Personal Service

1
Personal Service Client Service Contracts

• Presented by Laura Nelson
• Office of Financial Management
• October 21, 2005

2
What is a Contract?

• A legally binding agreement between the state and
  another entity, public or private, for the
  provision of goods or services
• Written contracts are required when
• Exchanging money
• Exchanging services
• Exchanging promises
• Relationship independent contractor

3
Who Writes Contracts?

• State Agency to protect states interests
• Contractor review carefully to ensure
  protection of states interests

4
Types of Contracts

• Client Services (RCW 39.29)
• Personal Services (RCW 39.29)
• Interagency Agreements (RCW 39.34)
• Purchased Goods and Services (RCW 43.19)
• Information Technology (RCW 43.105)
• Public Works (RCW 28B.10.50, 39.04, etc.)
• Architecture and Engineering (RCW 39-80)
• Competitive Contracting (RCW 41.06)

5
Personal Service Contracts

• Professional or technical services provided by a
  consultant to accomplish a specific study,
  project or task
• Historically receive considerable scrutiny from
  Legislature, press and public

6
Personal Service Contracts - cont.

• Competition Required
• Informal Competition - 5,000 to 19,999
• Formal Competition - 20,000 or more
• Centralized filing of contracts with OFM OFM
  reviews or approves contract filings.

7
Client Service Contracts

• Services provided directly to agency clients
  including, but not limited to, medical and dental
  services, employment and training programs,
  residential care, and subsidized housing.
• High legislative concern due to fiscal issues
• Exempt from personal service contract rules

8
When can we use Personal Service Contracts?

• Relationship independent contractor
• Services require professional and technical
  expertise of contractor
• Services are provided to your agency, other
  providers/contractors, other state agencies, or
  businesses

9
Is there a Time or Dollar Limit?

• Personal service contracts are typically short
  term, but can be up to five or more years in
  length
• No maximum dollar limit on contracts, but
  competition is required at
• 5,000 to 19,999 informal
• 20,000 or more formal

10
Personal Service Contracts Filing Categories

• Higher education state funds
• Sole source contracts/amendments, 5,000 or more
  10-day filing period prior to start
• Emergency contracts, 5,000 or more filed
  3-days after start of work or contract execution,
  whichever is greater

11
Personal Service Contracts Filing Categories
-cont.

• Competitive contracts/amendments, 20,000 or more
  10-day filing period prior to start or may
  start date of filing
• Management consulting, organizational
  development, marketing, communications, employee
  training, and employee recruiting

12
Personal Service Contracts Filing Categories
-cont.

• Amendments greater than 50 of the original
  contract value or substantial scope change,
  5,000 or more 10-day filing period prior to
  start

13
When can we use Client Service Contracts?

• Relationship independent contractor
• Services provided to your agency clients
  (students)
• Services can be professional/technical in nature,
  or more mechanical/routine

14
Is there a Time or Dollar Limit?

• Client service contracts are typically short
  term, but can be up to four or more years in
  length
• No maximum dollar limit on contracts
• Competition is not required, but is still
  advisable when possible

15
Does the Ethics Law (RCW 42.52) affect
Contracting?

• Special rules apply for regulatory agencies or
  staff involved in the contracting process
• Conflict of Interest state employees may not
  have a personal or financial interest in the
  contract
• Special rules apply to contracting with current
  or former state employees

16
Contracting with Current State Employees

• If contract was competitively bid, and
• If multiple bids were received, then
• Proceed with contract.
• OR
• If contract was sole source, or competitively bid
  with only one response (bid), then
• Contractor must obtain Executive Ethics Board
  (EEB) approval before starting work. Contractor
  must file contract with EEB within 30-days after
  execution of the contract.

17
Contracting with Former State Employees (2 years
since separation)

• Contract Restriction
• Administered or negotiated contract with
  potential post-state employer
• Beneficial Interest Restriction
• No direct or indirect interest in a contract in
  which employee participated

18
Contracting with Former State Employees
(continuing restriction)

• If employee knows offer was made to influence
  performance while he/she was a state employee
• If a reasonable person would believe the offer
  was made to influence performance while he/she
  was a state employee

19
Resources

• OFM Statewide Administrative and Accounting
  Manual (SAAM)
• OFM Guide to Personal Service Contracting
• OFM Guide to Client Service Contracting
• www.ofm.wa.gov
• Executive Ethics Board
• www.ethics.wa.gov

20
Contractual Relationships

• Subcontractor Relationship
• The agencys relationship is with the prime
  contractor, not the subcontractor.
• Independent Contractor or Employee?
• An agency should not attempt to enter into a
  contract with an independent contractor when the
  nature of the work and the relationship is that
  of employer and employee. See Internal Revenue
  Code Sec. 3121(d).

21
Independent Contractor vs. Employee

• Before you can determine how to treat payments
  you make for service, you must first know the
  business relationship that exists between you and
  the person performing the services.
• IRS website http//www.irs.gov

22
Who is an Independent Contractor and Who is an
Employee?

• According to the IRS website
• Independent Contractor the payer has the right
  to control or direct only the result of the work
  done, not the means and methods of accomplishing
  the result.
• Employee the payer can control what will be
  done and how it will be done.
• Page 3 of handout

23
Is there a General Checklist for using Contracts
Versus Employment?

• Look at the relationship of the parties
• IRS looks at three areas
• Behavioral Control
• Financial Control
• Relationship of Parties
• Contract independence
• Page 7 of handout

24
Conclusions

• Relationship of the parties guides whether
  contract or employment is appropriate
• When contracting, use the correct type of
  contract
• Contact your contracts staff to ensure
  appropriate contracting rules are followed