Contracts & Signature Authority

Q: What is a contract and what is the University’s policy with regard to contracts?

A: Any agreement between WSU and a non-WSU party that is enforceable by law, is a "contract". Although under University policy, contracts are to be in writing (University Policy 04-6, Contract Signatories) any agreement to exchange goods, services, or cash is a contract.

University Policy 04-6, Contract Signatories, provides rules regarding who within the University is authorized to sign contracts and the delegation of this authority.   Signatory authority may not be delegated below levels designated by the University Policy.  This policy can be accessed at:  http://policies.wayne.edu/04-06-contract-signatories.php.

With very few exceptions, no contract may be signed on behalf of WSU unless it has first been approved on its face, in writing, by the Office of the General Counsel, except for contracts that follow a pre-approved form (e.g. Personal Services contract, Purchase Order) to which no special language has been added.

Q: Who is authorized to sign business contracts such as purchases of goods or services,    property leases, etc.?

A:   The Board of Governors has delegated to the President full authority as chief executive officer of the University and has authorized the President to designate the duties of other executive officers.

The Board of Governors statute, “Contract Awards,” WSUCA 2.81.01, delegates certain contract-signing authority and authorizes the President to establish guidelines for such delegation. This statute can be accessed at http://www.bog.wayne.edu/code/.  The Board has reserved to itself approval authority in several key areas, such as the purchase or sale of most property.

The procurement of routine supplies, equipment and various types of services necessary for the operation of the University has been delegated to the Purchasing Department. 

WSUCA  2.81.01.080 requires routine contracts with expenditure of budgeted funds in excess of $25,000 to be awarded on the basis of competitive bids. Exceptions may be made with the approval of the Purchasing Department in limited circumstances.  A list of contracts not awarded by competitive bid is regularly given to the Board of Governors. In cases where a Request for Proposal is more appropriate, it will substitute for a competitive bid. Please note the Purchasing Department reserves the right to solicit competitive bids whenever competitive markets exist, even if less than the minimum bid level. Please see APPM section 2.3 for a description of the competitive bid and request for proposal process.

Equipment items of $5,000 or more, purchased with federal grant and contract funds, must have prior approval of the Sponsored Programs Administration (SPA), and the sponsoring federal agency, before a Purchase Order is issued.  SPA is responsible for all tentative index (account) activity. Therefore, all purchase requisitions and change order requests that involve tentative index activity must have the prior approval of SPA.

Special authorization is required for the purchase of certain goods and services.  Please refer to Special Approvals, 2.2.1, Requisitioning Policy for the identification of those goods and services and the unit authorized to approve the acquisition.

The President or his/her designee(s) may grant a written exception in the case of contracts requiring highly specialized service for which a public bid would not be appropriate, or in the case of an emergency. Architectural and engineering contracts, the cost of which are essentially fixed by the State, may be awarded on the basis of specialized experience and strength among the firms which indicate a desire to do business with the University.

It is the responsibility of each member of the University staff and of the Purchasing Department to take appropriate steps to assure that the University does not knowingly enter into any procurement which could result in a conflict of interest. Purchasing brings any situation that appears to be questionable to the attention of the appropriate University officers. In certain situations, transactions involving employees are prohibited unless they are specifically approved by the Board of Governors. The prohibited transactions include purchases from (contract with) (1) an employee of the University; (2) a firm in which the University employee is a partner, employee, director, officer, or substantial stockholder, and where the University employee has solicited the contract, engaged in negotiation regarding the contract, or represented either the firm or the University in the transaction.  For details, please refer to University Pollicy 2005-4 "Contracts Between WSU And External Organizations In Which University Employees Participate".

While you may have authority to sign payroll documents, HR documents, or other items used for internal University administrative matters, this does not necessarily mean that you have authority to sign contracts on behalf of the University.

Q: What are Personal Service Contracts?

A: Personal Service Contract (PSC), form 196, is used to contract for professional services with individual independent contractors who are not employed by the University. It is not used for services provided by corporations, partnerships, companies, or other business entities. Nor is it used to pay individuals who should be assigned to the payroll as employees as described below.

In order to properly initiate a PSC, the exact scope of work and length of time required must be determined.  At this point, it is appropriate to obtain quotations from individuals interested in performing the service. It is the responsibility of the requesting unit to ensure that all individuals, under consideration for the performance of a given service to the University, are treated in a fair and impartial manner. It is important to document the scope of work for use in responding to the request for quotation, and to maintain confidentiality of any and all responses. These documents should be attached to the PSC for audit purposes.

Payment for the personal professional services of individuals who are not employees of the University must be made pursuant to a completely executed contract. Work covered by a PSC is not to be performed until the appropriate PSC or extension thereof has been fully executed by the appropriate University personnel. The University will not pay for services rendered prior to the final execution of the PSC.

