Selection of Independent Contractors: Administrative Memo B-1

ADMINISTRATIVE MEMORANDUM

COUNTY OF SAN MATEO

NUMBER: B-1

SUBJECT: Selection of Independent Contractors

RESPONSIBLE DEPARTMENT: County Manager/Clerk of the Board

DATE: 09/24/2012

PURPOSE

The purpose of this memo is to establish policies and procedures for the selection of independent contractors to perform seNices for the County, and for the preparation and processing of agreements for their seNices. This memo covers the acquisition of seNices (including seNices with goods), and does not apply to contracts solely to acquire items, whether by purchase, lease, or lease-purchase, which are covered separately in Chapter 2.92 of the Ordinance Code. For step-by-step instructions on the selection of independent contractors and on the preparation of contracts, see the “Contract Handbook” on the County’s Intranet.

Contracts for physicians and Behavioral Health and Recovery Services contracts involving “any qualified provider” are exempt from the RFP process as described in Section IV. Physician contracts also have different insurance requirements

For additional requirements regarding construction contracts, see Administrative Memorandum B-21, “Selection of Construction Contractors.”

This Administrative Memorandum rescinds and replaces Administrative Memorandum B-1 dated September 28, 2006. Revisions include raising the RFP requirement level from $50,000 to $100,000; raising Department Head purchasing agent authority from $25,000 to $100,000; transferring approval authority from the County Manager’s Office to Department Heads and County Counsel for waivers allowing changes to Equal Benefits and Non Discrimination language; introducing the Contracts Compliance Committee; and maintaining the current agreement numbering system but transferring the archiving and numbering of contracts between $25,001 and $100,000 from the County Manager’s Office to departments.

I. GENERAL PROVISIONS FOR ALL CONTRACTS WITH INDEPENDENT CONTRACTORS

A. Local Preference in the Selection of Independent Contractors: When the combination of price, quality and terms and conditions are substantially equal, the County shall give preference in purchasing to San Mateo County-based goods, services and suppliers.

B. Solicitation of Independent Contractors: Departments must establish procedures that will ensure their consideration of the broadest possible range of service providers in the independent contractor selection process. Departments should exercise their best efforts to obtain quotes or request proposals from all qualified independent contractors. The selection process should be extensive and encourage the largest number of independent contractors possible to submit proposals. Where possible, specific efforts should be made to solicit proposals from small businesses, women and minority owned businesses.

C. Term of Contract:

1. If the contract is for a specified project, the completion of which determines the end of the work, the contract is a “lump sum contract.” The term of the contract and the schedule of payments should be related to the completion of the project. The contract should specify the time within which the independent contractor should finish the project required by the contract.

2. If the contract is for work that will continue for a specified period of time, the term of the contract should be the period of time for which the services are needed, but no longer than three years.

3. The Contract Compliance Committee must approve all contracts that are longer than three years, whatever the total amount.

D. Insurance Requirements: All independent contractors must have a minimum of $1 million general liability insurance, $1 million auto insurance if travel is part of providing services and statutory limits (including $1 million in Employer’s Liability) for workers’ compensation insurance if the provider has two or more employees. In addition, special circumstances may require higher limits. If there is any variance or questions, consult with Risk Management. Independent contractors must provide original Certificates of Insurance evidencing their insurance coverage for the term of the contract. Any waiver or modification of these insurance requirements must be approved by Risk Management. A copy of the insurance certification checklist must be included with all contracts. In most instances, the County must be named as an additional insured on the independent contractor’s general liability policy with an endorsement from the insurance carrier.

E. Equal Benefits Requirements (Ordinance Code Chapter 2.84): All independent contractors entering into an agreement with the County for consulting or other services in excess of $5,000 must offer equal benefits to their employees (meaning they must not discriminate in the provision of benefits between an employee with a registered domestic partner and an employee with a spouse). If the independent contractor does not provide equal benefits, the contract administrator must submit a waiver request to the Department Head or designee after County Counsel review and prior to the execution of the contract. Waiver or modification of these requirements may be granted by the Department Head or designee for contracts less than $100,000 and only by the Board of Supervisors for contracts above $100,000. Waiver or modification will be granted only when doing so is in the best interest of the County.

