Minnesota Department of Transportation

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MnDOT Policies

Contract Management Procedures

For Contract Management Policy #FM014

Effective Date: March 11, 2021

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Introduction

This document is the technical companion to the Minnesota Department of Transportation’s (MnDOT’s) Contract Management Policy.

Definitions

Agreement/Contract

A written document signed by two or more parties describing the parties' respective rights and obligations for a particular transaction or exchange. 

Note: In this policy, “contract” and “agreement” are interchangeable terms. All references to “contract” and “agreement” refer to a written legal obligation of MnDOT regardless of whether titled “contract” or “agreement.”

Amendment                                                                                                             

A change to a contract, in writing and signed by the parties to the contract. 

Note: The term “amendment” includes addendums, change orders, and supplemental agreements.

CAATS (Contracts Agreements Auditing Tracking System)

The system of record for managing contracts, agreements and associated documents between MnDOT and other parties.

Note: See CAATS for the listing of contract types to be recorded in the system.

Conflict of Interest (Personal)

A situation in which a person has a private or personal interest sufficient to, or that appears to, influence the objective exercise of their official duties as a public official, employee, or professional. 

Conflict of Interest (Organizational)

A situation in which a contractor has an unfair advantage, or the contractor is unable or potentially unable to render impartial advice or assistance to the State because of existing or planned activities or because of relationships with other persons.

Contract Types

The family or category of contracts to which a particular contract belongs. "Contract Type" is used to classify agreements into categories for reporting and tracking purposes. They are generally based on the purpose and subject matter of the contract, and not on the office responsible for the contract.

Contract types are established by MnDOT’s Contract Management Section and include: Construction, Collaborative/Intergovernmental, Grant, Partnership, Professional/Technical Services, Property/Facility, and Other. Goods and General Services contracts procured under Minn. Stat. Chapter 16C are not entered into CAATS.

Contractor         

Generic reference to the other party (or parties) to a MnDOT contract.

"Contractor" generally refers to a construction contractor, however, it can also include any other party contracting with MnDOT such as consultants, local government bodies, Tribal Nations, other State agencies, grantees, utility owners, or railroad companies.

Delegated Authority 

Established by a written order which describes the specified statutory powers or duties of the Commissioner that are delegated to be performed by a specified subordinate employee (see Minnesota Statutes §15.06, Subd. 6).

Solicitation

A process used to inform potential Contractors of an opportunity to compete for a MnDOT Contract and providing information about project and proposal or bid submission requirements.

SWIFT (Statewide Integrated Financial Tools)

The PeopleSoft based online financial, procurement, and reporting system used by the State of Minnesota.

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(See Policy-Manual for examples of HTML for lots of levels of lists)

    1. when required by law or another Executive Branch agency; or
    2. to set expectation, establish internal controls, and/or mitigate risk. Directives must be long-term and department-wide or across several divisions.

Procedures

Subjects appear in chronological order to help employees navigate through the process and to set expectations for managing MnDOT contracts:

  • Understand ethical obligations and implement ethical practices;
  • Understand legal requirements before entering into a State contract;
  • Use procurement methods prescribed by statute;
  • Use the appropriate bid/proposal solicitation and contract templates;
  • Understand the unique rules and requirements by contract type and subtype;
  • Prepare well-written contracts that follow all requirements provided by the Contract Management Section.
  • Obtain proper approvals and signatures for all contracts, record contract data in the system of record, and retain a copy of each contract;
  • Review invoices, make prompt payments, and be alert to fraud;
  • Use an amendment for changes in a contract; and
  • Diligently close out contracts and pursue the resolution of performance issues in a proper manner.

Employees must understand ethical obligations and implement ethical practices.

  1. Employees must comply with the Code of Ethics statute and policy.

    Public trust and confidence in MnDOT is critical to MnDOT’s success. MnDOT employees must use their authority and department resources in the public interest. All MnDOT employees are required to comply with the MnDOT Code of Ethics Policy.

    All MnDOT employees are required to comply with Minnesota Statutes §43A.38, Code of Ethics for Employees in the Executive Branch. This law governs a number of topics including accepting gifts, using confidential information, using State property, and determining and resolving conflicts of interest.

    A MnDOT employee involved in procurement or contract administration must contact Human Resources if the employee believes they may have an actual or perceived conflict of interest.

