Chapter 2 – Fiscal Management

The Department shall enter into contracts in accordance with the provisions of the State Administrative Manual (SAMState Administrative Manual), the Public Contract Code (PCCPublic Contract Code), the Government Code (GCGovernment Code), the Labor Code (LCLabor Code), the State Contracting Manual (SCM), the Penal Code (PCPenal Code) and all other applicable State law and regulations.

This Article describes departmental policy for processing contracts with the exception of those contracts which are subject to the provisions of PCPenal Code § 7000 et seq. (i.e., masterplan construction).

The Deputy Director of the Office of Business Services (OBSOffice of Business Services) acts as the Procurement and Contracting Officer (PCO) pursuant to the PCCPublic Contract Code §§ 10333 and 10351-2, and SAMState Administrative Manual § 1208 on behalf of the Secretary of the California Department of Corrections and Rehabilitation (CDCRCalifornia Department of Corrections and Rehabilitation), and delegates signature authority for approval for contracts to the Contracts Management Branch (CMBSee Office of Business Services (OBS)) managers.

The CMBSee Office of Business Services (OBS) of the Office of Business Services shall administer all contracts through execution into by the Department in a manner which:

• Conserves the financial interests of the State.

• Prevents thriftless acts or expenditures by employees of the Department.

• Ensures compliance with applicable laws, rules, and regulations of the Department.

The CDCRCalifornia Department of Corrections and Rehabilitation receives an exemption every four years from the Department of General Services (DGSDepartment of General Services) to execute contracts up to a certain dollar amount. All contracts exceeding the specified dollar amount must be approved and executed by DGSDepartment of General Services. The contracts executed by the CDCRCalifornia Department of Corrections and Rehabilitation are subject to approval by the DGSDepartment of General Services per PCCPublic Contract Code § 10335. The exemption is in addition to contract exemptions set forth in the SCM.

The Enterprise Information Services (EISEnterprise Information Services (formerly Information Services Division)) Division of CDCRCalifornia Department of Corrections and Rehabilitation is responsible for the acquisition and maintenance of information technology (ITInformation Technology) goods and services.

The California Prison Health Care Services (CPHCS), the receivership established by the federal courts in June 2005 as a result of the Plata v Schwarzenegger lawsuit, shall administer all adult inmate medical and related services, e.g., nursing, pharmaceutical, and laboratory services contracts of the CDCRCalifornia Department of Corrections and Rehabilitation.

The DGSDepartment of General Services is the State agency, which exercises supervision over contracts entered into by State agencies and departments. DGSDepartment of General Services reviews contracts to ensure that the best interests of the State are preserved; that agencies of the State are complying with applicable laws, rules, and regulations; and expenditures are fiscally responsible while meeting the needs of the State.

The Department of Finance (DOFDepartment Of Finance) and the DGSDepartment of General Services have general powers of supervision over matters concerning the financial and business policies of the State and shall institute investigations and procedures deemed proper to conserve the rights and interests of the State.

The Office of the Attorney General (AGAttorney General) will review and approve any public works construction projects exceeding $250,000 (adjusted periodically by the DOFDepartment Of Finance to reflect the percentage change in the annual California Construction Index) and executed under PCPenal Code § 7000.

The CMBSee Office of Business Services (OBS) shall administer all non-ITInformation Technology service contracts, including the competitive bid and non-competitive bid (NCB) processes, for Adult Institutions, Division of Juvenile Justice (DJJDivision of Juvenile Justice (formerly CYA)) facilities, Adult and Juvenile Justice Parole Divisions, and Adult and Juvenile Justice Headquarters Programs. Service and Expense orders can be utilized to obtain informal services not to exceed $4,999.99 (excluding tax) for a twelve-month period.

Contract processing time can vary significantly depending upon the complexity and volume of contracts and the various control agencies involved in the approval process. Programs shall follow the OBSOffice of Business Services established contracting guidelines to allow enough lead time for necessary approvals before the effective date of the contract.