F. Non-Discrimination: All independent contractors entering into an agreement with the County must comply with federal, state and local laws, directives and executive orders regarding non-discrimination for all employees and subcontractors under the agreement. All contracts must include the enforcement of non-discrimination language that is reflected in Board of Supervisors Resolution No. 64225 (the required language is already included in County contract templates). Any modifications or exceptions must be approved by the Department Head or designee after County Counsel review, prior to the execution of the contract, whatever the total amount. Waivers or modifications will be granted by the Department Head or designee only when it is in the best interest of the County.

G. Jury Service Pay Requirement (Ordinance Code Chapter 2.85): All independent contractors entering into an agreement with the County for consulting or other services in excess of $100,000 shall have and adhere to a written policy that provides that its full­ time employees shall receive from the contractor, on an annual basis, no fewer than five days of regular pay for actual jury service (actual time served on a trial) in San Mateo County. (If the employee serves four days on a jury, she should be paid for four days; if the employee serves six days, she should be paid for at least five days of jury service.) The policy may provide that employees deposit any fees received for such jury service with the contractor or that the contractor deduct from the employee’s regular pay the fees received for jury service. Note: this Ordinance only applies to a contractor with an employee(s) residing in San Mateo County (i.e., a contractor would not need to comply unless one or more of its employees are residents of San Mateo County, and it only need provide jury pay for jury service in San Mateo County). Any request for waiver or modification of these requirements must be reviewed by the Department Head or designee after County Counsel review, and only the Board of Supervisors may waive or alter the jury service pay requirement. (Note that this requirement applies only to contracts valued at $100,000 or above.)

H. Contract Administration: The Department Head is ultimately responsible for contract administration and for monitoring contract performance and payment schedule, in order to ensure full compliance with the terms and conditions of the contract.

I. County as Independent Contractor (Reverse Agreements) (Ordinance Code Section 2.83.150): When the County receives financial compensation or other consideration from a third party for the County’s provision of services, Department Heads or designees are authorized to approve and execute agreements $100,000 and below. All contracts in which the County receives more than $100,000 must be approved and executed by the Board of Supervisors.

J. Overview of Reviewing/Approving Authorities:

1. Board of Supervisors

  • Approves contracts over $100,000
  • Approves waiver of RFP process
  • Approves waiver or modification of equal benefits and/or jury service pay requirements for contracts over $100,000

2. Department Head or Designee

  • Approves contracts up to $100,000
  • Approves waivers or modification of non-discrimination requirement regardless of contract amount after County Counsel review Approves waiver or modification of equal benefits requirement for contracts up to $100,000
  • Reviews waiver or modification requests regarding equal benefits and/or jury service pay requirements for contracts over $100,000 prior to submission to Board of Supervisors

3. Contract Compliance Committee

  • Conducts periodic compliance reviews of all contracts
  • Approves contract extensions over three years regardless of contract amount

4. Risk Management

  • Approves waiver or modification of insurance requirements

5. Real Property Services

  • Reviews contracts involving the acquisition or disposition of real property, a loan or grant of funds controlled by the County for the acquisition, disposition or improvement of real property, use by County staff of real property owned or leased by others, use by others of County-owned real property, or use by others of facilities leased by the County

6. Information Services Department

  • Reviews contracts that involve information technology related items to ensure compliance with County IT standards
  • Reviews contracts affecting phone and data network infrastructure in Countyowned facilities

7. County Counsel

  • Reviews contracts up to $100,000 that are modified from standard templates
  • Reviews all contracts above $100,000
  • Reviews all contracts that do not use the County template
  • Reviews amendments to contracts that bring the contract amount above $100,000 or that modify any standard contract template language Reviews all RFPs for work anticipated to be above $500,000, and may review any other RFPs at the department’s request

8. Public Works

  • Reviews contracts involving work on County-owned facilities Reviews and administers certain public construction contracts per Administrative Memorandum B-21, “Selection of Construction Contractors.”