  2. Employees must watch for and report organizational conflicts of interest.

    The MnDOT Code of Ethics Policy discussed in the previous paragraph focuses on a MnDOT employee’s ability to act impartially. Organizational conflicts of interest focus on a State contractor’s ability to act in the best interest of the State, rather than their own interests or the interests of another party.

    Organizational conflicts of interest may raise doubts about the quality of the contractor’s performance and deliverables. Examples of organizational conflicts of interest include unequal access to information, biased ground rules in solicitations, and impaired objectivity due to a present or future financial or business relationship.

    MnDOT must make reasonable efforts to avoid, mitigate, or neutralize organizational conflicts of interest that may arise during the procurement process, as required by Minnesota Statutes §16C.04, Ethical Practices and Conflict of Interest. A MnDOT employee must notify the Contract Management Section if the employee suspects or discovers a potential organizational conflict of interest, or if a contractor or potential contractor discloses a potential conflict of interest.

    The Contract Management Section reviews potential organizational conflicts and determines an appropriate department response, consulting with the Department of Administration as needed. Appropriate responses to an actual or perceived organizational conflict of interest may include the following:

      • Disqualifying the contractor from eligibility for a contract award;
      • Canceling the contract if the conflict is discovered after a contract has been issued;
      • Revising the scope of work to be conducted;
      • Allowing contractors to propose the exclusion of tasks that create a conflict; and
      • Providing information to all contractors regarding actions taken by MnDOT.

Employees must understand legal requirements before entering into a State contract.

  1. There are statutory requirements for a valid State contract:
    • Minnesota Statutes §§16C.05 and 16B.98 require the State to use written contracts. An oral contract is unenforceable. MnDOT can only be bound to a contract that has been signed by the individuals required by statute.
    • Authorizing or permitting work to proceed before funds are encumbered and a contract is signed is a violation of State law under Minnesota Statutes §§16C.05 and 16A.15. MnDOT employees must familiarizes themselves with these State laws and the Department of Administration’s Encumbrance and Contract Execution Policy 21-01. MnDOT employees must make every reasonable effort to avoid 16A and 16C violations in contracting, purchasing, and other transactions. An employee must not authorize or permit a contractor to begin work before funds are encumbered and a contract is fully executed. If a 16A or 16C violation occurs, the employee incurring the violation must complete the appropriate documentation.

  2. MnDOT must have specific statutory authority for each contract it enters into.

    MnDOT derives its powers to enter into contracts from Minnesota statutes. The statutory authority to enter into a contract must be in the recitals or background of the contract.

    MnDOT has the statutory authority to enter into a variety of contracts. Each contract type has legal requirements and business considerations. MnDOT employees must familiarize themselves with the related statutes, rules, policies, and procedures associated with each contract type before entering into a contract. The best way to become familiar with these requirements is by discussing program needs with Contract Management Section staff.

  3. Money must be used for the purpose for which it was appropriated.

    MnDOT employees must not knowingly and intentionally use money appropriated by law for a purpose other than the purpose for which the money was appropriated. An employee who violates Minnesota Statutes §16A.139, “Misappropriation of Money,” may be found guilty of a gross misdemeanor, unless a greater penalty is specified by law.

MnDOT must use procurement methods prescribed by statute.

State law prescribes the method for awarding contracts for the procurement of goods, general services, professional/technical services, and construction services. In most instances, State law requires fair and open competition in the form of requests for bids or requests for proposals under Minnesota Statutes Ch. 16C and Minnesota Statutes Ch. 161. MnDOT will use competitive methods of procurement unless specifically exempted by statute or unless using an alternative method approved by the Department of Administration.

Employees must use the appropriate bid/proposal solicitation and contract templates.

  1. Select an appropriate bid/proposal solicitation template.

    When MnDOT is required to obtain bids or proposals for a contract, MnDOT employees must use the correct solicitation document for that type of contract. Solicitation documents are as follows:

      • A Request for Bids is used for building construction contracts and “traditional” (bid-build) highway construction contracts.
      • Request for Qualifications (RFQ) and Request for Proposals (RFP) documents are used for alternative construction contracting methods such as Design-Build and Construction Manager/General Contractor (CMGC).
      • A Quick Call, an RFP, or a Pre-Qualification Announcement is used for procuring consultant services depending on the dollar amount of the proposed contract.

