CHECKLIST OF GENERAL CONTRACT
to executing any contract, governmental entities should, at a minimum, consider
the following matters:
Government Entity’s Execution.
Is the proper entity or person executing the contract on behalf of the
governmental entity? The Board of
County Commissioners for each county, city council and/or mayor for cities and
the governing board for other entities are authorized to enter into contracts
for and on behalf of governmental entities.
By establishing a procedure which requires all contracts involving the
governmental entity to be made by the appropriate person(s), the entity avoids
the possibility of having liability for contracts which the entity did not even
know existed. It
is required that all contracts be approved by resolution at a public meeting of
the entity unless exempted by law.
Contractor’s Execution. Is
the person signing on behalf of the non-governmental entity authorized to sign
for and on behalf of that entity? For
example, if the entity is a corporation, is the person signing a corporate
officer who is authorized to bind the corporation?
The safest way to insure corporate authority is to require a certified
resolution of the board of directors authorizing the execution of the contract.
Insurance. If the contract requires insurance, a binder or proof of
insurance should be obtained prior to executing the contract.
Insure that the governmental entity is listed as an additional insured
(if appropriate) and that the coverage requested is listed on the proof of
insurance. An additional provision
should provide that before the policy can be canceled, the governmental entity
shall receive appropriate and timely written notice from the insurer.
Each time a contract is renewed, a new binder should be obtained and
maintained with the contract.
Contract Monitoring. Once
the contract is executed, a responsible party should be designated by the entity
to monitor the progress and operation of the contract and to insure that the
contracting party is complying with the terms of the contract.
(SEE CONTRACT ADMINISTRATION GUIDELINES FORM a.)
Attorney Review. Since a
contract when executed by the proper parties is legally binding upon the
governmental entity, it is again strongly suggested that the governmental
entity's attorney who handles contractual matters, prepare and approve the form
and content of the contract. If
there is any question regarding any contract issue, the attorney should be
consulted before any action is taken regarding the proposed contract.
Renewals. Generally a contract should be entered into for a period of
no longer then one year. If the
contract provides for renewal, an affirmative act of renewal should be required
by the contract and the renewal not occur by default.
Any contract that purports to last for more than one year should contain
a funding paragraph wherein the contract is contingent upon the governmental
entity receiving the funding necessary to continue the operation of the
Cost/Benefit Analysis. Prior
to renewing or extending a contract, a detailed cost-benefit analysis should be
conducted to insure that the governmental entity is receiving the benefit for
which they bargained at a fair and reasonable price.
Contractor Viability Analysis. If
there is reasonable concern about the economic viability of the contractor, it
is appropriate to request a financial statement from the contractor, as well as
references from the contractor's banking institution in order to insure that the
contractor will be able to comply with his contractual obligations.
If the contractor is a corporation, the entity should consider requiring
personal guarantees from the contractor’s principals.
Bidding. In all cases, an independent determination should be made by
the governmental entity's attorneys concerning whether the contract is required
to be competitively bid.
Modifications. The contract should provide that it can only be modified by a
written modification signed by the parties.
A sample modification form is contained in the contract manual.
[ ] 11. Default. In the event that the contracting party defaults on any term or condition of the contract, the default should be immediately discussed in an informal manner with the contractor to try to obtain a satisfactory resolution. If informal resolution is not immediately successful, a notice of default should be sent to the party. A sample notice of default is included in the contract manual. In order to insure proof of service, it is strongly suggested that the notice of default be personally served on the defaulting party or sent by registered mail return receipt requested. The notice of default should reference the return receipt number.
Financial Obligations. Governmental
contracts are prohibited by the state constitution from obligating future budget
years, except in certain circumstances. Any
contract extending for a period in excess of one year should be reviewed by the
entity’s attorney. The risk of
violating the state constitution for a multi-year contract may be lessened by
inserting a provision in the
contract making the contract contingent upon the governmental entity receiving
the necessary funding. A sample
provision is included in the contract manual.
Worker’s Compensation. In
all contracts where the other party may have employees, the contract should
require, and the entity should receive proof of, worker’s compensation.
non-governmental entity should indemnify and hold the governmental entity
harmless. If the non-governmental
entity requests the governmental entity to hold it harmless, the matter should
be specifically considered and approved by the executing official, legal
counsel, and reviewed by the insurer.
Contract Purpose. An
entity should determine whether the subject matter is appropriate for a
governmental entity. Does the
contract impose liability upon the governmental entity that is not normally
considered a governmental function? Does
the contract require the governmental entity to insure a private or
Contract Recordkeeping. It
is suggested that the county commissioners, city council or other governing
board maintain a current information list regarding all contracts currently in
existence which includes: the contracting parties; origination date; identity of
governmental unit; identity of governmental employee monitoring the contract;
expiration date; nature of services; insurance information; and the financial
obligation of the governmental entity by reason of each contract.
[ ] 17. Minors. In the event that any agreement is signed by a minor a provision should be added requiring authorization from the minor's parent or guardian. A sample provision is included in the contract manual.