Service Contracting for Personal and Purchased Services
January 31, 2018
Category: Purchasing and Contracting
Agencies have wide latitude in setting their own policies and procedures when it comes to selecting and contracting for personal and purchased services.
There are two exceptions for personal services contracts: one for port districts, which must competitively solicit contracts over $50,000 per RCW 53.19.020, and one for public facility districts, which must competitively solicit contracts that are over $150,000 per RCW 36.100.180, although both are statutory restrictions for personal services.
Selecting A&E services has its own unique requirements, not included herein, but has been addressed in Selecting A&E Services.
When setting their own policies and procedures for service contracting, public agencies should provide for varying levels of effort and procedure in selecting service providers based on the estimated contract price and complexity of the work. One good practice is for agencies to develop varying levels of competition for threshold categories, such as minimal competition, informal, and formal. The agency can then define what dollar level and competitive process would be applied to each category.
What differentiates a purchased service from a personal services contract? Let’s start by defining what work falls under each and how that impacts the type of contract used.
Purchased services are provided by vendors for necessary and continuing tasks, mostly relating to physical activities. They are routine, repetitive, or mechanical in nature, generally follow an established or standardized procedure, and involve a minimal level of decision-making. They contribute to the day-to-day operations of the agency and are intended for completion of an assigned or specific task.
Examples of purchased services include building maintenance (i.e. janitorial duties such as cleaning, emptying wastebaskets, window washing), litter pickup or recycling service, vehicle inspection and maintenance, herbicide application, landscaping (weeding, mowing type activities), delivery and courier services, HVAC remote monitoring services, and moving services.
Purchased services may require prevailing wages, in which case, contractors providing these services must follow the statutory requirements of RCW 39.12. Contractors whose work includes only observing, directing, verifying, and reporting would not have a prevailing wage requirement.
With regard to retainage and bonds, RCW 60.28.011 requires retainage for public improvement contracts but not for federally-funded transportation projects. RCW 60.28.011(12)(d) partially describes public improvement contracts as “a contract for public improvements or work, other than professional services, or a work order as defined in RCW 39.10.210.”
It’s possible that some maintenance contracts do not include any public improvement. A janitorial contract does not improve the property. Likewise, some HVAC maintenance contracts involving only tasks that keep the equipment in good running order (cleaning, adjustments, lubrication) may not be a public improvement contract. If it is not a public improvement contract, retainage is not required.
Public agencies are advised to scrutinize the scope of work intended for a service contract in order to determine the appropriate contracting process, as there can be a fine line between a purchased service and some public works projects. The specific facts of the work involved may change it from purchased services to public works.
An example of this would be landscaping. When the work under a landscaping contract is limited to mowing, weeding, and raking, it is a purchased service subject to prevailing wages. When the work includes activities such as digging and planting, it becomes a public works subject to both the public works bid laws as well as prevailing wage. When in doubt, contact L&I for additional clarification.
Solicitations and contracts issued for purchased services would need to provide a detailed outline of the work to be performed. The solicitation must identify when prevailing wage requirements and related activities that fall to the contractor are part of the work. There are specific details that must be included, such as clear specifications of the work, frequency to be performed, minimum qualifications of the contractor, applicable prevailing wage rate information (or a link to the appropriate information), and whether retainage and bonds are required, as stated above.
There is more detailed information on our Purchased Services Contracts webpage.
Personal services do not include any purchased services, nor any of the professional services identified in chapter 39.80 RCW, which must follow the A&E selection process. Personal services are those activities or products that are mostly intellectual in nature and provided by a consultant to accomplish a specific study, project, or task. These services may or may not be required in connection with a public works project as defined in RCW 39.04.010(4).
Examples of personal services include trainers, inmate physician services, translation services, or a city attorney. Other examples include comprehensive plans, utility rate studies, and right-of-way appraisals.
Additional information is available at our Personal Services Contracts webpage.
Solicitations and Awards
When soliciting for purchased services, an IFB or RFP could be used, depending on the type of service needed, though RFPs are typically used for personal services.
In both solicitation types, price is one of the basic criteria to consider when making the selection. Other criteria to consider include a contractor’s ability, experience, quality of previous performance (for agency or other agencies), responsiveness to solicitation, staff assigned to projects, and availability to meet deadlines. There will also be unique criteria to include for the specific service being sought.
Agencies will generally have different contracts for purchased and personal services, which serves to reinforce the different requirements for both. In addition to the potential of including prevailing wages, retainage, and bonds in a purchased services contract, the agency should consider what types and levels of insurance should be required, the level of indemnification imposed, what payments are allowed, when remittances will be made, how changes would be managed, and how work is confirmed and accepted.
It is noteworthy to mention that if an agency receives a grant for work that would be covered by a purchased or personal services contract, particularly if a federal grant has been received, care should be taken to ensure that the terms of the grant are met in any contracting process.
In the case of a federal grant, one of the requirements in the New Uniform Guidance, 2 CFR 200 is for local government grantees to have written purchasing and/or procurement policies and standards of conduct in place, or to adopt these. As an example, among other requirements, a grantee is specifically required to have a written method for conducting technical evaluations of proposals and for selecting recipients when using an RFP.
While the federal requirements are detailed, the grantee will need to apply the most stringent requirements, either those in the federal grant or their own local government requirements. Review all the requirements thoroughly to ensure your agency is in compliance when utilizing these options.
If you have had experience with service contracting or have developed an approach that has been working, please leave a comment below or contact me directly at firstname.lastname@example.org. If you have questions about this or other local government issues, please use our Ask MRSC form or call us at (206) 625-1300 or (800) 933-6772.
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