All requests for contracts shall be initiated by the program/institution on a Purchase Requisition (PReq) through the release process to the CMBSee Office of Business Services (OBS) in Systems, Applications, and Products (SAP).

Emergency contracts which are necessary for the immediate preservation of life or State property are exempt from advertising.

The definition of what constitutes an emergency is contained in two separate sections of the PCCPublic Contract Code.

• Section 1102 addresses emergency services and,

• Section 10122 addresses emergencies for construction and public works.

Emergency contracts are designed to provide immediate services needed to mitigate an emergency and cannot be used to complete an entire project or provide on-going services unless mitigating efforts are insufficient to address the emergency. State of California contracting rules and regulations require a competitive bidding process to obtain a contract for projects and on-going service needs. Under an emergency situation, informal bids (minimum of three) may be obtained by telephone and work may begin without an executed contract if the contract has been verbally authorized by someone with Department authority to authorize the initiation of an emergency contract. However, a full explanation of the emergency and a justification for the contract price shall be included on the Agreement Summary (STDStandard Form (DGS). 215).

Examples of acceptable emergency contract situations include:

• Institutional security failures such as gates, fences, security systems (i.e., lethal electrified fence, shaker fences, cameras, etc.).

• Failure of other critical building/site components or systems required to maintain staff, inmate, and public safety and licensing.

• Utility failures such as loss of power, potable water, wastewater.

• Failure of essential central plant services such as HVAC, steam, hot water.

• Loss of fire protection or other essential life safety systems.

• Loss of essential food services.

• Unanticipated loss of janitorial services that impact the immediate health and safety of staff.

• Identification of toxic mold within the premises that must be remediated to protect the health and safety of staff.

Examples of unacceptable situations for using the emergency contracting process include:

• Building system or component renewal beyond what is required to address the immediate failure or condition.

• Scope of work activity beyond the acceptable immediate emergency condition as demonstrated above.

• Restoration or replacement of a building system or component beyond its original design capacity.

• Instances in which the requesting institution or program failed to adequately plan for required services.

The PCCPublic Contract Code allows exceptions to the competitive bidding requirement in true emergencies. However, emergency contracts are not exempt from all other contracting requirements including a valid business license, insurance coverage certificates, and payment bonds, payment of prevailing wages and DGSDepartment of General Services/Office of Legal Services (OLS) or AGAttorney General approvals.

The responsible program shall complete and submit a PReq in SAP, including all required contract documents and forward to the CMBSee Office of Business Services (OBS).

The CMBSee Office of Business Services (OBS) shall prepare the Agreement Summary (STDStandard Form (DGS). 215), in accordance with the OBSOffice of Business Services Contracting Guidelines and the SCM.

The CMBSee Office of Business Services (OBS) will obtain the approval of the contract’s funding on the STDStandard Form (DGS). 215 from the approving authority within the program. The approving authority will be the same program representative authorized to approve a PReq in SAP.

Upon return of the contract from the contractor, the CMBSee Office of Business Services (OBS) shall obtain the appropriate departmental signatures and, if required, control agency review and approval. Signature authority for Service and Expense Orders not to exceed $4,999.99 (excluding tax) for a twelve-month period has been delegated to designated individuals at adult institutions and DJJDivision of Juvenile Justice (formerly CYA) facilities.

An executed contract cannot be changed except by formal amendment. An amendment is required when any of the following proposed changes to an executed contract are required:

• Change in the scope of work.

• Change in contract term (if original contract allowed for an extension).

• Increase or decrease in total funding for any one fiscal year.

• Salary increases over 15% of the budgeted high salary range.

• Increase in the total Personnel category greater than 15%.

If a contract needs to be amended, the original PReq must be amended to reflect the changes in SAP by the responsible program. The responsible program shall prepare and provide all required documents by attaching them to the PReq in SAP. Amendments must be requested to allow sufficient time for processing, as detailed in the OBSOffice of Business Services Contracting Guidelines.