    After determining the statutory authority and type of contract, MnDOT employees must utilize an appropriate template (approved by the Contract Management Section) for that particular type of transaction.

    Solicitation documents and the contact offices are as follows:

      • Consultant Services Unit: Quick Call for Proposals, RFP or Pre-Qualification Announcement, and other documents used to procure Professional/Technical (P/T) Services contracts;
      • Project Management and Technical Support: Design-Build, CMGC procurement and the Request for Bid documents for highway construction;
      • Department of Administration and MnDOT Building Services Section: Building construction requests for bid documents; and
      • Contract Management Section or Office of Financial Management Grants Unit: RFP or application for competitive grant solicitations.

  2. Use an approved contract template to draft a contract after selecting a contractor.

    Various offices act as the custodian of contract templates. For example, Consultant Services holds the templates for P/T services contracts. The Cooperative Agreements Unit has a collection of cooperative agreement templates. To ensure that the terms and conditions of contracts comply with current State law and MnDOT policies, MnDOT employees must use a current template that has been reviewed and approved by the Contract Management Section.

  3. The Contract Management Section must review and approve contract templates.

    The Contract Management Section will review templates on a periodic basis. Custodians of contract templates are encouraged to seek review on an annual basis. All MnDOT contract templates and external materials must be reviewed for accessibility and compliance with the Americans with Disabilities Act.

  4. Incorporate applicable small business program and anti-discrimination provisions into solicitation and contract templates.

    MnDOT is committed to diversity and inclusion in its public procurement process. The goal is to ensure that those providing goods and services to the State are representative of Minnesota’s communities and include businesses owned by minorities, women, veterans and those with substantial physical disabilities. To that end, MnDOT will include the required provisions for fostering small business opportunities and prohibiting discrimination against protected classes in all solicitations and contracts.

    This may include any of the following:

      • Disadvantaged Business Enterprise (DBE) goals on federally funded contracts;
      • Targeted Group Business (TGB) and/or Veterans (VET) goals and preference points on contracts that are solely State funded;
      • On-the-job training goals;
      • State and federal Equal Employment Opportunity goals;
      • State affirmative action clauses; and
      • Title VI provisions.

    MnDOT employees must cooperate with the appropriate MnDOT offices as necessary, including the Office of Civil Rights (OCR) for reviewing, setting, and clearing goals.

  5. Incorporate Prevailing Wage documentation.

    “Prevailing wage” requirements apply to public works projects, funded in whole or part with State or federal funds, including building and highway construction projects. The Prevailing Wage Special Provisions (Division A) and applicable Wage Determinations must be incorporated into contract documents for these types of projects. MnDOT may become liable to a prime or subcontractor for a portion of the prevailing wage if MnDOT fails to incorporate the applicable Wage Determinations. Project managers must enforce contract labor requirements and cooperate with the Labor Compliance Unit.

Employees must understand the unique rules and requirements by contract type and subtype.

MnDOT has statutory authority to enter into a variety of contract types. Each type of contract plays a role in MnDOT meeting its business needs, complying with legal requirements, and pursuing the goals established in statute. Deciding which type of contract is appropriate for a specific transaction can be a difficult and often confusing decision. Sometimes a contract may cross over multiple contract types as well (e.g., MnDOT procuring professional/technical services from another State agency). The Contract Management Section can help make a contract type determination and provide the required resources to draft a contract. The list of contract types and additional requirements below is not exhaustive. For more information, please read the relevant sections in the Contract Manual or discuss the specific situation with the Contract Management Section.

  1. Professional/Technical (P/T) Contract
    1. A P/T contract is for work that is primarily intellectual in character, including consultation, analysis, evaluation, prediction, planning, programming, or recommendation, and generally results in the production of a report or the completion of a task. P/T services may be used when MnDOT requires highly specialized work for which no State employee is capable or available.
    2. Contracting with consultants is regulated by State law and by Department of Administration policies and procedures. MnDOT has several options for selecting and soliciting P/T services depending on the cost and type of service needed. The following sections of this chapter will describe how to solicit and contract for P/T services.
    3. Term:  P/T contracts are limited to a five-year maximum by statute.
    4. Certification Forms:  Before soliciting or selecting a consultant to perform P/T services exceeding $5,000, a “P/T Contract Certification Form” must be completed. The Certification Form is the authorization by the Department of Administration to contract for P/T services. The contents of the certification form are largely dictated by State law and all requested information must be provided or the form will be returned unapproved. The certification form should be prepared in a careful and thorough manner, as the work parameters set forth in the certification form will govern not only the approval of the contract, but the approval of any amendments to that contract.
    5. Performance Evaluations: For all completed projects over $25,000, MnDOT must submit a copy of an evaluation report of a consultant’s performance to the Department of Administration for public viewing.  (See Minn. Stat. §16C.08, subd. 4c).
  2. Grant Contracts

