Section 17.1 - Consultants and Other Contractors for Professional and Artistic Services
Date: February 2010
Approved: Senior Associate Vice President for Business and Finance
University departments 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. University departments 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 5, Receivables).
- 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 Chancellor for Research at UIC or UIUC and the Assistant Vice President for Business and Finance and Academic Affairs at UIS.
- 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).
Certain words appear frequently throughout this policy and have the following meanings:
A contract is a mutual, written agreement between The Board of Trustees of the University of Illinois and another entity whereby each party is required to perform certain obligations to satisfy the agreement. A contract may or may not require the transfer of funds, the transfer of tangible property, and/or the issuance of a purchase order.
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.
An employee is any individual presently employed by the University.
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.
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)
A General Services (other than Professional and Artistic) contract is used 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
A Construction Related Services (including Architectural, Engineering, and Land Surveying Services) contract is used to procure construction related services that are usually obtained through the appropriate campus Office for Capital Programs or Facilities Management Department. 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 Office of Business and Financial Services (OBFS), 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 section.
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, departments must follow the administrative procedures outlined in Section 17.2, Classification of Independent Contractors Versus Employees.
Guidelines for Selection of 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, departments 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 U.S. 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 department, those departments 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 department requiring such services must submit a written request, approved by the department head , director and/or dean to the Executive Assistant Vice President (EAVP) for Business and Finance (UIC) , the Assistant Vice President (AVP) for Business and Finance (UIUC), or the Chief Business Officer (CBO) (UIS) . The EAVP (UIC), AVP ( UIUC) or CBO (UIS) transmits the request to the Chancellor for approval. After receiving the Chancellor's approval, the EAVP (UIC), AVP (UIUC) or CBO (UIS) 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 U.S. government (federally-sponsored projects), contact the OBFS, 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 and Related Documentation
Total fees and allowable expenses less than $5,000
Departments must complete the form titled University of Illinois Contract for Professional and Artistic Services Under $5,000 (P&A contract) when procuring professional and artistic services if total fees and allowable expenses are less than $5,000 for the duration of the contract including any renewal periods.
If services will involve the sharing of Protected Health Information (PHI), the provisions of the Health Insurance Portability and Accountability Act (HIPAA) apply. For services meeting this requirement in the amount of $4,999.99 or less, use the University of Illinois Contract for Professional and Artistic Services Under $5,000 Requiring HIPAA (P&A Contract Requiring HIPAA).
Before services commence, the department should complete and the contractor should sign two originals of the P&A Contract form or the P&A Contract Requiring HIPAA form. The Instructions to Department page of either the P&A Contract form or the P&A Contract Requiring HIPAA form include the necessary departmental certification requirements as well as the determination of independent contractor status, which is not to be submitted to the contractor.
When all the necessary departmental approvals and P&A Contract form or the P&A Contract Requiring HIPAA form signatures have been obtained, the department should distribute an original of the executed P&A Contract or the P&A Contract Requiring HIPAA to the contractor and retain one original for its files.
Payment may not be made to the contractor without a fully executed contract. For P&A Contract or the P&A Contract Requiring HIPAA payment procedures, see "Payments for Professional and Artistic Services" below.
NOTE: If the contractor will not accept the University form and requires the use of its own contract form, the department must submit the Contract Approval/Routing Form (CARF) with the contractor's form to the OBFS, Purchasing Division at UIC and UIS or the Office of University Counsel (University Counsel) at UIUC for review.
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 departmental representative discuss insurance requirements with the proposed contractor so there are no surprises or misunderstandings.
To facilitate the contracting process, University Risk Management has categorized contracts as either low, medium, or high-risk contracts.
Low risk contracts are those where all the following conditions apply:
- 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.
- Contractor’s activities are not perceived to expose the University, and other third parties, to harm.
- Contractor may drive on University premises but driving is incidental to the performance of the contract.
- 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:
- Contractor may be a sole proprietor but the contractor’s activities are perceived to expose the University, and other third parties, to harm.