A contract that has expired or been terminated cannot be amended.

Both contracting parties shall approve contract amendments. If the original contract required DGSDepartment of General Services approval the amendment shall also require DGSDepartment of General Services approval, except, to extend the original contract term for a period of one year or less.

A NCB may be required to amend a contract under the following circumstances:

• If the original contract was let via the NCB process.

• The amendment changes the scope of work.

• The amendment increases the dollar amount by 30% or more of the original contract amount, not to exceed $250,000, and there is no change to the scope of work.

• The amendment extends the term of the contract and adds money.

The date of the amendment shall be prior to the expiration date of the original contract.

A budget change between line items does not require a contract amendment if the change:

• Is 15 percent or less of the total amount of the contract or such other percentage as specified in the contract.

• Does not increase the total amount of the contract.

• Does not significantly modify the original intent of the contract.

The amendment will clearly state all changes to the original contract and incorporate any changed exhibits or attachments.

All documents shall be executed before the date of performance. No back dated documents are authorized except as provided under emergency situations. (See Department Operations Manual (DOMDepartment Operations Manual) § 22040.5.) All contracts must contain the following information:

• An accurate identification of the parties.

• A complete scope of the work, service, or product to be performed, rendered or provided.

• A clear statement of the basis of payment and the maximum amount to be paid.

• The period of time for performance or completion of the contract, including beginning and ending dates.

• Restrictions on payment of mileage, per diem, and transportation governed by the Department of Personnel Administration (DPADepartment of Personnel Administration (see CalHR)) regulations for nonrepresented State employees or University of California for contracts with California State higher education institutions.

• Legal clauses, language, or formats when applicable for specific classes of contracts; e.g., public works, consultant, personal services, etc.

• Signature by a person for each party who is authorized to bind that party.

Contracts for services should normally not exceed two years, unless there is statutory authority for a longer term or a substantial written justification demonstrates a business need for a longer term.

Contracts for more than one fiscal or calendar year shall be bid on a multiyear basis; that is, a twoyear contract shall include a total dollar amount for the two years which is not subject to yeartoyear increases or negotiation.

Contracts bid or written on a multiyear basis to secure a rate/cost for the entire period of the contract shall have a termination clause for the State only.

A fully executed contract shall have original signatures of the contractor, the CMBSee Office of Business Services (OBS) manager, DGSDepartment of General Services, or other approving authority. Contracts must also be approved and released within the SAP program.

Under no circumstances can a contractor commence services before a fully approved and executed contract is received by the contractor. However, under an emergency situation work may begin without an executed contract if the contract has been verbally authorized by someone with Department authority to authorize the initiation of an emergency contract. (See DOMDepartment Operations Manual § 22040.5) Backdating of a contract is prohibited.

The risks associated with a contractor commencing services without an executed contract include:

• Inability of the State to hold the contractor accountable for poor, insufficient, or incomplete work;

• Inability to pay the contractor for work performed;

• A possible 15 percent penalty fee of the total costs of claims filed against the Department with the Victims Compensation Government Claims Board added to the total cost of the claim and charged to the program; and

• Potential loss of qualified contractors for future work.

Provisions for payment shall be clearly defined in the contract.

Advance Payments During Contracts

• Advance payments are allowed only to communitybased, private, non-profit agencies, and to public agencies. If an advance payment is essential for the effective implementation of a program and funds are available, an advance may be granted. The program and or contractor may request that the contract be written to allow advance payment.

Determining Need

• Program and contract staff shall jointly determine the need for advance payment based upon a review of the contractor’s most recent financial statements, budget, and audit report by an independent accountant or other comparable financial information.

• The determination shall be based on the following factors:

  • The percentage of the contractor’s total operating budget to be funded by the contract.

  • The extent to which the contractor is dependent upon voluntary contributions from individuals.

  • The extent to which the contractor receives financial support from other governmental organizations, private commercial firms, and fundraising organizations, such as United Way.

