rather to retain the
services of a construction manager, who shall be required
to directly retain subcontractors through issuance of
multiple, competitively negotiated bid packages.
(e)
it is in the State’s best interest to pay a single management
fee which may be either a lump sum or a combination of
other fees, except that said fees shall not be calculated as a
percentage of construction costs, with a guaranteed
maximum cost for construction.
(f)
it is in the State’s best interest to hire a construction
manager
who
can
provide
construction
services,
management services, accounting services, and retain
specialty
subcontractors
as
deemed
necessary
to
successfully complete the project.
(g)
the project has an estimated cost equal to or greater than
twenty-five million dollars ($25,000,000).
8.11.3.5 Owner Program Management. Owner Program Management is a
method of procurement in which the program manager acts as the
owner's agent in all aspects of the construction project including
architectural programming, planning, design and as well as
construction. The owner’s program manager provides services
ranging from early feasibility studies to post-construction facilities
management. The program manager typically provides services
that include: a) the establishment and management of cost and
time parameters, b) value engineering input and cost analysis, c)
preparation of bid packages, d) establishment and maintenance of
quality control standards, e) project reporting and, f) project
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accounting services. Other specific services may be contracted to
the owner’s program manager.
The Owner Program Management method may be selected for a
project when it is determined that the following criteria will be
met:
(a)
the State does not have the ability to prepare the requisite
design or engineering specifications, bridging documents,
or scope of work;
(b)
the State cannot manage or supervise the work of specialty
trade contractors and will not contract directly with such
specialty trade contractors;
(c)
it is in the State’s best interest to retain a program manager
to supervise and or monitor the activities of a general
contractor; and/or
(d)
it is in the State’s best interest to retain a program manager
to supervise and or monitor the engineering and
architectural services for a project;
(e)
the construction project has an estimated cost equal to or
greater than ten thousand dollars ($10,000).
8.11.4
Construction Contract Management Selection Information. In addition to
criteria set-forth in Rule 8.11.3, the following information for a particular
project shall be submitted to the Chief Purchasing Officer under Rule 8.11.5:
8.11.4.1
when the project must be completed or ready for occupancy or use;
8.11.4.2
the specific nature of the project and its specialized needs, e.g.
housing, offices, laboratories, and specialized construction;
8.11.4.3
the extent to which the requirements of the procuring agency and
the ways in which said requirements are to be met are known;
8.11.4.4
the location of the project;
8.11.4.5
the size, scope, complexity, and economics of the project;
8.11.4.6
the amount and type of financing available for the project,
including whether the budget is fixed and the source of funding,
e.g., general or special appropriation, federal assistance moneys,
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general obligation bonds or revenue bonds;
8.11.4.7
the availability, qualification, and experience of State personnel to
be assigned to the project and how much time the State personnel
can devote to the project;
8.11.4.8
the availability, experience and qualifications of outside
consultants and contractors to complete the project under the
various methods being considered;
8.11.4.9
the method of source selection under the State Purchases Act that
will be used to award a contract to a vendor for this particular
project.
8.11.5
Documentation of Selection Determination. Using and including the
information in Rule 8.11.4, the purchasing agent or purchasing agency
responsible for carrying out the construction project shall set forth in writing
to the Chief Purchasing Officer the facts that led to the selection of a
particular method of construction contract management pursuant to the criteria
set forth in Rule 8.11.2 or 8.11.3 and the information required in Rule 8.11.4.
The Chief Purchasing Officer shall include in the contract file a written
statement setting forth the facts that led to the selection of a particular method
of management of construction in each instance. The Chief Purchasing
Officer’s written statement may adopt, in whole or in part, any written
statements provided by the purchasing agent or the purchasing agency.
8.11.6
Protest. Any actual or prospective bidder, offeror, or contractor, who is
aggrieved in connection with the solicitation or selection for award of a
contract, may file a protest with the Chief Purchasing Officer pursuant to
RIGL section 37-2-52.
8.12 CONTRACT ADMINISTRATION
Subsequent to the award of any contract for goods or services and continuously over the
life of any contract, each agency shall determine and verify that service(s) provided or
goods received match exactly all contract specifications as to kind, quality, quantity, or
frequency and price. Each Agency shall document in detail all deviation(s) and submit
formal complaint(s) to the Office of Purchases for followup action.
8.12.1 Attestation and approval of payment vouchers by duly authorized agents of the
agency shall constitute acceptable evidence of such verification.