Authority/Reference(s)
Revision Date November 1, 2011

Policy

Contract staff are responsible for adhering to all applicable rules and regulations to promote contracting accountability for state and federal funds.

A contract is an agreement between two or more parties creating obligations that are enforceable or otherwise recognizable at law. Government contracting is subject to more laws and regulations than contracting for private entities.

Federal and State Laws

Federal laws governing DFPS contracts include:

  • U.S. Constitution;
  • federal statutes and treaties;
  • federal regulations [e.g., Code of Federal Regulations (CFR) and Office of Management and Budget (OMB)];
  • case law and administrative decisions; and
  • grants or contracts between U.S. and DFPS.

State laws that govern DFPS contracts include:

  • Texas Constitution;
  • Texas statutes;
  • Texas rules [e.g., Texas Administrative Code (TAC)];
  • case law and administrative decisions; and
  • contract between DFPS and contractors.

The legal authority for DFPS to enter into a contract is conditioned on following the proper procurement procedure.

DFPS Contracting Authority

The State legislature gives the HHSC Executive Commissioner authority to delegate contractual authority to the DFPS Commissioner to contract on behalf of DFPS. The DFPS Commissioner delegates the authority for certain contracts based on dollar thresholds to the Deputy Commissioner, assistant commissioners, and to some directors. The Commissioner forbids any further delegation below the director level.

The contract does give contract managers and others the ability to approve certain things within a contract such as budget amendments. Any individual who acts beyond the delegated authority is acting at his or her own individual risk.

Other Parties The "other parties" with whom DFPS contracts are known as contractors. The contractor must be another legal entity (e.g., individual, partnership, corporation, governmental entity). All entities except the individual are creatures of the law and do not exist without the law.

We must always contract with a true legal entity and obtain signatures from the legal entity's authorized representatives (e.g., individual for an individual, general partner of a partnership, official with properly delegated authority for a governmental entity, official with properly delegated authority for a corporation).

Client Service Contract Expectations

Generally, in DFPS client service contracts, the contractor agrees to serve DFPS clients in a manner defined by program and incorporated in the contract. DFPS generally agrees to pay the contractor in a manner defined in the contract (e.g., fixed, fee-for-service, or cost reimbursement). Other terms have conditions and contingencies for the main promises.

Contract Enforceability

No matter what the agreement is called, if it does not create an obligation that is not otherwise imposed by the law, it is not a contract. If it does create an obligation beyond the general law, which the courts or the administrative hearing officer could order the parties to perform or pay damages because of a breach of that obligation, it is a contract.

A Memorandum of Understanding (MOU) is often used between state agencies, but if it is not enforceable, it is not a contract. If it is enforceable, it is a contract. Understandings not involving cash can still be contracts (e.g., DFPS promises to give information to the Texas Department of State Health Services (DSHS) for a public purpose, and DSHS promises to keep the records confidential).

Letters of Agreement are considered contracts if they are enforceable; they may also be expensive and illegal. An example would be that some non-profit organization offers to "volunteer" staff time in exchange for promises of space, equipment, and indemnification (exemption from damages). "Volunteer" work in exchange for space and equipment may really be a contract subject to competitive procurement.

Acceptance of donations may also result in a contract. If there are any conditions tied to the acceptance of the donation, then acceptance with the conditions is a contract. Only a person with authority to sign a contract may accept a gift with conditions, and depending on the type of condition(s), it is possible that only the Commissioner may accept.

How do we go about getting a client service contract? Procurement is the decision-making process for contracting before entering a contract. There are proper procedures that define how we enter a contract. These procedures are detailed, and good business practices are just as important. The legal authority for DFPS to enter a contract is conditioned on following the proper procedures. If the wrong procedures are used, then DFPS has no legal authority to enter the contract.

Contract Risk and Risk-Management Resources

Some, but not all, of the risks associated with DFPS contracts include:

  • contracts signed with non-existent entities, which are not enforceable;
  • contracts signed by unauthorized parties, which are not enforceable; or
  • contracts signed in the wrong name, creating confusion and making the contract difficult to enforce.

To control these risks, the Secretary of State website provides access to the real names of corporations or business entities. The Comptroller's website provides information regarding entities on ”vendor hold” or entities with issues related to certificates of account status. Other websites provide information regarding entities that have been debarred or suspended by the United States or by the State of Texas.

A general contracting resource for Texas state agencies is the Comptroller's State of Texas Contract Management Guide. The guide is not DFPS-specific, and our contracting rules and policies may be more restrictive, but the guide is a good starting point to understand Texas governmental contracting.