PSCs for $25,000 or more are awarded on the basis of the Competitive Bid Process. (see section 2.4 of APPM). Any individual who receives compensation for services is either an independent contractor or an employee. If the individual is an employee, he or she must be assigned to the payroll in accordance with University policies and procedures. PSCs, including honorarium agreements, are not to be used to pay for the services of individuals who should properly be placed on the payroll.

Independent contractors fall into two groups: (1) those providing professional services in five days or less, who receive honoraria and are paid on the Special Payment Authorization (SPA), form 102A, with attached Supplemental Data Required of All Individuals to be Paid for an Honorarium, form 186B, as described in section 1.3.1. Expense Guidelines of the APPM. The submission of more than three honorarium payments during a fiscal year for a single individual is not permitted; and (2) those providing professional services for a period in excess of five days, for whom the PSC must be processed.

Q: How do I determine if someone is an employee or an independent contractor?

A: Any individual who performs services subject to the will and control of the University, both as to what is to be done and how it should be done, is an employee for purposes of federal payroll taxes. It does not matter that the University permits the individual considerable discretion and freedom of action, so long as the University has the legal right to control both the method and result of the services.  It does not matter whether the individual is employed full-time or part- time.

The following questions, which are included in the attachment to the PSC and are set forth in the APPM (at page 105), are helpful in deciding whether a worker should be designated as an employee or as an independent contractor. Each "yes" is a factor in favor of designating the worker as an employee.  Each "no" is a factor in favor of designating the worker as an independent contractor.

1. Is the worker required to comply with instructions from the University about when, where, and how the work is to be done?
2. Is the worker provided free training that would enable him or her to perform a job in a particular method or manner?
3. Are the services provided by the worker an integral part of the University's, or the hiring department's or division's operations?
4. Must the worker render the services personally?
5. Does the University hire, supervise, or pay assistants to help the worker on the job?
6. Is there a continuing relationship between the worker and the University?
7. Does the University set the worker's work schedule?
8. Is the worker required to devote his or her full time to the University?
9. Does the University require that the work be performed at the University or at a specific place designated by the University?
10. Does the University direct the sequence in which the work must be done?
11. Must the worker submit regular oral or written reports to the University (other than invoices)?
12. Is the worker paid hourly, weekly or monthly (as opposed to commission or by the job)?
13. Are business and travel expenses reimbursed?
14. Does the University furnish tools or materials used by the worker?
15. Is the worker able to provide the service without having invested in equipment or facilities used to provide the services?
16. Does the worker work exclusively for the University (as opposed to working for a number of companies or organizations)?
17. Is the worker subject to dismissal for reasons other than non-performance of the contract? (Can the University terminate the worker at will?)
18. Can the worker terminate the relationship with the University at will?
19. Can the services be performed without extensive education or expertise?
20. Is the worker required to do the work without delegating or assigning it to others?
21. Is the worker required to have University approval to hire his or her own assistants?
22. Is the work in question customarily performed by employees?

If the answer to many of these questions is "yes", the person is probably an employee, and should be assigned to the payroll through appropriate personnel procedures.

If the answer to many of these questions is "no", the person is probably an independent contractor. Some of the questions carry more weight than others. For example, if questions 2, 3, 12, 19 or 22 were answered "yes" the person is likely to be an employee. Further, if questions number 6 and 16 are both answered "yes", then the person is probably an employee.

The University interprets question 19 above to mean that professional services are services performed by individuals who are professionally qualified or licensed. Clerical, technical, computing and similar services are not "professional" for purposes of this policy. Individuals performing such services must be paid through the payroll.

If there is doubt, the Office of the General Counsel should be consulted.

Q: What happens if someone who should be treated as an employee is improperly retained as an independent contractor?

A: When a worker who should be treated as an employee is improperly retained as an independent contractor, whether through the Personal Service Contract or the honorarium process, the University is exposed to possible legal and financial liability for failure to:

1. Withhold and pay taxes and social security in accordance with federal and state laws;
2. Report wages paid to the Michigan Employment Security Commission, in accordance with Michigan law;
3. Properly account for the payment of employer unemployment taxes;
4. Properly pay fringe benefits to which an individual may be entitled.

Any financial liabilities (fines and penalties) associated with improper use of the Personal Service Contract will be borne by the budgetary resources of the respective Vice President. Accordingly, if it is discovered that a department or division is improperly utilizing the Personal Service Contract (or honorarium payments) process, the department may be required to submit all future Personal Service and honorarium documents for review and approval to the Office of the General Counsel before the contracts can be processed and payments made.

--updated June, 2011