Business and Financial Policies and Procedures
 

Section 17.1 - Consultants and Other Contractors for Professional and Artistic Services

Date: March 2014
Approved: Senior Associate Vice President for Business and Finance

 

Overview

University units may contract for the purchase of professional and artistic services to accomplish the objectives of the University when such services are specialized, highly technical, and cannot be economically or satisfactorily performed by University employees as part of their normal duties. Units shall review the insurance policies (see Section 6, Insurance of the University and comply with all requirements. Contractors are used for specific tasks and for explicit periods of time. Contractors can be either business firms or individuals who are not employees of the University.

Payments to contractors must be made in full compliance with all United States government and State of Illinois laws, orders and regulations. Specific issues related to payments are referenced throughout this section.

Agreements not addressed in this section include:

  • Revenue generating agreements - contracts wherein the University provides services, facilities or products for compensation (see Section 22.1, Contracts for Revenue Generating Activities).
  • Intellectual property rights or technology transfer agreements - contracts wherein the University provides intellectual property rights or technology transfer to outside entities for compensation. For assistance with these types of contracts, contact the Office of the Vice President for Research (OVPR).
  • Revenue neutral agreements - contracts such as non-disclosure agreements, student placement agreements (including internships, student teaching, etc.), affiliation agreements with other institutions or settlement agreements (personnel or lawsuits). See Section 2.3, Initiation, Review, and Approval of Contracts and Leases.

Definitions

Contract
A contract is an agreement between the University and one or more other parties, creating obligations that are legally recognizable or enforceable. A contract may or may not require the transfer of funds, the transfer of tangible property, and/or the issuance of a purchase order.

Contractor
A contractor is either a business firm or an individual (who is not a University employee) who contracts with the University to perform a service.

Employee
An employee is any individual presently employed by the University.

Employer-Employee Relationship
An employer- employee relationship exists when an employer has the right to direct and control the work of an individual who performs the services, including not only the results to be accomplished but also the methods and means by which the results are accomplished. Even if the employer does not exercise the right to direct or control the manner in which the worker performs the services, the fact that the employer retains the right to do so is sufficient to create an employer-employee relationship.

Independent Contractor
An independent contractor is a business firm or an individual that contracts with the University to provide services for which the University controls or directs at most the result of the service, not the means and methods of accomplishing the result.

Types of Contracts

General Services (other than Professional and Artistic) - contracts for the purchase of useful manual skills or labor that may or may not produce a tangible commodity. Examples of these services include, but are not limited to: security guard services, transportation services, clothing rental and cleaning, laundry, film processing, janitorial work, window washing, rubbish and waste removal, and service and repairs to equipment. The process for acquiring such services is described in Section 7, Purchase of Goods and Services.

Construction-Related Services, including Architectural, Engineering, and Land Surveying Services - contracts used to procure construction related services that are usually obtained through the University Office of Capital Programs and Real Estate Services (UOCPRES), or the campus Facilities Management unit. The process for acquiring such services is described in Section 2.3, University Contracts and Leases.

Professional and Artistic Services
Professional and Artistic Services means those services provided under contract to the University by a business firm or individual acting as an independent contractor and qualified by education, experience and/or technical ability as defined below.

An essential element distinguishing professional services from other services is confidence, trust and belief in not only the ability but also the talent of the individual(s) performing the services.

Professional and artistic services are primarily for intellectual or creative skills. Contracts for services involving primarily manual skills or labor are not considered professional and artistic services contracts.

If the professional or artistic services contract is with a business entity, the individuals whose education, experience, and technical ability provided the basis on which the business entity was selected must meet the required qualifications.

Professional and artistic services are further defined as follows:

  • Qualified by education means the individual(s) must have obtained the level of education required to provide the requested services.
  • Qualified by experience means the individual(s) must have the level of general experience required to provide the requested services.
  • Qualified by technical ability means the individual(s) must demonstrate a high degree of skill or ability to provide the requested services.

A detailed list of specific professional and artistic services can be found at Professional and Artistic Service Categories. For other services not specifically listed, the Purchasing Division, using the factors identified above, will determine on a case-by-case basis whether such services qualify as professional and artistic. Any services identified as professional and artistic must be purchased in accordance with this policy.

How to Contract for Professional and Artistic Services

The policies and procedures to contract for professional and artistic services are based on the total anticipated fees and allowable expenses for the duration of the contract including all renewal periods. For any professional and artistic services contracts entered into with individuals, units must follow the administrative procedures outlined in Section 17.2, Classification of Independent Contractors Versus Employees, and as directed by the Purchasing Division’s Professional and Artistic Services.

