Business Services Policies

BS17 Use and Procurement of External Consultants

Policy Status: 

Active

Policy Steward: 

Associate Vice President for Auxiliary & Business Services

Contents:

PURPOSE:

To state University policy governing the use and procurement of consultants.

POLICY:

It is the policy of the University to utilize Consultants in a legitimate and economical way in order to obtain specialized expert and professional opinion or advice in the course of attempting to improve the quality of services and operations of the University, fulfilling its mission of teaching, research, and service. Such external opinion or advice is to be sought and procured only when an individual with the proper knowledge and skills cannot be located internally to provide this service as part of their normal job responsibility, or as a Collaborator. (See "Definitions," below.) Nor shall such procurement be used to circumvent the normal hiring and promotion procedures of the University.

It is the intention of the University that: the hiring of a Consultant be in the best interest of the University; that Consultants are selected and procured in a proper manner; that Consultants have provided the services for which they are paid; and that dealings with Consultants follow sound business practices and are able to be readily audited. The procurement, scope of activity, and subsequent payment of Consultants as indicated above shall be governed by this policy. Additional stipulations that appear in the preprinted terms of the Consulting Agreement that do not explicitly appear in this Policy shall be considered to be a part of the University's consulting policy.

The use of Consultants shall be compliant with the provisions of Federal Office of Management and Budget Circular 2 CFR Part 200 - Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, also referred to as "the Uniform Guidance." Compensation to Consultants shall be compliant with Internal Revenue Service regulations.

PROCUREMENT AUTHORITY:

Policy BS07 specifies the University's policy regarding the negotiation and procurement of equipment, materials, goods and services, including consulting. Policy BS07 also specifies that this Policy (BS17) shall prevail for the acquisition of consulting services. Authority has been delegated to the purchasing entities within the Applied Research Lab (ARL) for the procurement of Consultants for projects related to their Federal government contracts, and to The Milton S. Hershey Medical Center (Medical Center) for the procurement of Consultants for all hospital and medical center operations.

DEFINITIONS:

  1. Employee - Any individual hired by Penn State that meets the provisions as specified under section 101 of the Federal Tax Coverage Rules from the Internal Revenue Service Circular E. Typically, an Employee's work environment is substantially controlled by the University as opposed to an Independent Contractor where the work environment is not.
  2. Independent Contractor - An individual or organizational entity hired by Penn State to perform a non-routine activity. Per Policies HR80 and IP06, the individual may not be a current Employee of Penn State. Typically, an Independent Contractor faces the risk of loss as well as profit when providing such services, as opposed to an Employee who does not.
  3. Consultant - An Independent Contractor who is exceptionally qualified, by education or experience in a particular field, to render an opinion or give advice that is unavailable from an Employee of the University. (See "Collaborator" below.) Charges for Consultants must be to Object Classification Code 0392.
  4. Collaborator - A Penn State Employee providing qualified opinion or advice (in an awarded project) for which the Employee is remunerated as part of his/her regular compensation, or is paid an additional amount as a Supplementary appointment. (See HR06.)
  5. Sponsored Award - The document that is executed on behalf of the governmental agency, or other organization, and the University which specifies the terms and conditions under which a project will be conducted.
  6. Subcontract - The document which formalizes a third party relationship with an Independent Contractor to perform substantive work for Penn State based upon an award made to Penn State by a governmental agency or commercial organization or institution. (See Policy RA80.)
  7. Subcontractor - An Independent Contractor who is made responsible for a discrete part of the project award per the terms of a Subcontract. (Use Object Code 0408 up to and including $25,000, or 0416 for over $25,000.)
  8. Purchased Services - Routine activities performed other than as a Consultant or Subcontractor, normally paid to OTHER than individuals. (Use Object Code 0411 or other specific purchased service Object Codes - See Object Classification Codes.)
  9. Professional Services - Services requiring specialized skills (e.g., physician, dentist, sports officials, etc.) performed other than as a Consultant or Subcontractor; normally paid to a non-employee individual (use Object Code 0393).
  10. Honorarium - A payment given to a professional person (non-employee) for services for which fees are not legally or traditionally required (use Object Code 0391).