  • The ability of the contractor to repay the advance from other income.

Proof of Non-Profit Corporation Status

• The contract with a communitybased, private, nonprofit agency shall provide that the agency submit proof of nonprofit corporate status to the Department before advance payment is made.

• This proof shall be reviewed by the CMBSee Office of Business Services (OBS) staff and be retained in the contract file.

Granting Advance Payments

• Advance payments to a community-based, private, non-profit agency may be granted by the Department for contracts of $400,000 or less; for contracts over $400,000, an advance may be granted only with prior DOFDepartment Of Finance approval.

• Advance payments may also be granted to any “Public Agency” and shall be repaid in accordance with the provisions of the contract.

• “Public Agency” includes any State or federal agency, county, city, or public district of the State of California.

Fidelity Bond

• The contract shall include a requirement that the agency and its representatives who, in any way, handle financial transactions related to the receipt or disbursement of funds provided by the contract shall be covered by a fidelity bond equal to at least 50 percent of the total amount of the contract.

Type of entity shall be clearly defined (partnership, corporation, etc.). Full name of contractor and contractor’s business address shall be included in all contracts.

A termination clause allowing the Department to terminate the contract with a 30-day written notice to the contractor shall be included in all contracts. A 30day termination clause may be included in public works contracts if it is considered to be in the best interest of the State.

Travel or Per Diem

• Travel expenses and per diem rates for contracts with consultant services, legal services or a cost reimbursement budget shall be set at the rate specified by the DPADepartment of Personnel Administration (see CalHR) for similar employees or verification supplied that such rates are not available to the contractor.

Consultant Contract

• A consultant cannot commence services before a fully approved and executed contract is received by the consultant. The exception is an emergency, as determined by the Department, where the use of contracted services appears to be reasonably necessary but time did not permit the obtaining of prior formal approval of the contract.

• Backdating of a contract is prohibited.

Contract/Contractor Evaluation (STDStandard Form (DGS). 4)

• Upon completion of a consultant contract, the responsible program shall prepare the STDStandard Form (DGS). 4, and submit it to CMBSee Office of Business Services (OBS) within 60 days of the expiration date of the contract. The CMBSee Office of Business Services (OBS) shall forward the STDStandard Form (DGS). 4 to the DGSDepartment of General Services.

Progress Reports

• All consultant contracts shall provide for a series of progress reports or meetings of at least once a month to allow the Department or program to determine if the consultant’s service is meeting the specific problem, administrative requirements, or program needs and is on schedule.

Funds

• Each contract shall state that it is subject to the availability of funds.

Local Government

• When one of the contracting parties is a county, city, district, or other local public body, the contract shall be accompanied by a copy of the approved resolution, order, motion, or ordinance of the local governing body by law having authority to enter into the proposed contract, approving and authorizing execution of the contract.

• The CMBSee Office of Business Services (OBS) will obtain a copy of the resolution, order, motion, or ordinance on behalf of the Department.

• Responsible programs shall consider the time involved in obtaining the resolution when planning their contract start date.

Departmentally Authorized Signature

• A Legal Office Form (LO) 33, Signature Authority Card, shall be submitted in triplicate and forwarded to the CMBSee Office of Business Services (OBS). After approval and signature of the OBSOffice of Business Services Deputy Director or designee, the completed card is distributed as follows:

  • The requesting program

  • CMBSee Office of Business Services (OBS)

  • Claims Audit, State Controller’s Office (SCOState Controller’s Office)

The CMBSee Office of Business Services (OBS) shall mail an original copy of the contract to the contractor. When contracts are approved and are ready for distribution, notification shall be made to the requesting program, headquarter or regional accounting office, and the SCOState Controller’s Office. The executed contract is also placed in SAP for the headquarter or regional accounting office to retrieve. If a contract has been approved by DGSDepartment of General Services they will provide a copy of the contract to the SCOState Controller’s Office.

