Kentucky Legislative Research Commission:

Government Contract Review Committee

Personal Service Contracts & Memoranda of Agreement:

Committee Jurisdiction, Process, and Approval

I. Jurisdiction: The Role of the CommitteeGovernment Contract Review Committee (GCRC) is a statutory

committee created by KRS 45A.705. It is required to meet monthly and review Personal Service Contracts and Memorandum of Agreement submitted to the LRC. This review must occur within 45 days of the receipt.

Personal Service Contract: Agreement where an individual, firm, partnership, or corporation is to perform services

Professional skill/judgment required for a specified time at an agreed upon price

i.e. – PSC # 14-036: UK contracted with Crowe Horwath, LLP for auditing of various services

Memorandum of Agreement: Agreement between agencies of the Commonwealth

i.e. – MOA # 90109: Murray State Univ. contracted with Graves County Board of Education to provide a Reading Recovery Teacher Leader on their campus

The GCRC is composed of 8 members of the General Assembly4 members of the House and 4 members of the

SenateCurrent Membership:

Senator Sara Beth Gregory (Co-Chair)Representative Dennis Horlander (Co-Chair)Senator Julian CarrollSenator Paul HornbackSenator Christian McDanielRepresentative Jesse CrenshawRepresentative Brad MontellRepresentative Brent Yonts

Scope of Committee Review (KRS 45A.695-705)

Provide oversight and examine the following:The stated need for the serviceWhether the service could or should be

performed by state personnelThe amount and duration of the contract or

agreementThe appropriateness of any exchange of

resources or responsibilities

Committee ActionsDuring review at the monthly meeting, GCRC

members can:consider the contract “Reviewed without

objection” This allows the contract to pass through committee

Defer the contract for a specified amount of time Typically occurs when a questions remain on the

contract or items are missing (i.e. – SOS registration requirement)

Disapprove the contract This occurs when the members deem the amount,

duration, or exchange of resources as inappropriate

NOTE: Committee “Action” requires a constitutional majority of the membership, or 5 votes.“Action” is considered to be a motion to defer

or disapprove a contract.A motion to “Review without objection” is

considered as allowing the contract to pass through committee without a formal action taken on it.

If Disapproved...Following a successful motion to disapprove, we submit

a written notation to the secretary of the Finance and Administration Cabinet to request the contract be terminated

The secretary or a designee will then determine whether the contract or agreement should

Be revised to comply with the committee’s objectionsBe cancelledRemain effective as originally approved

The secretary will notify the committee of the action taken within 10 days from the date of committee review

II. Preparing the contract for review

Filing your contractEstablishing “Proof of Necessity”

Committee PolicyExemptions

Filing your contract...In order to ensure your contract gets

reviewed at the proper time:Each Personal Service Contract or Memorandum of

Agreement is to be filed with the committee prior to the effective date and shall be accompanied by a completed Proof of Necessity (PON) – KRS 45A.695

Personal Service Contracts of $10,000 or less and Memorandum of Agreement of $50,000 or less are exempt from routine review and are to be filed with the committee no more than 30 days after their effective date for informational purposes only. – KRS 45A.700

NOTE:Although submitted for information purposes only,

PSCs of $10,000 or less and MOAs of $50,000 or less may still be examined by the committee. Agency participation may still be requested at monthly meetings relative to those agreements.

If a PSC of $10,000 or less or an MOA of 50,000 or less is amended so that the total now exceeds those threshold amounts, the amended contract will be placed on the agenda for routine review.

Payment for PSCs over 10,000 & MOAs over 50,000 cannot be remitted prior to committee review. However, work can begin once the contract is filed.

Proof of Necessity...The Proof of Necessity form must accompany all filed

contracts and agreements, and must include:The need for serviceThe unavailability of state personnel or the non-

feasibility of utilizing state personnel to perform the service

The total projected cost of the contract and source of funding

The total projected duration Payment information, in detailFor MOAs, the reason for exchanging resources or

responsibilitiesOther information as the committee deems appropriate

Committee Policies...Personal Service Contract Amendment

PolicySpecialized Service: Maximum RatesAppraisers Auctioneers Auditing Multiyear Contracts

Personal Service Contract Amendment Policy*Policy Statement #00-6*

It shall be a policy of the Government Contract Review Committee of the Legislative Research Commission that no personal service contract amendment coming before the committee for review shall be in order any sooner than ninety (90) days after a committee action on the contract, unless the amendment is supported by a detailed explanation, addressed to the committee, citing specific valid and justifiable reasons for amendment of the contract. The failure of a contracting body to accurately estimate the total amount of a contract or proposed contract shall not constitute the sole reason for amending a government contract.

Specialized Service: Maximum Rates*Policy Statement 99-1*

Legal ServicesPartner - $125/hourAssociate - $100/hourFor Appellate cases - $125/hour

Legal Services for Title Examinations on Parcels of LandSurface Title - $170/titleMineral Title - $500/title

Paralegals - $40/hour

Note on Legal Fees... The Government Contract Review Committee may approve higher

hourly rates for legal services provided in high rate areas, or for legal services provided by attorneys located in high rate areas.