GENERAL RESTRICTIONS:

  1. University Employees may not be hired as Consultants by the University. (See Policies HR80 and IP06 for specifics.)
  2. University Employees may participate as Collaborators under the provisions of Policies HR06 and HR80.
  3. Independent Contractors cannot be procured when a conflict of interest exists. (For guidance, refer to policies AD47, BS07 , HR80, HR91, RA10, IP01, and IP06.)
  4. The Center for Grants and Contracts at Hershey must ensure compliance with Sponsored Awards associated with prior approval requirements and "flow-through" provisions for projects related to their respective Sponsored Awards.
  5. No Consultant will be compensated unless the stipulations of this procurement process have been met. The procurement process may not be done retroactively.

GENERAL REQUIREMENTS:

INFORMAL CONTACT WITH POTENTIAL CONSULTANTS:

It is permissible, within the bounds of Policy BS08, for a University department interested in obtaining a Consultant to have informal discussions with potential Consultants in order to ascertain the capabilities and suitability of a Consultant for the task at hand. Such interaction is also desirable for communicating University requirements to potential Consultants as well as discussing cost approximations. It is NOT permissible for any University Employee to make any manner of verbal agreement with, or commitments to, a potential Consultant.

COMPETITIVE BUYING:

The Department of Purchasing Services (or the Purchasing Departments at ARL and the Medical Center, as appropriate) is required to take mandated purchasing action and retain corresponding documentation according to the following guidelines:

Consulting Agreements from $0 - 9,999- Competition is not required if prices from the suggested source are known to be reasonable.However, a competitive process may be utilized when a buyer feels a betterprice will be obtained by competition.

Consulting Agreements between $10,000 - 24,999- TheUniversity Department interested in obtaining a consultant may obtain informal quotations from consultants. For the Applied Research Lab, Hershey Medical Center, and Purchasing Services, attach the quotes, along with the approved Consulting Justification Form, to the Purchase Order Requisition (use either the Applied Research Lab or Hershey Medical Center versions for those areas or the eBuy+ Requisition for all others) and submit for normal approval and processing of the Purchase Order Requisition through those respective purchasing departments. The appropriate Purchasing entity may accept the informal quotations if determined that acceptable competition exists, or the Purchasingentity may initiate a bid process.

Consulting Agreements $25,000 and over - Requires a formal bidding or negotiation process conducted by the Department of PurchasingServices, or Purchasing entities at ARL or at the Medical Center.

NON-COMPETITIVE BUYING:

Consulting Agreements $10,000 and over - Should a requisitioner feel that a specific Consultant is required, justification isnecessary to document the reasons why competition is restricted. The "Consultant Single/Sole Source Justification" portion of the "Consultant Justification Form" must be used. For the Applied Research Lab, Hershey Medical Center, and Purchasing Services, attach the approved Consulting Justification Form to the Purchase Order Requisition (use either the Applied Research Lab or Hershey Medical Center versions for those areas or the eBuy+ Requisition for all others) and submit for normal approval and processing of the Purchase Order Requisition through those respective purchasing departments. After a careful review by the Department of Purchasing Services (or purchasing at Applied Research Lab, or at the Hershey Medical Center) in conjunction with the department or ultimate user, a decision will be rendered as to the advisability of making a non-competitive purchase. Through documentation, the respective Purchasing entities will show that Consultants selected via sole source criteria have been selected based on price reasonableness.

INITIATION OF PROCUREMENT PROCESS:

It is the responsibility of the area requesting the procurement of a Consultant to initiate:

  1. A Consulting Justification Form. This form provides information regarding the proposed terms of the relationship with a Consultant, the method of selecting a Consultant, and other information necessary for approvers, Purchasing Services,and others to process the request. This form and instructions are available in a Consultant Procurement Packet.
  2. A Purchase Order Requisition (either the Applied Research Lab or The Hershey Medical Center versions for those areas, or the eBuy+ Requisition for all others). Limited Orders are not permitted. The resulting Purchase Order Requisition must make reference to "Consulting Services," and Object Code 0392 where appropriate.

