How to Hire Independent Contractor, Consultant
The steps below are required for compliance with policy statements in Business & Finance Bulletin BUS-34, Securing the Services of Independent Consultants; BUS-77, Independent Contractor Guidelines; and BUS-43, Materiel Management; and the laws behind them.
1. Determine the nature of the work relationship.
When planning to procure services from an individual, a sole proprietor, or a corporation, the department must first determine the nature of the relationship between the employer and the individual(s) to be hired by completing the Independent Contractor Pre-Hire Worksheet.
If the relationship is not that of an employer-employee, proceed to Task 2.
2. Determine if an individual, a sole proprietor or a corporation is an independent consultant or an independent contractor.
Because different policies and laws apply to independent consultants and independent contractors, the department is required to use the following guidelines:
Object Code 3455, Consultants/Professional Services Non-University, is a common object code used for services provided by independent consultants and independent contractors. Use other more descriptive object codes where applicable.
For more information, please refer to these policies:
|3. Determine if there is a potential conflict of interest.|
Whether hiring an independent consultant or an independent contractor, the department is required to complete the Independent Contractor/Consultant Form.
It is University policy to keep separate an employee’s University and private interests, and to safeguard the University and its employees from charges of favoritism in the acquisition of goods and services.
If the proposed consultant or contractor is a current or former UCLA employee, departments are strongly encouraged to acquire the services through the payroll/human resources method. The Public Contract Code has waiting periods addressing former employees providing goods or services as independent contractors, and prohibits current UC employees from providing goods or services as independent contractors. UCLA has indicated to the IRS that we do not plan to issue 1099 statements to employees.
If the proposed consultant or contractor is a near relative to a current UCLA employee, and the employee had any involvement in the contracting decision, Campus Purchasing must make the determination that the goods or services to be acquired are not available commercially or from within the University before proceeding. The Political Reform Act of 1974 requires UC employees to disqualify themselves from participating in the making of decisions in which they have a financial interest, including contracts involving spouses or domestic partners.
For proposed contracts with independent contractors or independent consultants, whether with near relatives, current or former employees, the department is required to complete the Request for Approval of Proposed Purchasing Transaction Involving Possible Conflict of Interest and obtain approval from the department head and department chief administrative officer before submitting the request to Purchasing for review and approval.
For more details, please refer to the following policies for definitions and guidelines:
|4. Determine the funding to pay for the services.|
Source Selection & Price Reasonableness
Different sources of funding have different requirements for competition. The federal government requires maximum competition down to the micro-purchase level, currently $2,500. State or other funding sources are subject to the Public Contract Code and policy requirements. Contracts for independent contractors are subject to the competitive bidding requirements in BUS-43. Contracts for independent consultants are subject to the requirement for competing proposals in BUS-34. Depending on the circumstances, the hiring department must either competitively bid the purchase, solicit competing proposals or provide a Sole-Source Request Form when you anticipate that the payment to a consultant or contractor will exceed the following limits:
After the Fact
If the work took place before the requisition is issued, the department must complete the Justification Form for After-the-Fact Purchases form, and obtain all required approvals. If the request would not have been approved if presented in advance, the University may not be able to make payment to the contractor.
|5. Insurance coverage.|
In accordance with Policy BUS-63, Insurance Requirements/Certificates of Insurance, a consultant or contractor must provide a copy of the certificate(s) of insurance prior to performing work, in amounts consistent with policy and with the policy endorsed, as applicable, to add the Regents of the University of California as an additional insured.
Refer to BUS-63 for details on insurance requirements. If the consultant or contractor does not carry sufficient insurance to meet University requirements and the department plans to request an insurance waiver, then please complete a Liability Insurance Requirements form and e-mail it to Office of Insurance and Risk Management (OIRM) for review and approval. The department must forward the OIRM approval and express the acceptance of the waived risks to Campus Purchasing. Failure by former UC employees to obtain insurance is further evidence that the payroll/human resources method of obtaining their services may be more appropriate and not subject to future challenge by the IRS.
6. Basic requirements and other considerations.
To comply with the laws, policies, and procedures noted above, Campus Purchasing can only issue a Purchase Order (P.O.) and/or agreement to a consultant or contractor when all the required documents are received in a complete package. See checklist for details.
|7. High-value requisition.|
The Purchasing delegation requires that funds be available before Purchasing can enter into an agreement. The Purchasing system seeks confirmation of funds availability on low-value orders and requisitions. Purchasing’s practice is that requisitions of $100,000 or more require validation in the General Ledger that funds are available before a purchase order or an agreement can be issued.
|8. Issue a Purchase Order and/or an agreement.|
Once Campus Purchasing receives all required documents as listed in Task 6 and validation that funds are available as listed in Task 7, and depending on whether competition is required or terms and conditions negotiated, a purchase order can be issued and/or an agreement established typically within five (5-10) business days. Campus Purchasing acts as an office of record for the University, and will maintain the file in accordance with Records Retention Policy.
Note: Please be advised that work should not be performed without a signed P.O. or agreement issued by a Campus Purchasing buyer, because the Accounts Payable Department is allowed to make payments to a consultant or contractor against an executed P.O. and/or agreement ONLY.