    A grant contract is a written instrument or electronic document defining a legal relationship between a granting agency (MnDOT) and a grantee when the principal purpose of the relationship is to transfer cash or something of value to the recipient to support a public purpose authorized by law.  MnDOT generally receives no direct benefit as a result of making the grant. Rather, the grant helps support the recipient in providing a general societal benefit.  Because of this unique relationship between MnDOT and the other party, grants are subject to a number of unique requirements.

    (See the Grants Management Manual for procedures, best practices, and requirements.)

  3. Interagency Contracts (Interagency Agreements)

    Interagency contracts are contracts with other State agencies to share resources, work, staff, etc. to make the best use of State resources. In CAATS, the contract type for an interagency contract is based on the work being performed. For example, training services would be classified as a P/T contract and construction services would be classified as collaborative/intergovernmental. Indemnification and worker’s compensation clauses are generally not included in an interagency contract because a State agency cannot indemnify and hold harmless another State agency and all State agencies already comply with worker’s compensation laws.

  4. Receivable Partnership Contracts

    Partnership contracts are contracts with a governmental or non-governmental entity for joint undertakings specifically authorized by Minn. Stat. §174.02 Subd. 6 (e.g., to share resources or funds, or to build bridges across State lines). Receivable partnership contracts require that a partnership proposal be created in order to establish an account to deposit the funds (See Special Revenue Funds Policy).

  5. Property/Facility Contracts

    An agreement between MnDOT and another party for the use of real property or facilities. This contract type includes Leases, Railroad contracts, and Utility contracts. When MnDOT leases real property or facilities from another entity (i.e., MnDOT is the Lessee) it must work through, and receive approval from, the Department of Administration Office of State Procurement (OSP), Real Estate and Construction Services (RECS). (This category does not include Goods and General Services contracts, such as janitorial services – see the Procurement of Goods and General (non-P/T) Services Policy for additional information.)

Employees must prepare well-written contracts that follow all requirements provided by the Contract Management Section.

Drafting MnDOT contracts is a shared responsibility. The Contract Management Section and other offices requiring specialized contracts are responsible for providing approved contract templates. Project managers and contract administrators are responsible for drafting “non-boilerplate” sections of the contract such as the scope of work and payment sections. The following sections discuss the minimum requirements for all MnDOT contracts.

  1. Basic form requirements
    • The contract must have a MnDOT contract number on the document, preferably in the upper right-hand corner. The contract number allows the Contract Management Section and other MnDOT offices to track each contract and record contract data. The CAATS system assigns all contract numbers, except for highway construction contracts, which use a different numbering system.
    • The contract must correctly identify the parties by their full and correct legal names and must indicate which type of legal entity the contractor is organized as (such as a corporation or limited liability company).
    • All exhibits must be correctly attached and labeled. Costs, dates, property, and highway numbers must be consistent between the contract and exhibits. Clearly identified materials may be incorporated “by reference” by listing the title of the document, where the document is located, and the version date (if applicable).

  2. Scope of work and payment requirements

    When drafting the duties of the contractor and MnDOT, be clear, concise, and unambiguous. The contract must answer who, what, where, when, and how much. The following is a list of items to address when drafting:

      • List precisely and in plain language, the duties of the contractor, the time for performance, required deliverables, and deadlines for delivery, including both interim and final deadlines;
      • Specify the final product(s);
      • List the cost of services and any reimbursement separately; and
      • Include a total contract cost. It is unlawful to agree to uncapped expenses.

  3. Liability, indemnification, and insurance requirements

    MnDOT contracts must include provisions to mitigate the risk of loss by MnDOT. These risks generally include the risk of faulty designs created by contractors and the risk of personal injury and property damage arising from the acts and omissions of contractors.  MnDOT may mitigate its risks by requiring its contractors to indemnify MnDOT and obtain insurance.

