Contract Renewal/Administration/Multiyear Contracts
Purchasing and Payment Processing
View policy pdf: Contract Renewal Administration Multiyear Contracts Policy
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:
- Such contracts may be executed only on a standard form developed by the Department of Administrative Services for such use.
- The contract shall terminate absolutely and without further obligation on the part of the University at the close of the fiscal year in which it was executed and at the close of each succeeding fiscal year for which it may be renewed.
- The contract may be renewed only by a positive action taken by the University and the nature of such action shall be specified in the contract (i.e., no automatic renewals).
- The contract shall terminate immediately at such time as appropriated and otherwise un-obligated funds are no longer available to satisfy the obligations of the University under the contract. The determination of the occurrence of such unavailability of funds shall be made by the university in its sole discretion and shall be conclusive.
- The contract shall state the total obligation of the University for the fiscal year of execution and shall further state the total obligation, which will be incurred in each fiscal year renewal term, if renewed.
- The contract shall provide that title to any supplies, materials, or equipment shall remain in the vendor until fully paid for by the University.
- A contract containing the provisions listed above shall be deemed to obligate the University only for those sums payable during the fiscal year of execution or, in the event of renewal by the University, for those sums payable during the individual fiscal year renewal term. No such contract shall create a debt of the state for the payment of any sum beyond the fiscal year of execution or, in the event of a renewal, beyond the fiscal year of such renewal.
- The contract may provide for the payment by the University of interest or the allocation of a portion of the contract payment to interest so long as the contract is in compliance with the provisions listed above.
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.
Responsible University Senior Administrator: Vice President for Finance & Administration
Responsible University Administrator: Procurement Officer
Policy Owner: Procurement
Policy Contact: Robert Currey
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
Date Issued: 01/01/2016