Guidelines for Selecting a Professional and Artistic Services Contractor

  • A determination is made that the services cannot be performed more economically or satisfactorily through the University employment process.
  • An appropriate selection process, based on the dollar level of the expenditure, is used to secure the most qualified firm or business entity or person available, subject to the constraints of timeliness and costs.
  • Charges are appropriate considering the qualifications of the independent contractor, the contractor's normal fees and the nature of the services.
  • Conflict of interest is avoided. In general, the following contractors are prohibited from contracting with the University: members of the General Assembly; elected state officers; state employees (unless certain conditions are met - see below); members of The Board of Trustees; University officers and employees; and, in every case, their spouse, parents, and children. In the case of University officers, employees, and their families, an exception can be made by the President of the University or delegate if the contract is deemed essential to University operational, research, or academic needs. See the Higher Education Procurement Rules, Section 526.5013, and Section 7.2, Purchase of Goods and Services for more details.
  • If the services are to be provided by an individual and not by a business entity or firm, the service provider is properly identified and classified as an independent contractor versus an employee. The first step in contracting is to make this classification determination using the University's policy and guidelines contained in Section 17.2, Classification of Independent Contractors Versus Employees.

    The Internal Revenue Service (IRS) may impose penalties on an employer that fails to correctly classify an individual as an employee and thereby fails to withhold the required income and employment taxes. If an individual is classified as an employee, units should contact the Office of Academic Human Resources for information and assistance on how to process an appointment or payment for the individual in question.
  • Federal employees may be utilized as consultants. They may receive compensation and/or reimbursement of expenses from restricted funds provided by the US government under the following conditions.
    • They obtain prior approval from their employing agency.
    • Services are performed outside their regular working hours (as defined by their employer) or while they are on leave status from official duties.
    • Persons paid from federal grants or contracts are normally not considered federal employees.
  • Employees of the State of Illinois, its agencies, and state-supported educational institutions may be utilized as consultants. They may be paid reasonable compensation and/or expenses for their consulting work under the following conditions:
    • Prior written approval is obtained from their employing agency.
    • Services are performed outside their regular working hours (as defined by their employer) or while they are on leave from official duties.
    • The dollar level of the state employee's current salary does not exceed 60% of the current salary of the Governor of the State of Illinois.
  • The University employment contract provides that intra-University consultation is part of an employee's obligation to the University. When an employee provides services to more than one unit, those units may apportion the costs of the services between them. Except in unusual cases, employees may not receive additional financial compensation beyond their full-time base salary (and additional summer appointment, if applicable).

In unusual cases where consultation is across organizational lines, and the work performed is in addition to the individual's regular workload, special approval may be requested from the President of the University to enter into a separate consulting contract with the employee, including payment of a reasonable and customary consulting fee. This fee is in addition to the employee's salary as an employee.
The President is authorized to approve such consulting arrangements with an employee only if the services are deemed essential to the University. The unit requiring such services must submit a written request, approved by the Unit Head/Dean, to the campus OBFS executive officer, who routes it to the campus Chancellor for approval. After receiving the campus Chancellor's approval, the campus OBFS executive officer forwards the request to the President for approval. If the request is approved by the President, a written copy of the approval is attached to the request.

In addition, if a University employee is paid a consultant fee or additional compensation from restricted funds provided by the U.S. government, prior written approval must be obtained from the sponsoring agency.

If payment for professional and artistic services, including consulting, is made from restricted funds provided by the US government (federally-sponsored projects), contact Grants and Contracts for information regarding possible payment limitations.

  • Procedures for contracting for professional and artistic services with resident aliens are the same as detailed in this section. No Immigration and Naturalization Service (INS) or IRS restrictions exist regarding contracting with resident aliens for services.
  • Instructions for contracting for professional and artistic services with nonresident aliens as consultants, scholars, and dignitaries who will receive a University payment for services can be found in Section 18.2, Foreign Nationals. This includes University payments either directly to or on behalf of the nonresident alien for services as an independent contractor or expenses (i.e., hotel, meals, transportation, etc.). Services as an independent contractor include lecturing, consulting, or other activities for which the nonresident alien provides a service for payment to the University.

Contracting Methods

Units must use one of two methods when contracting for professional and artistic services: the traditional, paper-based process; or, the Illinois Contract System (iCS), the University’s online contracts management system. iCS allows units to “build” certain contracts online, route them for electronic signatures, and submit the fully executed contract for recording and filing by the University Contract Records Office (UCRO) on behalf of the Board of Trustees. Consult the iCS Resource page for more information, contacts, and training options.