      • MnDOT cannot agree to indemnify, defend, or hold another party harmless. The Attorney General’s Office has advised that an agreement by a State agency to indemnify another party, absent a supporting appropriation, is a violation of Article XI, Section 1 of the Minnesota Constitution. An agreement by MnDOT to indemnify another party constitutes an unencumbered and uncapped obligation and therefore violates the Constitution. In addition, Minnesota Statutes §16A.15, prohibits State employees from making expenditures or incurring obligations without supporting appropriations.
      • Although MnDOT may not agree to indemnify another party, MnDOT may require another party to indemnify MnDOT. Indemnification is a method of allocating the risk of loss or damage due to the improper performance of work to the party performing the work. In some cases, however, the role of the parties may call for a more balanced allocation of the risks. The Contract Management Section must review and approve all requests to remove or to change the standard indemnification clauses in MnDOT contract templates.
      • Insurance requirements are another method used in contracts to manage risk. MnDOT insurance requirements include:
        • Commercial general liability;
        • Workers’ compensation;
        • Automobile liability;
        • Professional/technical errors and omissions liability; and
        • Other forms of insurance, such as Data Breach, Builder’s Risk, or Pollution Liability that may be required depending on the risks involved with the project.
      • The Department of Administration, Risk Management Division, regularly updates standard insurance requirements to reflect changing market conditions and best practices for insurance coverage. In addition, the Risk Management Division consults with agencies in cases where the standard insurance requirements may not be comprehensive enough and special insurance provisions may be required.
      • MnDOT requires most State contractors to obtain the required insurance. Contractors must submit requests for insurance coverage variances to the Contract Management Section for review and approval. The Contract Management Section will consult with the Risk Management Division as necessary to make coverage determinations. Consultation with the Project Manager may be required to provide project information to the Risk Management Division to identify unique risks. Contract Management Section review of insurance coverage questions includes:
        • Cost of insurance coverage versus the potential loss or harm;
        • Commercial availability of the desired coverage; and
        • Amount of the insurance coverage based on the potential risks of loss or harm.

  4. Payment and audit clause requirements

    State contracting laws contain provisions to safeguard public funds and maintain the integrity of the contracting process. MnDOT employees must incorporate these safeguards into the payment terms of the contract.

      • MnDOT can generally only make payments after receiving goods or after the contractor performs the services.
      • State law permits prepayment for software or software maintenance services, sole source maintenance agreements for exhibit booth space, newspaper, magazine, and other subscription fees (see Minnesota Statutes §16A.065).
      • MnDOT may make prepayments to county, municipal, and other governmental entities, under certain conditions. These allowable prepayments are governed by Minnesota Statutes §16A.41, Subd. 1a.
      • When required by a federal agency, a State agency may negotiate contract terms providing for payment to the federal agency before work is performed under Minnesota Statutes §16C.071.
      • Any contract or pass-through disbursement of public funds to a contractor or grantee must contain an audit clause providing for review of the contractor’s books, records, documents, accounting practices and procedures relevant to the contract.
      • The audit clause must provide that these records are subject to examination by the contracting agency, the Legislative Auditor, and the State Auditor for a minimum of six years.
      • There is an exception to the audit requirement when a contract is for the purchase, lease, or license of software and data from the State.
      • Contracts must inform contractors of their obligations to pay subcontractors promptly. Minnesota law requires prime contractors under State contracts to make prompt payments to their subcontractors (see Minnesota Statutes §16A.1245*).

        *The law imposes obligations on both State agencies and their prime contractors. The law places a duty on State agencies to include a provision in the contract requiring the prime contractor to pay its subcontractors promptly, as required by the law. The law requires prime contractors to pay their subcontractors “within ten days of the prime contractor’s receipt of payment from the State for undisputed services provided by the subcontractors.”

        The law governing payments from a prime contractor to a subcontractor does not require “enforcement” by MnDOT, instead it gives subcontractors certain rights against the prime contractor. MnDOT may (and must, upon request) provide information to subcontractors concerning MnDOT payments made to a prime, or payment bond information (for construction contracts). Questions concerning the prompt payment to subcontractors should be directed to the Contract Management Section. While the Contract Management Section will discuss publicly available information with subcontractors, ethical constraints prevent MnDOT Chief Counsel staff from providing legal advice to aggrieved subcontractors and MnDOT employees will advise parties to seek their own legal counsel.