Once the respective Purchasing entity receives the Consulting Justification form and the Purchase Order Requisition, the appropriate Purchasing entity shall be responsible for the remainder of the procurement process and the completion and execution of the Consulting Agreement.

ALLOWABLE COSTS:

  1. Compensation to a Consultant will be made only for efforts rendered and expenses incurred as specified in the Consulting Agreement.
  2. The rate of compensation for efforts rendered may either be an hourly or daily rate up to a stated maximum, or lump sum for the entire project.
  3. Travel expenses, in accordance with University travel policies, may be specified in the Consulting Agreement as a separate reimbursable item beyond the rate of compensation for efforts rendered. If travel expenses are specified in the Consulting Agreement, then reimbursable amounts must be for allowable actual expenses and/or per diem amounts and not exceedthe dollar limitations of University travel policies. If the Consultant is procured as part of Sponsored Award, then reimbursable amounts must be per the dollar limitations of Penn State travel policies, and be specified in the Consulting Agreement. In some cases it may be deemed necessary to agree to reimburse travel expenses in excess of University policy limitations. This is permissible if it is reasonable, is in the best interest of the University, and has the prior written approval of the Corporate Controller (or theAssociate Vice President for Health Finance and Controller for issues at theMedical Center), as an exception to policy.
  4. Other expenses may be specified in the Consulting Agreement as a separate reimbursable item beyond the rate of compensation.These might include other costs to be incurred by the Consultant in fulfillment of the terms of the Consulting Agreement. Such expenses must be considered allowable, reasonable and in the best interest of the University, and be specified in the Consulting Agreement. If the consultant is procured with Sponsored Awards, then allowable cost provisions must be in accordance with the stipulations of the Sponsored Awards.

UNALLOWABLE COSTS:

  1. Alcoholic beverages.
  2. Donations or contributions.
  3. Costs of entertainment, including amusement, diversion, andsocial activities and any costs directly associated with such costs (such astickets to shows or sports events, meals, lodging, rentals, transportation, andgratuities).
  4. Fines and penalties.
  5. Any personal (non-business) costs.
  6. Anything prohibited by any applicable federal, state or local lawor regulation.
  7. When Sponsored Award funds are involved, any costs unallowable under the stipulations of the Sponsored Award or the federal Office ofManagement and Budget circulars.

EXECUTION OF CONSULTING AGREEMENT AND PURCHASE ORDER:

All Consulting Agreements and related Purchase Order Requisitions remain a "request" to procure a Consultant until Purchasing Services (or the purchasing services at the Applied Research Lab or at The Hershey Medical Center, as appropriate) have reviewed all documentation and Purchase Orders, have approved the Purchase Order Requisition, have signed the Consulting Agreement, have secured the Consultant's signature on the Consulting Agreement, and issued the Purchase Order.

PAYMENTS:

  1. No Consultant will be compensated unless the stipulations of this procurement process have been met. The procurement process may not be done retroactively.
  2. Payments shall be made to a Consultant only for efforts renderedand expenses incurred, and only within the terms of the Consulting Agreement.
  3. Payments will be made to Consultants only when the Consultant has provided to the University an invoice that reflects the following information:
    • The name, address and phone number of the Consultant.
    • The Consultant's Social Security number (if a private Consultant) or Federal Identification Number (if a sole proprietorship, partnership, or corporation).
    • The inclusive dates of the billing period for which compensation is claimed.
    • The Purchase Order number.
    • An indication if this is a partial billing or a final billing.
    • A general description of the services rendered and a progress report specifying what services were rendered during the billing period.
    • An itemization of all claimed efforts rendered and expenses incurred as follows:
      • If a Consultant is procured using an hourly or daily rate of compensation, billings from the Consultant must reflect that rate and the number of hours, days or claimed effort for that billing period. If the lump sum compensation is used, billings from the Consultant must reflect the lump sum for the entire project, and the percentage of efforts rendered (as a portion of the entire Consulting Agreement) and the claimed amount of earned compensation for that billing period.
      • All separate travel expenses allowable by the Consulting Agreement must be clearly detailed on the Consultant's billings. If the Consulting Agreement stipulates that University travel policies will be followed and University policy requires a receipt, then appropriate receipts must be attached.
      • All separate miscellaneous expenses allowable by the Consulting Agreement must be clearly detailed, both by description and cost, and on the Consultant's invoice. Supporting documentation must be attached.