Insurance requirements

Because the University’s policy is that contractors, consultants, and other service providers must have liability insurance and other insurance as necessary to protect the financial interests of the University, and other parties, it is imperative that before beginning the contracting process a unit representative discuss insurance requirements with the proposed contractor so there are no surprises or misunderstandings.

To facilitate the contracting process, University Office of Risk Management (UORM) has categorized contracts as either low, medium, or high-risk contracts.

Low risk contracts are those where all the following conditions apply:

  1. Contractor is a sole proprietor.  (If the contractor is NOT a sole proprietor, they will not qualify as a "low risk" contractor.) NOTE: If company is in the construction business, trucking business operating a construction site, or other extra-hazardous occupation, 820 ILCS 185 of the Illinois Combined Statutes requires that even "sole proprietors" MUST obtain insurance.
  2. Contractor's activities are not perceived to expose the University, and other third parties, to harm.
  3. Contractor may drive on University premises but driving is incidental to the performance of the contract.
  4. Contract value is less than $5,000 for the duration of the contract including any renewal periods.

General Liability and Workers' Compensation insurance is waived for low risk contractors. Regarding auto liability, all contractors who drive vehicles on University premises are expected to comply with State of Illinois auto liability law; however, we will not require proof of such insurance from low-risk contractors. *See list for low-risk contractors.

Medium risk contracts are those where:

  1. Contractor may be a sole proprietor but the contractor's activities are perceived to expose the University, and other third parties, to harm.
  2. Contract value is less than $5,000 for the duration of the contract including any renewal periods.
  3. Contractor may drive to multiple locations on University premises.

Generally speaking, "medium risk" contractors will be businesses and will have the necessary insurance.

For medium risk contractors, evidence of a minimum of $500,000 of general liability insurance is required. Unless the medium-risk contractor is a sole proprietor evidence of Workers' Compensation is required.  NOTE: If company is in the construction business, trucking business operating at a construction site, or other extra-hazardous occupation, 820 ILCS 185 of the Illinois Combined Statutes requires that even "sole proprietors" MUST obtain insurance. 

Regarding auto liability, if the medium-risk contractor transports UI property and/or employees, or if use of a vehicle is integral to the performance of the contract then they will be required to have commercial/business auto liability with a minimum of $500,000 combined single limit. If the contractor will not drive vehicles on University premises, evidence of auto liability insurance will not be required; however, contractors are expected to comply with State of Illinois auto liability law. In instances where the contractor is also a sole proprietor, General Liability may be waived using the Exceptions process.*See list for medium-risk contractors.

High risk contracts are those where:

  1. Contractor may be a sole proprietor but the contractor’s activities are perceived to expose the University, and other parties, to greater harm than a “medium-risk” contractor.
  2. Contract value is less than $5,000 for the duration of the contract including any renewal periods.
  3. Contractor may drive to multiple locations on University premises.

Generally speaking, “high risk” contractors will be businesses and will have the necessary insurance.

For high risk contractors, evidence of a minimum of $1 million of General Liability insurance (per occurrence) and $2 million (aggregate) is required.  Unless the high-risk contractor is a sole proprietor evidence of Workers’ Compensation is required.  NOTE: If company is in the construction business, trucking business operating at a construction site, or other extra-hazardous occupation, 820 ILCS 185 of the Illinois Combined Statutes requires that even "sole proprietors" MUST obtain insurance. 

In addition, evidence of Professional Liability insurance of no less than $1 million per occurrence is required, unless waived by UORM.* (If the contractor can satisfactorily document their professional liability coverage is included in their General Liability policy, we will not require a separate Professional Liability policy.) Regarding auto liability, if the high-risk contractor transports UI property and/or employees, or if use of a vehicle is integral to the performance of the contract then they will be required to provide proof of commercial/business auto liability insurance with a minimum of $1 million combined single limit. If the contractor will not drive vehicles on University premises, evidence of auto liability insurance will not be required; however, contractors are expected to comply with State of Illinois auto liability law. *See list for high-risk contractors.

*Exceptions to the University’s insurance requirements will be made only after a risk identification and evaluation process. To request an exception, submit a written request to UORM.

Waivers of the Competitive Selection Process

In exceptional circumstances, the Illinois Procurement Code allows for a waiver of the State-mandated requirement for a competitive selection process. Exceptional circumstances include services available from only one source or emergency procurements. A sole source purchase may be justified when only one contractor is deemed economically feasible or when a requirement is available only from a single supplier.

