A contract is an agreement negotiated by two or more parties. It documents the business relationship by confirming the commitments each party is making and helps avoid later misunderstandings. A contract includes various business components such as pricing, deliverables, and duration of business relationship; and legal components such as indemnification for harm or loss, data security, and intellectual property ownership.
A contract is generally required when a business unit, school, or department would like to hire a non-Stanford, outside company or individual to perform a service for Stanford. Because these contracts bind or obligate the university to a financial or a non-financial commitment, contracts must be written and signed by the proper authority. Administrative Guide Memo 1.9.1: Signature and Financial Approval Authority specifies that the Procurement Services department within Financial Management Services is the designated authority to sign contracts for purchase of goods and services (also referred to as procurement contracts) for the university.
Transactions that do not require a contract signed by Procurement Services typically follow the Purchase Order process or are purchased through other methods and signed under a Delegation of Signature Authority letter already on file.
There are many types of transactions that require a contract in order to document the expectations of each party. Here are some examples of services that require a contract:
- Architecture & Engineering
- International/Global Services
- IT Services
- Lease (Equipment)
- Lease (Real Estate)
- Non-Disclosure Agreement
- On-Campus Cafe Operator
- Technical Services
The pre-request includes:
- Ensuring the requesting department has a discussion with internal and external stakeholders on whether they need to work with a supplier. Additionally, schools and departments should review and understand the policies and guidance on how suppliers are selected at Stanford, which are referenced in:
- Conducting a basic outline of scope, ensuring pricing is documented in a statement of work or proposal. In some cases, a formal Request for Proposal (RFP) will be needed.
A supplier is any individual or organization that receives a payment, or exchange of services, from Stanford University. Before a contract request can be made, the supplier must have an active record in the university’s database. See the Topic Overview: Setting Up a New Supplier or Payee for guidance on searching for existing, and setting up new, suppliers.
Departments and schools begin the contract process when they submit a contract request and obtain subsequent financial approval.
1. Request the Contract in SmartMart Contracts
- Submit new and amended contract requests of any or no dollar amount to Procurement Services using the SmartMart Contracts system within iProcurement. Certain Capital Equipment purchases are an exception, which may need to be initiated in iProcurement.
- Attach a Statement of Work, proposals and/or draft agreements within the SmartMart Contracts system. Certain contracts, such as those involving an Independent Contractor or supplier use of Stanford data require additional consideration and documentation which helps inform and expedite the contract request and review process.
- Watch for an email providing the requisition number to continue in iProcurement.
Please note: Contract request processing times vary depending on the:
The Contract Advisor assigned to your contract will process your contract as quickly as possible based on the above factors. For specific questions about your contract, please use the Communications Center feature within SmartMart Contracts. If you need to rush your contract request, refer to How To: Submit a Contract Request.
2. Obtain Financial Approval in iProcurement: For contracts that require paying money to the supplier, the system will automatically create a purchase requisition in iProcurement after the contract request is marked as “completed” in the SmartMart Contracts system.
- Add the PTAE(s)to the purchase requisition in iProcurement. A designated PTA approver is auto-populated in the requisition based on the PTA and the dollar amount being requested.
- Attach either competitive bid(s) or a sole source justification (SSJ) form. The university requires that the purchase of products or services be by competition between suppliers to the extent possible based upon the requirements of quality, price and performance. This supplier selection documentation must be attached to the purchase requisition if purchasing a product or services with a cost of $25,000 or greater.
- Submit the purchase requisition for financial approval. If the contract request contains a monetary value, the funds must be fully approved before the contract signature can be completed. For more information, see Topic Overview: Financial Transaction Approval.
For more details on submitting a purchase requisition with appropriate documentation, refer to the Purchase Order Process.