"High Rate Area" means those geographic areas recognized by the secretary of the Finance and Administration Cabinet as high rate areas by promulgation of an administrative regulation (http://finance.ky.gov)

If a higher hourly wage is sought, submit a letter to the committee to justify the need to pay the wage

For out of state attorneys, be prepared to explain why out-of-state counsel is necessary

Additional Fee Requirements...Appraisers - Policy Statement 99-2

Real Estate - $560/dayResource & Mineral - $600/day

unless required by the complexity of the appraisal, in which case, prior justification must be presented to the committee.

Auctioneers - Policy Statement 99-3 Real Property and Personal Property

Not to exceed $800/event for auctioneer services, unless required by the complexity of auction, in which case, prior justification must be presented to the committee.

Auditing - Policy Statement 99-5 Principal or Partner - $125/hour Sr. Auditor or Manager - $100/hour Jr. Auditor or Staff Auditor - $75/hour

Multiyear Contract Policy...Policy Statement 99-4 It shall be the policy of the Government Contract

Review Committee of the LRC to consider for approval, only those personal service contracts, price contracts for personal services, memoranda of agreement, memoranda of understanding, program administration contracts, interlocal agreements (to which the Commonwealth is a party), privatization contracts, or similar devices and instruments under the jurisdiction of the committee that are entered into and concluded prior to the end of the biennium in which the contract or agreement was made. (June 30, 2014 for state funds...September 30, 2014 for federal funds)

Exceptions & Exemptions...

Sole Source ContractsSecretary of State

Registration/foreign vendorsRetroactive Start DateContracts that exceed maximum

rate

Sole Source Contracts...Sole Source contracts submitted for review

must include a written letter of explanation.Letters must be addressed to committee co-

chairs and submitted prior to reviewDetail why it is not practicable to bid the

contract This may include:

Specialized nature of the work to be performed Exigent circumstances Market conditions that prevent feasible competition

SOS Registration Requirement...Per KRS 14A.9-010: A foreign entity shall not

transact business in this Commonwealth until it obtains a certificate of authority from the Secretary of State.Must be registered, active, and in good standing

Contracts submitted for review that utilize foreign vendors must meet this requirement prior to the monthly committee meeting. Inability to meet this requirement leads to a deferral on the contract.

Info on the process for vendor registration can be found at www.sos.ky.gov

Exceptions to the Registration Requirement... KRS 14A.9-010(2): The following activities, among others, shall not constitute

transacting business within the meaning of subsection (1) of this section:

(a) Maintaining, defending, or settling any proceeding;(b) Holding meetings of the board of directors, shareholders, partners, members, managers, beneficial owners, or trustees or carrying on other activities concerning the internal affairs of the foreign entity;(c) Maintaining bank accounts;(d) Maintaining offices or agencies for the transfer, exchange, and registration of the foreign entity's own securities or maintaining trustees or depositaries with respect to those securities;(e) Selling through independent contractors;(f) Soliciting or obtaining orders, whether by mail or through employees, agents, or otherwise, if the orders require acceptance outside this state before they become contracts;(g) Creating or acquiring indebtedness, mortgages, and security interests in real, personal, or intangible property;(h) Securing or collecting debts or enforcing mortgages and security interests in property securing the debts;(i) Owning, without more, real or personal property;(j) Conducting an isolated transaction that is completed within thirty (30)days and that is not one (1) in the course of repeated transactions of alike nature; and(k) Transacting business in interstate commerce.

Retroactive Start Date & Contracts of High Rate

In cases where a retroactive start date is needed or a contracted hourly rate exceeds the maximum requirement, submit a letter of explanation to the co-chairs prior to the meeting. Lack of this documentation can lead to a deferral.

III. The Day of the Meeting

Contracts Selected for “Further Review”

What should you expect?

What do members generally look for?

What to expect for “meeting time”In the week prior to the meeting, committee members

and agencies will receive the complete agenda to review.We strongly encourage all agencies to look over the

agenda thoroughly to ensure that no corrections or additions need to be made prior to the meeting.

Committee members typically have up until the business day before the meeting to select contracts for review, at which point we immediately notify all agencies that need to attend the meeting and speak to their contract.

The routine meeting day is the 2nd Tuesday of the month. Members notify us by the Monday before the meeting with any questions or pulled items.

If your contract is selected for further review...Members typically pull contracts that present

questions on the amount, scope, source of funding, necessity, and effectiveness of the agreement.

If the contract deals with a reoccurring program, be prepared to discuss measurements of its success.

Members often look at service contracts for universities to understand whether the contracted service can be performed by current staff or students with particularized training.

If questions remain after discussion at the meeting, members can request to defer the contract to the following month.

After the meeting...

All approved contracts transmittals will be stamped, scanned and emailed to the respective agencies.Payment can begin upon receipt of the scanned

copyAnticipate receipt the business day following

the monthly meeting.

Call or email our office if you ever have a question or concern. We are located in 002 of the Capitol Annex.

Kim Eisner, Committee Staff Administrator – Ext. 756Kim.eisner@lrc.ky.gov

Charles Booker, Legislative Analyst – Ext. 346Charles.booker@lrc.ky.gov

Becky Brooker, Committee Assistant – Ext. 806Rebecca.brooker@lrc.ky.gov

Committee Website:http://www.lrc.ky.gov/Statcomm/Contracts/homepage.htm