To request a waiver of the competitive selection process, units must submit a written request to the campus Director of Purchases and include the following information:

  • A description of the services required;
  • An explanation of why the services are needed, including:
    • Names of other sources that were considered,
    • Why other sources were rejected, and
    • How the qualifications of the designated contractor make it unique;
  • The dollar amount of the contract, including an estimate of allowable expenses; and
  • A draft of the contract and/or the contractor's proposal.

If the competitive selection process is waived, the University's intent to contract for the specific services must be advertised in the Illinois Public Higher Education Bulletin, for a minimum of fourteen (14) days prior to execution of the contract or the commencement of services.

If a waiver of the competitive selection process is not granted, or if a qualified provider for the services responds to the advertisement in the Illinois Public Higher Education Bulletin, a competitive selection process must be used.

Payments for Professional and Artistic Services

Contract Obligations and Filing Requirements

When necessary, the University Contract Records Office (UCRO) obligates all professional and artistic services contracts paid from State-appropriated funds. All contracts, regardless of funding (revenue, expenditure, or no funds), that require the Comptroller’s signature must be filed with the UCRO.

To meet University and State of Illinois filing requirements, units must ensure that all fully-executed contracts, along with signed CARF, are filed with the UCRO within seven calendar days after execution. For contracts developed and routed in the Contract Management System, the buyer or coordinator must assign the final checklist task to the UCRO role.

Payment Voucher

Payments for all professional and artistic services contracts (except those issued on purchase orders) are made on the invoice-voucher form. For contracts less than $5,000, the voucher must provide an explanation of the services rendered and the dates the services were performed. Attachments to the invoice voucher must include the contractor's invoice and a fully executed copy of the P&A Contract or the P&A Contract Requiring HIPAA.

If the total amount of the contract is $5,000 or more and obligated by a contract number, the invoice voucher and attachments (i.e., contractor's original invoice) must contain the contract number, the dates the services were performed, and an explanation of the services rendered.
If the funds have been obligated with a purchase order number, payments are made by University Payables.

Sponsored Agreements

Sponsored agreements are reviewed and processed through the Office of Research Services (ORS) at UIC; Grants, Contracts, and Research Administration, or Office of the Provost at UIS; and the Office of Sponsored Programs and Research Administration (OSPRA) at UIUC.

Subcontracting under a Sponsored Agreement for Professional and Artistic Services

Sponsored agreements funded by the U.S. government or other sponsors may include a named subcontractor for the provision of specific professional or artistic services, including consulting services. Procurement of such services does not require a competitive selection process or advertising in the Illinois Higher Education Procurement Bulletin provided the contractor meets the criteria for professional and artistic services and is specifically named in the original grant proposal or award, or if the sponsor provides other written approval of the specifically named subcontractor.

If the need for an independent subcontractor can be anticipated, the proposal to the funding agency may include the name of a preferred subcontractor.

If the subcontract is for professional or artistic services, including consulting services, and will not be with a named or sponsor-approved subcontractor, the appropriate documentation for the dollar level of the subcontract as described elsewhere in this section must be furnished to the Purchasing Division.

Reimbursement Restrictions

Independent contractor fee (excluding allowable expenses) - Independent contractor fees paid from U.S. government grants of contracts may not exceed the current daily equivalent rate paid a United States GS-18 unless specific advance written approval is received from the sponsor.

Concurrent service - If during the duration of the contract, an individual is also being compensated at 100% time for services from other funds provided by the U.S. government, regardless of whom the employer may be, such individual may not receive a fee. The individual may be reimbursed by the University only for actual and reasonable allowable expenses. Any exceptions require prior written approval from the sponsoring agency.

Other restricted funds - Services of independent contractors may be utilized subject to the terms and conditions of award documents. If an award document prohibits or restricts the use of an independent contractor, prior written approval must be obtained from the sponsor to secure such services.

Federal and State Certifications

The Federal and State certifications that are required in University contracts have been incorporated into all standard University contracts. If the contractor requires the use of its own contract forms, certifications contained in the University's standard forms must be included. For certification requirements on contracts, submit the contractor's form to the campus Purchasing Division.

Standard Contract Forms and Templates

The following standard contract forms have been reviewed and approved by the Office of University Counsel (OUC). Use these if your unit has not opted to implement the Illinois Contracts System (iCS). If the contractor requires a change to any of the terms and conditions in these standard forms, review and approval by OUC is required.

 

Please send questions regarding this policy manual to OBFSPolicies@uillinois.edu.

Last Updated: March 14, 2014