  5. Intellectual property and government data
    • MnDOT recognizes the value of the data that it generates, receives, or procures through its contracts. To protect its data assets, MnDOT contracts must include the State’s standard provisions regarding MnDOT’s intellectual property rights. Before executing a contract or license agreement with terms deviating from the State’s standard intellectual property provisions, MnDOT employees must send the terms and conditions to the Contract Management Section for review and approval. The Contract Management Section may ask the Attorney General to review the proposed changes.
    • MnDOT has a duty to comply with the Minnesota Government Data Practices Act (“Data Practices Act”) found in Minnesota Statutes Ch. 13.  This Act regulates how State agencies collect, create, store, maintain, disseminate, and provide access to government data. When the State hires a contractor, the data created or collected by the contractor as part of the contract becomes “government data.” In addition, the State may also provide “government data” that the contractor will need to perform its work. The contractor, working as MnDOT’s agent, is required to comply with the Data Practices Act just as if MnDOT was performing the work. All contracts must include a Data Practices clause notifying the other party of the obligations and potential penalties under the Act.

  6. Federal Requirements
    • When federal funds are used to pay any portion of a State contract, the federal program may require MnDOT to include specific clauses in MnDOT’s contract with its contractor. These provisions are known as “flow-down” clauses. MnDOT must comply with all “flow-down” requirements.
    • When federal funds are used, the contract must include the Catalog of Federal Domestic Assistance (CFDA) number, program name, and other information as required by federal regulations.

Employees must obtain proper approvals and signatures for all contracts, record contract data in the system of record, and retain a copy of each contract.

  1. Required signatures

    Every MnDOT contract must contain certain signatures depending on the type and value of the contract. No exception from this signing protocol is allowed unless approved by the Contract Management Section.

    Most MnDOT contracts require four signatures:

      • “Encumbrance Verification” (the MnDOT employee who encumbered funds for the contract);
      • Contractor;
      • Commissioner of Transportation (or a delegate of the Commissioner); and
      • Commissioner of Administration (or a delegate of the Commissioner). This signature is not required for grants, annual plan agreements, leases, and interagency agreements.

  2. MnDOT employees must have delegated authority to sign contracts.

    MnDOT employees must have authority to take a particular action (such as signing a contract) on behalf of the agency.

    By law, the Commissioner and Deputy Commissioners have the authority to sign MnDOT contracts and other documents. The law allows them to delegate this authority as they deem proper. Delegation of Authority is a formal process that includes filing an official form with the Secretary of State. Except for the Commissioner and Deputy Commissioners, MnDOT employees may sign contracts only if they have been specifically delegated the authority to sign contracts. When approving contracts, the Contract Management Section will review the contract to ensure that the MnDOT official who signed the contract has a valid delegation of authority.

    When determining whether a delegation is valid, consider the following:

      • First, the current commissioner must sign the delegation order. The delegation of authority order remains in effect only as long as the issuing commissioner continues in office.
      • Secondly, the delegation order must be current to the person and position. A delegation remains in effect only so long as the named individual remains in the specified position. A delegation does not stay with the position after the named individual leaves it, nor does it follow the individual to a new position.

  3. Political subdivisions must document approval of a contract.

    Proper approval of agreements with other units of government consists of two requirements:

      • Resolution evidencing approval of the agreement
        • The governing body of the political subdivision must adopt a resolution. The resolution must clearly state that the body is approving the contract (it is best to include the MnDOT contract number in the resolution if available). The resolution must be “certified” by the official responsible for maintaining the official records of the political subdivision (for example, the City Clerk or County Auditor), who declares that the copy of the resolution is a true copy of the original on file with the certifying officer. Because many political subdivisions now post approved board/council minutes on the internet, a printout of the approved minutes showing adoption of the resolution is an acceptable alternative to a certified copy of the resolution.
      • Proper signatures pursuant to the resolution
        • Generally, the resolution will specify the officials required to sign the agreement. If the resolution uses the word “and” in signature requirements (e.g., the Mayor and the City Clerk), the Contract Management Section will require both signatures on the contract. If the resolution states “appropriate city officials,” the Contract Management Section will review the “apparent authority” of the signers.