K. Contract Form:

1. Departments shall use the standard County of San Mateo Agreement with Independent Contractor “short” form for agreements up to $100,000, and the “long” form agreement for contracts above $100,000. These agreement templates are found in the County’s on-line “Contract Handbook.” Other agreement templates, maintained by the Health System, are used for physician contracts.

2. Exhibit A of the “short” form and Exhibits A and B of the “long” form must, at a minimum, include a detailed scope of work and a description of the deliverables, due dates, payment amount, payment rates, payment process and schedule. These items should contain sufficient detail to allow someone not affiliated with the department to understand the full scope of work and financial obligations.

3. The contract must contain the (1) payee name, (2) contract term, and (3) payment/contract amount, and (4) agreement number to allow the Controller to validate such information that will subsequently be recorded in the County’s accounting system (IFAS).

4. In transactions that present an above average level of risk, it may be appropriate to substitute the hold harmless and indemnification provisions from the County of San Mateo Agreement with Independent Contractor “long” form in place of those in the “short” form. Departments should consult with County Counsel if they would benefit from guidance as to which form of the hold harmless and indemnification language is most appropriate for a specific transaction.

L. Amendments: If an existing contract needs to be amended, the requirements of the contracting process described in this memo apply to the amendment. If an amendment raises the contract’s total amount above $100,000, all requirements for contracts above $100,000 (including jury service pay) must be met. And County Counsel must review and approve all amendments that bring the contract amount above $100,000, that modify any standard contract template language, or that modify any contract that is not on the County’s contract template. County Counsel may but does not need to review an amendment to the County’s “short” form template that only (1) increases an agreement’s term (duration) up to three years total, (2) increases the contract’s amount up to a total of $100,000, or (3) modifies Exhibit A without increasing the term beyond three years or the amount above $100,000.

II. CONTRACTS $100,000 and BELOW

A. Selection Process: Departments are not required to complete a formal Request for Proposal (RFP) process to select an independent contractor if the total amount of the contract is $100,000 or below. Departments must establish internal procedures that are consistent with County policies and ensure that the selection process is fair, that the independent contractor is qualified and that the cost is competitive. The results of another public agency’s competitive process may be used. Departments must document how and why each independent contractor was selected on the Recommendation for Execution of an Agreement with Independent Contractor form.

B. Approval Process: Contracts of $100,000 and below must be approved and signed by the Department Head or designee. Department Heads or designees are responsible for ensuring a selection process has been followed, obtaining Certificates of Insurance or a written waiver of insurance requirements from Risk Management and that services that are more than $100,000 are not being split into smaller contracts to circumvent the approval requirements. The completed Contractor’s Declaration Form must be included. If a waiver or modification of the equal benefits or non-discrimination requirements has been granted by the Department Head or designee, the waiver form must be included. If a department chooses not to use the standard agreement form or changes any language on the form, County Counsel must review and approve the language. Contract documents will be reviewed periodically by the Contract Compliance Committee and the Controller’s Office Internal Audit Division to ensure compliance. The jury duty pay requirement does not apply to agreements up to $100,000. ·

C. Agreement Numbering, Distribution. and Archiving: Departments are responsible for assigning an agreement number in the format XXXXX-XX-DXXX that begins with the five-digit IFAS organization number of the department, division or budget unit, followed by a two-digit number for the fiscal year in which the agreement begins (using the second portion of the fiscal year, such as “12” for the 2011-12 fiscal year), and the letter “D” followed by a three-digit sequential number beginning with “001” that resets at the start of a new fiscal year. For example, the Sheriff’s Office could track agreements at the department level (30000-12-D001) or division level (30100-12-D001, 30500-12- D001). Other examples of contract numbering:

Contract

Start Date

Contract

End Date

Contract begins in this fiscal year Contract ends in this fiscal year

Contract

Numbering

January 1, 2011 June 30, 2011 FY 2010-11 FY 2010-11 30000-11-DOOO
March 1, 2011 June 30, 2013 FY 2010-11 FY2012-13 30000-11-DOOO
July 1, 2011 June 30, 2012 FY 2011-12 FY 2011-12 30000-12-DOOO
September 1, 2011 September 1, 2012 FY 2011-12 FY2012-13 30000-12-DOOO
June 15, 2012 December 31, 2012 FY 2011-12 FY 2012-13 30000-12-DOOO
July 1,2012 March 31, 2013 FY 2012-13 FY2012-13 30000-13-DOOO
July 1, 2012 December 31, 2014 FY 2012-13 FY 2014-15 30000-13-DOOO
Fiscal Years begin July 1 of each year and end June 30 the following year

When a contract is submitted to the Department Head or designee for approval, contract administrators must include the Recommendation for Execution of an Agreement with Independent Contractor form, copies of Certificates of Insurance with the completed Insurance Certification Checklist, and the Contractor’s Declaration Form. If a waiver of the equal benefits or non-discrimination requirements has been granted, the waiver form must be included. Review by the Information Services Department is also required for all information technology related items.

Departments will assign agreement numbers for all contracts under $100,000 according to the standard naming convention. Once an agreement is executed, the Department will file the original contract in a central location and forward copies (via scanned PDF) to the Controller’s Office at pocontracts@smcgov.org. It is the responsibility of the department to provide the independent contractor with a copy of the fully executed agreement. A signed W-9 form must be provided to the Controller’s Office for all new independent contractors.

III. CONTRACTS $100,001 and ABOVE

Contracts of $100,001 and above must be approved and signed by the Board of Supervisors.

A. Selection Process (Requests For Proposals): Departments must conduct a formal RFP process to select any independent contractor when the contract amount is expected to exceed $100,000. The RFP is a solicitation for proposals from potential independent contractors. The results of another public agency’s competitive process may be used.

The primary purpose of using an RFP is to ensure that that the County receives the best value in obtaining services. The determination of “best value” is not based solely on the lowest price or the highest quality. It involves a subjective weighing of efficiency, quality, and economy, and a recommendation as to how the services might best be provided. The RFP is not a bid, in which the contract is awarded to the lowest bidder and the bid dictates the terms of the contract. Rather, it is a mechanism for exploring the expense and potential methodologies that could be used for dealing with the project for which the proposal is solicited. The outcome of the evaluation of proposals should be regarded as the recommendation of the independent contractor with whom negotiations will be initiated regarding the work and the terms of the contract.

Another purpose of an RFP is to encourage competition for public contracts and to ensure that all qualified independent contractors are given an opportunity to be considered for providing services to the County. Each RFP should be publicly advertised and distributed to the qualified firms and/or individuals identified by the department.

To ensure that the proposals are responsive to the County’s needs, the RFP should describe the known requirements for the work. The RFP should include all information necessary to enable a potential independent contractor to describe how the independent contractor would perform the job and propose a price. The RFP should explain how to prepare and submit a proposal.

The RFP should include at a minimum the following:

  • • Complete description of the scope of the work, including the department’s objectives
  • Methodology to be used to accomplish the scope of work or an inquiry as to what methodology the submitting independent contractor would use
  • Process to be used in reviewing the proposals, identification of selection criteria and time frames
  • Any relevant information known to the department that would affect the performance or cost of the work
  • Required contract terms
  • A statement regarding the County’s right to reject all proposals, and not to enter into any contract for the services described in the RFP
  • A statement that the submitted proposals are public records, and a description of the process that will be followed in the event of a request for copies of the proposals
  • A statement of the process and authority for approval of the contract
  • The method, if any, by which potential independent contractors may protest the recommendation of the RFP review committee

The criteria for choosing the independent contractor should include whatever particular criteria are important and appropriate to the project, as well as the following:

  • Experience of firm and specific staff assigned to complete the work, including description of experience with similar projects
  • References from similar projects
  • Independent contractor’s proposed methodology, work plan and time line to complete the scope of work
  • Proposed cost to complete the work

Departments must complete the RFP Matrix form describing the selection process used and include this form in the Board packet.