- Contract value is less than $5,000 for the duration of the contract including any renewal periods.
- 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:
- 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.
- Contract value is less than $5,000 for the duration of the contract including any renewal periods.
- 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 University Risk Management.* (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. In addition, an “Exceptions Form” should be completed by the Department and routed to University Risk Management when seeking to obtain the exception form.
Total fees and allowable expenses $5,000 - $19,999.99
The P&A Contract or the P&A Contract Requiring HIPAA may not be used if the department anticipates a continuing or recurring need for the same or related services from the same contractor and the total amount of the services will exceed $4,999.99 for the duration of the contract period including any renewal periods. Instead, the following procedures apply.
Before services commence, the department should complete and submit the following documents to the OBFS, Purchasing Division for review and processing.
- Contract Approval/Routing Form (CARF)
NOTE: If the chosen contractor requires the modification of University forms or the use of its own contract form, the department must submit the contractor's original document along with a completed CARF for review and possible modification.
Purchasing reviews and makes any required modifications to the contract, obtains University Counsel approval (if necessary), and obtains the contractor's signature (if not already affixed to the contract) and official University signatures for execution of the contract. After the contract is fully executed (signed by both parties), Purchasing distributes the document providing an original to the contractor, an original to the Office of The Board of Trustees, and a copy to the department.
Total fees and allowable expenses $20,000 or more
Requirements for professional and artistic services at this dollar level must be handled through a State-mandated competitive selection process. Purchasing issues a formal Request for Proposal (RFP) that uses standard RFP forms, contract forms and other documents, and includes public advertisement in the Illinois Public Higher Education Procurement Bulletin for a minimum of fourteen (14) days prior to opening RFP responses.
Departments must complete and submit the Professional and Artistic Services Information Form (PASIF) to Purchasing, who will use this information to prepare the RFP. Departments will receive copies of all RFP responses for review and evaluation. Departments should submit their recommendation for contract award to Purchasing in the form of a letter signed by a responsible departmental representative. For planning purposes the department should allow at least two (2) months for completion of the RFP process.
Following selection of the contractor and before services commence, an executed contract must be in place. Purchasing works with the department to finalize the contract, reviews it for compliance with the requirements in Section 2.3, University Contracts and Leases, and obtains the official University signatures and contractor's signature. The CARF is used for routing the contract for official signatures.
Total fees and allowable expenses of $1,000,000 or more
Contracts for $1,000,000 or more must follow the same competitive bid process as contracts for $20,000 or more, as described above. In addition, contracts for professional and artistic services amounting to $1,000,000 or more in one fiscal year require prior approval of The Board of Trustees. At this dollar level, departments should allow at least two additional months for completion of The Board of Trustees approval process and execution of the contract.
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 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, the department must submit a written request to the OBFS, 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 Higher Education Procurement 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
The OBFS, University Payables obligates all professional and artistic services contracts paid from State-appropriated funds. University Payables files all professional services contracts of $5,000 or more from UIC, UIS, and UIUC with the Illinois State Comptroller.
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 the OBFS, University Payables.
Sponsored agreements are reviewed and processed through the Office of the Vice Chancellor for Research at UIC and through the OBFS, Grants and Contracts at UIS and 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 OBFS, Purchasing Division.
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 contract forms. 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 under $5,000, submit the contractor's form to the OBFS, Purchasing Division at UIC and UIS or University Counsel at UIUC. For certification requirements on contracts of $5,000 or more, submit the contractor's form to the OBFS, Purchasing Division.
Standard Contract Forms and Templates
The standard contract forms referenced in this section have been reviewed and approved by University Counsel. If the contractor requires a change to any of the terms and conditions in the standard University contract forms, additional review and approval by University Counsel is required. Following is a list of all forms referenced in this document.
Please send questions regarding this policy manual to OBFSPolicies@uillinois.edu.
Last Updated: November 1, 2013