  4. Tribal Nations do not require resolutions evidencing approval of the agreement.

    Unlike political subdivisions, which are created under State law, Tribal Nations are sovereign nations with the inherent right to self-govern. Executive Order 19-24, signed by Governor Tim Walz in April 2019, recognizes the unique legal relationship between Tribal Nations and the State of Minnesota due to the inherent sovereignty of tribes. Minnesota Statutes §16C.05, Subd. 7 prohibits State agencies from requiring a Tribal Nation to deny its sovereignty as a requirement or condition to enter into a contract. Similarly, Minn. Stat. §16B.98, Subd. 10 prohibits State agencies from requiring a Tribal Nation to deny its sovereignty as a requirement or condition to enter into a grant. Consistent with Executive Order 19-24 and the statutory prohibitions, MnDOT will not require Tribal Nations to provide a resolution when contracting with them or approving a grant agreement. If a Tribal Nation chooses in the exercise of its sovereign right to provide a resolution, MnDOT may accept the resolution.

  5. Business entities must have actual or apparent authority.

    For business entities, generally the person signing must have apparent authority. Apparent authority means that a reasonable person would believe that the person signing the contract has authority to act on behalf of the business entity. For example, an officer of a corporation has both actual and apparent authority to sign a contract. A “General Manager” or a “Contracts Manager” may also have apparent authority to sign based on the particular circumstances. When in doubt, MnDOT employees must request acceptable written evidence of the signer’s delegation of authority. Acceptable written evidence includes a board resolution or applicable provisions of either the articles of organization or the member control agreement, depending on the type of business entity involved.

  6. The Commissioner of Administration is required to sign all State contracts except Grants, Annual Plan Agreements, Leases, and Interagency Agreements.

    With some exceptions, the Commissioner of Administration has delegated to the Contract Management Section the authority to sign most MnDOT contracts on behalf of the Department of Administration.

  7. Record core contract data in the system of record for contracts.

    MnDOT has designated CAATS as the system of record for contract data. This system facilitates legislative reporting, responses to data practices requests, historical record-keeping, and legal holds. Therefore, MnDOT offices responsible for recording contract data in CAATS must accurately record the required information for every MnDOT contract. See the CAATS iHUB page for additional information on entering core contract data into CAATS.

  8. Retain a copy of each contract.
    • Minnesota Statutes §16C.05 requires State agencies to retain a fully executed copy of each contract and amendment for the period of time that complies with the most restrictive standard specified in State or federal law or the MnDOT Retention Schedule.
    • MnDOT uses a mixture of paper contracts and electronic contracts. Minnesota Statutes §325L.07 recognizes electronic contracts.
    • MnDOT requires the electronic retention of all contracts in eDOCs. Minnesota Statutes §325L.12 provides that an electronic record is a valid record when the law requires that a record be retained. Offices may choose to retain a paper copy for their own records.
    • Refer to the MnDOT Records Retention and Disposal policy and the MnDOT Records Retention Schedule to ensure compliance with records management requirements.

Employees must review invoices, make prompt payments, and be alert to fraud.

  1. MnDOT employees must diligently administer and monitor contracts and contractor performance.
  2. MnDOT employees must review invoices.

    Before approving payment, MnDOT employees must review invoices to ensure that all costs and expenses are correct and proper within the terms of the contract.

  3. Minnesota has a prompt payment law, Minnesota Statutes §16A.124, which requires State agencies to pay valid obligations in a short timeframe.
    • The law generally requires State agencies to pay valid contractor invoices within the contractor’s early payment discount period. If there is no early payment discount, the agency must pay the invoice no later than 30 calendar days following the receipt of the invoice for the completed work. If MnDOT fails to make prompt payments, the contractor may invoice MnDOT for interest on the portion of the payment past due at a rate of 1.5% per month (18% per year). If a contractor brings a legal action to receive payment, they are entitled to an award of the attorney’s fees incurred in bringing the action.
    • If MnDOT believes that an invoice is incorrect, improper, or otherwise defective, MnDOT must notify the contractor within ten business days of discovering the error. MnDOT then requests the contractor to submit a corrected invoice. The prompt payment obligation is “suspended” until a corrected invoice is received. If MnDOT contests an invoice, the 30-day prompt payment period starts on receipt of the corrected invoice. If an invoice is partially contested, the non-contested amount must be paid promptly.
    • A different standard applies to invoices undergoing an audit, such as the final invoice on a P/T services contract. In that case, payment is not past due until more than 30 calendar days have passed since the completion of the audit.
    • The prompt payment law requires project managers and contract administrators to deal with all submitted invoices in an expeditious manner. Project managers must promptly review invoices and either authorize payment or determine that the invoice should be contested. If contested, the contract administrator must provide notice to the contractor within ten business days. Payment of interest on late payments adds cost for the State without adding any extra value.
    • For construction contracts, where contractors do not typically submit “invoices,” the prompt payment obligation starts with the approval of an engineer’s estimate or the architect’s certification of a building contractor’s pay application.