After the funding requisition has been financially approved, the Procurement Services Contracts team will:
- Review the request
- Draft the agreement
- Negotiate any changes to legal terms requested by the supplier to ensure alignment with university policy
- Request signature from the supplier
- Sign the contract on behalf of Stanford
Occasionally, certain contracts may require review by other departments (e.g., the Office of General Counsel, Global Business Services or Office of Technology Licensing) or pose unique circumstances/risks, which may affect processing time. If the contract will involve the use of Stanford data by others, please refer to the contract considerations section on this page. Fiscal year end generally sees a significant increase in the volume of contract requests and can impact processing time.
Communicating With the Contracts Team
When a contract request is submitted in SmartMart Contracts, departments should use the SmartMart Contracts system’s communications functionality to communicate with the Contracts Advisor assigned to their contract. The Contracts Advisor can provide status updates and will reach out if additional information or changes are needed from the preparer. Refer to How To: Use Message Tools Within SmartMart Contracts for additional details.
If a Change is Needed Before a Contract is Fully Executed
There may be a need to make changes to a contract before it is signed/fully executed. Due to the various stages that the contract request might be in at the time a change is needed, and the number of possible paths forward at each stage, it is best to communicate these types of changes with the assigned Contract Advisor using the Communications Center within SmartMart.
The PO number is embedded in the contract prior to signature. The preparer of the contract request will receive a system-generated email letting them know when the contract has been fully signed.
At this point, the preparer, and named contract stakeholders have view access of the contract file within SmartMart Contracts and can download a copy of the signed agreement if needed.
The table below outlines the description and process for possible actions a preparer can take on a contract that has been fully executed/signed:
|Preparer Action||Description and Process|
Once the contract is fully executed with an associated PO number, invoices may be uploaded to the PO.
See the Topic Overview: Purchase Order Invoice Processing to understand PO invoicing requirements.
|Request Simple Financial Changes to the Active PO||
There are several activities that can occur on an active PO, such as a PTA change, which do not impact or involve the supplier and therefore do not require an amendment to the contract.
See the Topic Overview: Purchase Order Process on how to review, access and manage an active purchase order.
|Request a Contract Amendment||
An amendment is a legally binding document that records any agreed upon changes to an executed contract.
Changes need to go through the amendment process because there is an amendment clause in all Stanford contracts specifying that “agreements shall not be changed, except in writing, signed by both parties.”
Amendment examples include changes to the:
See the How To: Amend a Contract for the end-to-end contract amendment process on a contract that is signed and fully executed.
If the amendment requires an increase to the amount of money in the contract, then a change order purchase requisition is automatically created in iProcurement and the requester must complete and submit for financial approval.
|Request a Contract Extension||
A contract extension is a type of an amendment to provide additional time to complete the currently contracted scope of work. This may require additional funding.
Contract extensions are entered in the SmartMart Contracts system as a request to “Amend/Change a Contract.”
If the contract amendment is only for additional time (and does not require additional money) a purchase requisition will not be automatically created in iProcurement. The amendment will route directly to the Contracts Advisor assigned to the agreement for review and signature.
|Request a Contract Renewal||
A contract renewal creates a new contract between the parties. Most often, the majority of the new contract is a repeat of the business and legal terms agreed in the last contract, with the only changes being start and end dates, and the amount of money being paid. Therefore, instead of writing an entirely new contract, a much shorter document is written to confirm that both parties agree to all the same terms of the prior agreement plus the new dates, amount of money, and any other minor changes such as updated contact information. Please note that after a number of contract renewals, the contracts team may elect to write an entirely new contract rather than trying to track multiple amendments and renewals.
Contract renewals are entered in the SmartMart Contracts system as a request for a “New” contract.
When the renewal requires funding, a purchase requisition is automatically created in iProcurement and the requester must complete and submit for financial approval.
|Manage Potential Issues or Disputes||Refer to the Topic Overview: Managing the Supplier Relationship and Record for more information on how to manage disputes with suppliers when the delivered product or service is not meeting expectations. In some situations, schools and units can request that the Accounts Payable (AP) team place a hold on an invoice associated with the contract, allowing additional time to communicate with the supplier and reach a reasonable resolution.|
|Request a Contract Termination||
Most Stanford contracts automatically terminate at the “end date” set in the contract. The university generally does not allow “evergreen” or automatic contract renewals because they represent a financial risk; creating legal obligations to pay money that has not been budgeted.