The RFP process for contracts above $100,000 may be waived only by the Board of Supervisors by resolution when it is determined to be in the best interest of the County. If an RFP waiver is requested, the resolution authorizing execution of the contract should also include a waiver of the RFP process. The reasons why the waiver is in the best interest of the County should be stated in one of the “Whereas Clauses” of the resolution, and the actual approval of the waiver of the RFP process should be stated in the “Now Therefore It Is Hereby Determined And Ordered” section of the resolution. Situations in which an RFP may be waived include, but are not limited to, emergency situations or those in which an independent contractor is the “sole source” of a particular service.

Contracts for physicians and Behavioral Health and Recovery Services contracts with “any qualified provider” are exempt from the RFP process. Services included in the “any qualified provider” category include:

  • Long-term locked facilities without specialized treatment programs;
  • Individual private psychiatrists, psychologists, therapists and group practices; Psychiatric inpatient hospital services;
  • Housing services and related supports;
  • Services required for specific clients placed in out-of-county facilities by other agencies;
  • School-linked services in which mental health services are a component of services in a school placement made by the school district and parents through the Individualized Education Program process.

RFPs for contracts that are expected to exceed $500,000 must be reviewed by County Counsel prior to distribution, and RFPs for contracts below that amount may be sent for County Counsel review at the department’s discretion.

B. Approval Process: All contracts above $100,000 should be prepared using the standard County of San Mateo Agreement with Independent Contractor “long” form and must be reviewed and approved by the County Counsel’s Office prior to submission to the Clerk of the Board for Board of Supervisors approval. Review by the Information

Services Department is also required for all information technology related items to ensure compliance with County IT standards prior to distribution. The Clerk of the Board will assign a resolution number to contracts above $100,000.

Contracts at this amount must include one or two quality or outcome performance measures in the cover memorandum submitted to the Board of Supervisors. If the independent contractor does not comply with the County’s non-discrimination requirement, the Department Head or designee may approve a waiver. The contract administrator must submit a request waiving the language to the Department Head or designee prior to the execution of the contract. The department must include mention of the waiver in the Board memo.

If the independent contractor does not comply with or requests modification to the County’s equal benefits and jury service pay requirements, the contract administrator must submit a request waiving or modifying the language to the Department Head or designee for review, the Board memo must mention the request for waiver or modification, the reasons why the waiver or modification is in the best interest of the County should be stated in one of the “Whereas Clauses” of the resolution, and the actual approval of the waiver or modification of the requirement should be stated in the “Now Therefore It Is Hereby Determined And Ordered” section of the resolution. Situations in which these requirements may be waived or modified include, but are not limited to, emergency situations, those in which an independent contractor is the “sole source” of a particular service, or those in which no compliant contractors are capable of providing services that respond to the County’s requirements.

Departments may request from the Board authorization for the Department Head or designee to execute contract amendments that modify the County’s maximum fiscal obligation by no more than $25,000 (in aggregate), and to modify the contract term and/or services so long as the modified term or services is/are within the current or revised fiscal provisions. A copy of the amendment (using the “Contract Amendment Above $100,001 Template” in the Contract Handbook) must be completed and filed in the department in a central location when the department makes any change to the contract. Additional information for preparing contracts requiring Board approval can be found in Administrative Memorandum B-4: Board Agenda Procedures.

C. Agreement Numbering, Distribution and Archiving: The Clerk of the Board will assign a resolution number to contracts above $100,000. When recording the agreement number in the County’s accounting system (IFAS), refer to Section 11-C of this memo for the agreement number format; however, for contracts over $100,000 the resolution number will be used in the numbering sequence and the letter “R” will precede the resolution number. For example, the contract number in IFAS for a one-year FY 2011-12 Sheriffs Office contract with a Board resolution number of 012345 would be 30000-12-R012345.