  4. Be alert for and report potential fraud and false claims.

    MnDOT personnel involved in the approval and payment of invoices may encounter costs that appear to be false or inflated. These charges may violate a State law, Minnesota Statutes §15C.01, also known as the Minnesota False Claims Act. The MnDOT False Claims against the State Policy requires all MnDOT employees to report suspected violations of the Minnesota False Claims Act to the employee’s supervisor, Office of Chief Counsel, or by completing MnDOT’s anonymous MnDOT Report of Wrongdoing/Questionable Activity Form.

Employees must use an amendment for changes in a contract.

  1. Execute an amendment to make changes to a contract.

    The amendment must “entail tasks that are substantially similar to those in the original contract or involve tasks that are so closely related to the original contract that it would be impracticable for a different contractor to perform the work.” Minn. Stat. §16C.05, Subd. 2(c). The Commissioner of the Department of Administration (or an agency official to whom the Commissioner has delegated contracting authority under Minn. Stat. §16C.03, Subd. 16), must determine that an amendment to a P/T contract would serve the interest of the State better than a new contract and would cost no more. See Minn. Stat. §16C.05, Subd. 2(c) . The amendment must be properly numbered and approved in the same way as the original contract.

  2. Execute amendments in a timely manner and follow the required process if the contract has expired.

    An amendment to a contract must be executed before the original contract expires. If it is necessary to amend a contract that has already expired, complete a 16A.15 -16C.05 violation form. Attach the 16A.15 – 16C.05 violation form to the amendment for the expired contract.

    The draft amendment must contain language incorporating the terms and conditions from the original contract. In all cases, MnDOT requires executed amendments no later than 30 days after the original contract expiration date. The Project Manager must contact the Contract Management Section as soon as possible if the 30-day deadline is not achievable. The Contract Management Section will advise Project Managers on their contracting options. The Project Manager may not process an amendment after the 30-day deadline except with the written consent of their Division Director.

Employees must diligently close out contracts and pursue the resolution of performance issues in a proper manner.

Employees must promptly take all actions necessary to close out contracts.  Closeout requirements vary by contract type.  Prompt closeout ensures that financial reconciliations and/or audits are conducted promptly, contractors are paid promptly, and any remaining funds can be re-directed to other purposes.

Employees must diligently administer contracts to ensure fulfillment of contract requirements. Non-compliance with contract terms necessitates a prompt discussion with the contractor. If MnDOT fails to enforce the contract terms, the contractor may later argue that MnDOT “waived” its right to enforce those terms.

Protecting MnDOT’s legal position in contract disputes requires a resolution process. MnDOT employees must determine the severity of the performance issue, ranging from minor to repeated significant issues. If a contract includes provisions for resolving performance issues, MnDOT employees must comply with the contract provisions. If a resolution process is not achievable, MnDOT employees must follow these steps:

    • Escalate issues to the appropriate management individual (MnDOT and contractor). Follow the chain-of-command to ensure accurate and shared information among all parties.
    • Consult with the Contract Management Section to ensure accurate and shared information.
    • Request a plan from the contractor to resolve the performance issue by a specified time.
    • Document communications with the contractor and MnDOT employee time needed to correct the issue.

The severity of the performance issue will control:

    • The appropriate level of escalation (vis-à-vis the chain-of-command), and
    • The timeline for the contractor’s response to MnDOT’s request for a plan to remedy the identified issues.

The “escalation” process described above does not apply to construction contracts, because construction contracts require specific procedures to resolve claims and disputes.

MnDOT employees discovering potential consultant errors and omissions during the construction phase of a project must refer to the MnDOT Consultant Errors and Omissions Policy. Consult with the Contract Management Section prior to contract termination.