Prior to executing any contract, governmental entities should, at a minimum, consider the following matters:

[  ] 1.  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.

[  ] 2.  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. 

[  ] 3.  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. 

[  ] 4.  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.)

[  ] 5.  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. 

[  ] 6.  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 contract. 

[  ] 7.  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. 

[  ] 8.  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. 

[  ] 9.  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.

[  ] 10.  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.

[  ] 12.  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. 

[  ] 13.  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.

[  ] 14.  Indemnification.  The 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.

[  ] 15.  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 non-governmental entity?

[  ] 16.  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.