State entities, including the University of Georgia, are authorized to enter into contracts for the acquisition of goods, materials, equipment, services, and supplies. Ordinarily, to avoid pledging the credit of the state, the term of a contract is one year or less. Some contracts contain renewal clauses describing the conditions under which a contract may be renewed for an additional period of time.
When determining beginning and ending dates of the initial contract term, the University must consider both its needs and its budget. To ensure the contract dates comply with the Georgia Constitution prohibiting the pledging of the state’s credit, the university must set aside sufficient funds to meet the entire financial obligation of the initial term of the contract when the contract is signed. Thereafter, the university must ensure sufficient funds are available prior to exercising any renewal option. It may be necessary to structure the end of the initial term to coincide with the end of the state’s fiscal year so that renewal terms will align with the state’s fiscal year for budgetary reasons. Open contracts (or contracts that do not commit the university to spending any money) are an exception to this requirement.
Multiyear agreement refers to any contract which exceeds twelve months and/or will cover more than one fiscal year. When the intent is to enter into an agreement for more than one year, specific contract provisions are often required. Unless sufficient funds are on hand and obligated at the outset, to avoid pledging the state’s credit, the university must divide the multiyear agreement into two or more contract terms. The most common multiyear structure is to define an initial term of twelve months or less followed by up to four one-year renewal terms which may be exercised by the university.
Unless sufficient funds are obligated at the outset, multiyear agreements must be structured as follows:
Contract renewal and monitoring of multiyear agreements are part of contract administration. Other aspects of contract administration include monitoring of supplier performance, monitoring of payments, and documenting and communicating contractual and vendor issues to the Procurement Office. Continued communication and documentation throughout the life of the contract is essential to protect the rights of the University and ensure vendor compliance.
The end user department and Procurement Office should work together to maintain a complete file of all documents and communications related to vendor performance during the contract period. Documentation may include, but is not limited to, noting any discrepancies and following up with the vendor, documenting actual performance against scheduled performance, addressing the dedicating of sufficient resources and appropriate personnel to the contract, etc.
For renewals, the end user department should conduct the following steps:
The Procurement Office will conduct the following steps upon receiving a request from the end user department to renew the contract:
4. Fully execute the Contract Amendment Template, renew the agreement within UGAmart, and if applicable,issuethe purchase order to the vendor.
Phone Number: 706-542-2361
Responsible University Senior Administrator: Vice President for Finance & Administration
Responsible University Administrator: Procurement Officer
Policy Owner: Procurement
Policy Contact: Annette Evans
Phone Number: 706-542-2361
Responsibilities: It is the responsibility of the end user department to complete the Contract Assessment Report.
Responsibilities: It is the responsibility of the end user department to submit a new purchase request
to establish a new agreement when there are no remaining renewal options available.
The end user department should submit this request to Procurement well in advance
of the expiration of the existing contract to allow time for a complete procurement
Record Copy: Procurement
Retention: 10 years from contract expiration for building construction, alterations, repairs; 7 years from contract expiration for others
Question 1? How do I renew a contract that has used all of its available renewal options or that didn’t include renewal options?
Answer 1. A contract cannot be renewed if there are no remaining renewal options or if the agreement was not originally established as a renewable agreement. To obtain goods/services when renewals are not available a requisition will be required and will be processed according to the then current policies and procedures governing purchase of goods/services.