If a department wishes to terminate a contract before the scheduled “end date”, please contact the assigned contract advisor in the SmartMart Contract Communication Center for assistance. See How To: Use Message Tools Within SmartMart Contracts for further information.
The contracts advisor will request a detailed explanation of why the department requests early termination.
If there is a dispute between the department and the supplier, the contracts advisor will require documentation of communications between the department and the supplier which demonstrate efforts to reasonably resolve the dispute.
If a department has reason to believe that Stanford’s relationship with a specific supplier should be terminated on behalf of the entire university community, they should submit a help ticket with details. Procurement will then coordinate with OGC, OCRO, stakeholders and senior leadership to determine appropriate actions.
If a staff member is aware of conduct that violates, or anticipates a situation that potentially violates, university policies such as the Code of Conduct or Conflict of Commitment and Interest, they should notify the appropriate university officer or reach out to the Ethics & Compliance helpline.
Contracts Submitted Through a Non-Catalog Requisition in iProcurement
For questions on contracts that originated in iProcurement prior to the launch of the new SmartMart Contracts system, please submit a support request.
The IRS requires that business owners correctly determine whether an individual providing services must be paid as an employee or may be paid as an independent contractor. The determination of how work is classified drives whether employment taxes must be withheld and paid by the university and eligibility for benefits including vacation. Refer to IRS guidance at Employee versus Independent Contractor Status for more information.
An Independent Contractor Checklist (IC Checklist) can help determine whether to pay a consultant as an independent contractor or employee and must be attached when submitting a requisition if the supplier is an individual person and not a company or corporation.
For more information:
- Visit the IRS webpage on Independent Contractor (Self-Employed) or Employee?
- Refer to Administrative Guide Policy 2.2.3, University Payroll
Special care must be taken when Stanford data is used or accessible by others. Whether it be consultants who may use the data or services that host it, data risk classification must be considered. See the Data Risk Assessment (DRA) FAQs and Third Party Security Requirements for more information. Contracts with consultants or hosting services will require a DRA review of data risk by the Information Security Office (ISO) and University Privacy Office (UPO). The DRA process could take from 4-6 weeks, so it is important to start the process early. Complete the Data Risk Assessment (DRA) with the university’s ISO office and attach a copy of the final DRA Report to the SmartMart contract request.
Additional contract terms may need to be incorporated into contracts when the supplier performs a service function or activity that may involve the use, access, transfer, or storage of moderate or high risk data. Please consult Procurement through an FSC support request as soon as the purchase has been identified as involving moderate or high risk data, such as data protected by the Health Insurance Portability and Accountability Act of 1996 (HIPAA), or other similar Federal or State security requirements.
When a supplier facilitates credit and/or debit card payment processing on behalf of Stanford, it means that community members (e.g., students or members of the public) give their card information to suppliers to purchase items from:
- The university, such as tickets to a Stanford-sponsored concert or sporting event, or
- A supplier at a Stanford campus location, such as a campus cafe, vending machine, or web site operated and owned by the supplier, but, where the purchaser might reasonably believe they are making a payment directly to Stanford.
When working with suppliers that will facilitate credit and/or debit card payment processing on behalf of Stanford, contract preparers must ensure compliance with Stanford’s associated policies and align supplier engagements with any additional requirements requested by Merchant Services and the Information Security Office (ISO). This includes:
- Consult with the Merchant Services team by submitting a support request. After receiving this consultation, attach a copy of the email confirmation from Merchant Services to the SmartMart contract request.
- Complete the Data Risk Assessment (DRA) with the university’s ISO office and attach a copy of the final DRA Report to the SmartMart contract request.
The university’s standard Contract and Purchase Order language also addresses Payment Card Industry Data Security Standards (PCI-DSS) with suppliers who process credit and/or debit cards on behalf of Stanford.