      NOTE: If IRS regulations would require the consultant to retain the original receipts, copies must be substituted.

  4. All billings must be reviewed by the project director or other representative of the department who has significant knowledge of the Consultant's activities. It is the responsibility of that individual to certify that the charges claimed on the Consultant's billing are reasonably representative of the individual's perception of the Consultant's efforts rendered and expenses incurred.
  5. All billings must be reviewed by the appropriate accounts payable function (of Purchasing Services, at the Applied Research Lab, or at The Hershey Medical Center) to assure that the claimed charges are within the terms and bounds of the Consulting Agreement.
  6. The actual generation of a payment to Consultants shall be theresult of the same process used by the University for other payables associated with any other Purchase Order. Consultants shall not be paid by any other means.
  7. Cumulative payments may not exceed the stated value of the Consulting Agreement. If there is a need for additional work beyond thevalue of the Consulting Agreement, a Modification and an eBuy Purchase Order Change must be completed for the additional amount.

PROCEDURES:

A specific procedure (#PC2008) is available from Systems and Procedures.

FURTHER INFORMATION:

For questions, additional detail, or to request changes to this policy, please contact the Office of the Associate Vice President, Auxiliary & Business Services.

CROSS REFERENCES:

Other Policies in the Policy Manual may apply, especially:

AD47 - General Standards of Professional Ethics,

BS07 - Authority and Procurement,

BS08 - Information Inquiries,

HR06 - Types of Appointments,

HR80 - Private Consulting Practice,

HR91 - Conflict of Interest,

IP01 - Ownership and Management of Intellectual Property (Formerly RA11 - Patents and Copyrights [Intellectual Property]),

IP06 - Technology Transfer and Entrepreneurial Activities (Faculty Research) (Formerly RA12), and

RA80 - Subawards and Subcontracts.

Effective Date: June 13, 2016
Date Approved: June 13, 2016
Date Published: June 13, 2016

Most Recent Changes:

  • June 13, 2016 - Changes throughout the policy (form titles, proper object code formatting, etc.) to clarify operational details.

Revision History (and effective dates):

  • May 25, 2016 - Editorial change in PROCUREMENT AUTHORITY section, 1st sentence, to clarify that consulting is included in the negotiation and procurement process discussed in BS07.
  • January 3, 2014 - Editorial change in CROSS REFERENCES section. RA10, Addressing Allegations of Research Misconduct [formerly Handling Inquiries/Investigations Into Questions of Ethics in Research and in Other Scholarly Activities], has been removed. Revisions to RA10 make it no longer applicable to this particular policy as a cross reference.
  • October 25, 2013 - Editorial changes. Addition of policy steward information, in the event that there are questions or requests for changes to the policy.
  • March 18, 2011- Revisions made in INITIATION OF PROCUREMENT PROCESS and EXECUTION OF CONSULTING AGREEMENT AND PURCHASE ORDER to reflect the use of the eBuy+ system in the procurement of consultants. Other editorial changes made, as necessary, to clarify current operations.
  • October 31, 2005:
    • Under GENERAL REQUREMENTS, "Competitive" Buying- changed the ranges for Consulting Agreements FROM the $ 0 - 4,999 range TO $0 - 9,999, and FROM $5,000 - 24,999 range TO $10,000. - 24,999, respectively.
    • Under GENERAL REQUIREMENTS-Competitive" Buying- changed the Consulting Agreements range from $5,000 to $10,000.
  • February 7, 2005- Editorial change to eliminate "General Forms Usage Guide" and correct bad links.
  • October 26, 1999- Reduced dollar limit requiring completion of the "Consultant Single/Sole Source Justification" portion of the "Consultant Justification form from $10,000 to $5,000.