All contracts shall contain a budget itemizing the expenses involved with the contract.

Basic components of a budget could include:

• Personnel Services

  • Salaries and benefits of the staff involved with the contract performance Operating Costs

  • Postage

  • Printing

  • Travel

  • Office supplies

• Reimbursable Costs

  • Bookkeeping services

  • Computer services

  • Training consultants

When the contractor submits a budget for contracts not required to be bid or for amendments, program staff shall verify the line item amounts in each component to ensure the total budget does not exceed the specified contract amount.

Progress payments authorized within a consultant contract shall comply with the provisions of PCCPublic Contract Code § 10346.

When progress payments are authorized, not less than 10 percent of the contract amount shall be withheld pending final completion of the contract. However, if the contract consists of the performance of separate and distinct tasks, then any funds withheld with regard to a particular task may be paid upon completion of that task.

The small business preference applies for competitive solicitations regardless of the solicitation format or dollar value with few exceptions. The exemptions to the Small Business (SB) preference are Interagency Agreements, contracts or purchases with any government agency (including cities, towns, colleges, universities, etc.), federally funded contracts, and Joint Power Agreements. The SB participation goal has been established for all contracts by Executive Order S-02-06. It is the commitment of the Department to provide SBs with the opportunity to participate to the maximum extent feasible in the performance of contracts and subcontracts.

The CDCRCalifornia Department of Corrections and Rehabilitation is committed to achieving the legislatively established goal for the participation of disabled veteran-owned businesses in procurement and contracts to the fullest extent possible. The CDCRCalifornia Department of Corrections and Rehabilitation may establish Disabled Veterans Business Enterprise (DVBEDisabled Veteran Business Enterprises) participation requirements on individual contracts.

The DVBEDisabled Veteran Business Enterprises program policies and procedures seek to achieve the established statewide annual minimum goal in the performance of contracts. All managers, procurement officers, and contract officers are responsible for implementing those policies and shall exert maximum efforts to successfully achieve the legislatively established DVBEDisabled Veteran Business Enterprises goal.

The State may terminate a contract for any reason other than failure to perform services as long as the 30day termination clause is included in the contract language. A notice of termination shall be written to the contractor giving at least 30 days notice by the CMBSee Office of Business Services (OBS).

Failure to Perform

• Termination for failure to perform services specified in the contract may occur immediately under the provisions of the contract. Prior to termination, the contractor shall be given a reasonable amount of time in which to improve the services. After a written notice to improve is given and services have not improved, the contract may be immediately terminated.

• The CMBSee Office of Business Services (OBS) contract analyst will process all contract terminations. Copies of any prior correspondence to the contractor shall be forwarded to the CMBSee Office of Business Services (OBS). The written notice of termination shall indicate the specific provisions that were not adhered to.

To the greatest extent possible, engage in competitive bidding.

At least three competitive bids or proposals shall be secured on all contracts except those specifically exempted in GCGovernment Code § 14825 and PCCPublic Contract Code § 10348. Exceptions to a minimum of three bids are listed in SCM § 5.08A and SCM § 5.10B.

All bids/proposals received and all related correspondence and documents shall accompany the contract for final approval.

The Deputy Director, Business Services or designee shall be responsible for ensuring that the contents of this Article are kept current and accurate.

SAMState Administrative Manual §§ 1200, 1208, and 1216 et seq.

PCCPublic Contract Code §§ 1102, 10122, 10333, 10335, 10340, 10346, 10348, 10351, 10352, and 10371 PCPenal Code § 7000, et seq.

GCGovernment Code § 14825 SCM §§ 2.05, 2.06, 2.06D, 2.07, 3.02, 3.07, 3.09, 3.10, 3.11, 3.12, 3.17.2, 4.05, 4.10, 5.08, 5.08A, 5.10B, 5.60, 5.75, 5.80B2, 6.00, 7.15, 7.25, 7.30, 7.32, 7.40, 7.80, 7.85, and 9.12