NEXT REVIEW DATE: November, 2008

POSITION(S) RESPONSIBLE FOR REVIEW: Director, Design & Construction
                                                                                    Director, Operations & Utilities
                                                                                    Director, Capital Projects

PURPOSE: To establish a policy and procedures for Project Managers to comply with appropriate guidelines and procedures during the procurement process.

BACKGROUND: In 1995, FMS published the Project Management Manual (PMM) (REFERENCE 1) to guide the person acting in the role of the Project Manager (PM) in his or her work on university renovation and other construction projects. The PMM holds the PM accountable for all aspects of each project to which he or she is assigned, including timely performance by outside firms – designers (architects, engineers, and other consultants working directly for the university) and construction firms (general contractors, construction managers, and trade contractors working directly for the university). Frequently the PM is confronted with project schedule demands that make it urgent for a consultant, a construction firm, or a service provider to begin work at the earliest possible moment, possibly even before regular approvals (such as signed contracts and purchase orders) have been completed.

In 1998, the university published the Procurement Guidelines (REFERENCE 2) to aid designated university buyers (and to inform all other members of the campus community) in the use of best procurement practices (which also have the value of acceptance by federal agency auditors, in the university’s role as a federal contractor). (The designated university buyer for FMS projects works in the university’s Business Service Center; FMS managers and FMS people acting as PMs are not designated university buyers.) Among other matters, the Procurement Guidelines define the signature authority and the delegation authority of the university’s officers for financial commitments such as contracts and purchase orders. The Guidelines imply that work which requires such approvals cannot proceed until these approvals are in place.

The university’s Risk Manager requires each contracting entity to meet the university’s need for insurance protections, and the Office of the General Counsel advises the university’s contracting entities to obtain, in its contracts with outside firms working in our behalf, and/or on our campus, indemnifications for risks to which the university is exposed. Whenever outside firms are providing services before their contracts have been approved, the university is without contractual access to those protections.

In the FMS contracting process, the Project Manager distributes copies of the bid package or request for proposals (RFP) to participating firms. The bid package or RFP contains a sample contract and, as appropriate, the Carnegie Mellon Special Conditions, and a sample Carnegie Mellon No-Lien agreement. (Participating firms are advised not to submit bids or proposals if they cannot accept terms of the university’s sample contract.) FMS completes a draft contract that contains the terms of the successful bid or proposal, obtains required internal reviews, and delivers the contract (with the Special Conditions attachment, and the completed no-lien agreement, when appropriate) to the firm to sign. The firm signs and returns all documents to FMS. FMS assures that all required documentation is in hand (e.g., certificates of insurance documenting that the firm holds the coverages required by its contract), and then the Assistant VP for FMS either signs the contract or refers it to the person who is authorized to sign for the university, according to the contract amount and to university guidelines on signature authority. (For contracts in excess of $2 million, this referral includes approval by the trustees.) The FMS staff distributes the signed originals to the parties for their files. The Project Manager is notified that the contract is finalized by a copy of the cover letter that returns one signed original to the firm. The FMS staff files the university’s copy of the signed original contract in the central file for the project.

POLICY: It is FMS policy to comply with university legal, risk management, and procurement guidelines and procedures, and to deliver contracts with appropriate signatures for the university to outside firms before authorizing work to begin on projects that are the subjects of those contracts.

PROCEDURES:

1. Competitive Selection FMS obtains competitive bids or proposals for contracted work that is expected to cost more than $50,000. For contracted work expected to cost between $50,000 and $5,000, FMS obtains competitive bids or proposals, or price quotations, at the discretion of its Assistant VP. For work expected to cost less than $5,000, FMS does not require a competitive selection process. (Note that projects using federal funds must use competitive selection for acquisitions of $2,000 or more.) Competitive selection is the preferred means of confirming price reasonableness for procurement records purposes. (Note that for a department to procure furniture above the $50,000 threshold, even with a Preferred Vendor, it must contact FMS to create a project and to conduct a competitive selection process.)

3. Signature Authority Contracts for amounts of $2 million or more require the signature approval of the university’s Board of Trustees. Signature authority for contracts between $250,000 and $2 million lies with the designated officers of the university: The President, the Provost, the Vice Presidents, and the Chief Financial Officer. Signature authority up to $250,000 resides in direct reports to those officers, including the Assistant VP for FMS. The designated officers of the university and their direct reports may delegate their signature authority, or some portion of it, to others subordinate to them in their organizations. The Assistant VP for FMS may delegate signature authority, in writing, to an FMS director, up to $50,000.

4. When Contracts are Needed Contracts are always required for work with a value greater than $50,000, and they are not required for work with a value of less than $25,000. Between those two figures, the requirement for a contract is at the discretion of the Assistant VP for FMS, and depends on the nature of the work and the corresponding need for contractual protections for the university. The university purchase order, as it relates to FMS projects, is itself simply an authorization to make payments to outside entities, and a notice to that entity as to how to cite that authorization on its invoices to the university. A purchase order’s standard terms and conditions support transactions involving the procurement of goods, but not of services. When a purchase order is issued to authorize payment for services, the contract replaces the standard terms and conditions of the purchase order.

5. Exceptions When a Project Manager deems that an exception to these procedures is necessary, he or she brings the matter, through the Director, to the Assistant VP for FMS. Any direction from the Assistant VP to contravene these procedures needs to be documented in writing.

RESPONSIBILITIES:

The person acting as Project Manager is responsible for conducting the procurement process in compliance with this directive and with related university policies and guidelines. This responsibility includes knowing the standard procedures required for routine procurements of project-related services, and the unique requirements of such procurements when federal funds are involved. The Project Manager is responsible for meeting the documentation needs for internal signatures on contracts for such services, including the use of standard contract forms, and for providing evidence of a competitive selection process, of funding authorization, and of insurance coverages that comply with contract terms.

Each Director is responsible for supervising the work of people in his or her area who serve in the role of Project Manager as they perform their responsibilities under these procedures. The Director reviews a Project Manager’s judgment concerning the need for exceptions to these procedures, and brings to the Assistant VP for FMS cases that appear to justify such exceptions, and requests written waivers of the applicable process from the Assistant VP.

The Deputy Assistant VP is responsible for administering the contracting process. The Deputy is responsible for monitoring FMS for compliance, in its contracts, with university contracting requirements, including legal, procurement, risk management, and equal opportunity procedures and guidelines. The Deputy works with people who act as Project Managers, with the Directors, and with members of the foregoing administrative groups to achieve consensus on the FMS contracting process as needed for each contract.

REFERENCE(S):

Project Management Manual, 1995
Procurement Guidelines, current revision

CANCELLATION(S):

1. None

Kenneth R. Kimbrough

Assistant Vice President

ATTACHMENT(S):

1. None