Procurement: Prohibited Contract Types

Original Issuance Date: October 15, 2019
Last Revision Date: October 15, 2019
Effective Date: December 1, 2019

1. Policy Purpose

The purpose of this policy is to identify contract types that are prohibited by federal grant and contracting regulations.

2. Responsible UW System Officer

UW System Director of Procurement

3. Scope

This applies to all federally funded contracts, whether the contract is awarded under State of Wisconsin procurement policies (ss 16.70) or Board of Regents (BOR) procurement procedures.

4. Background

The Board of Regents of the University of Wisconsin System is authorized by s. 36.11(1)(b), Wis. Stats., to purchase goods and services supporting the educational and research mission of the university. This authority is used to purchase goods and services not typically purchased by other state agencies nor found in statewide mandatory contracts. This authority is also used to purchase goods and services statutorily assigned to the university.

Federal grant and contract regulations prohibit certain types of contracts when using federal funds, so this policy applies regardless if a contract is awarded under BOR or state of Wisconsin polices.

5. Definitions

Cost-plus-percent-of-cost contract: The cost plus percent of cost contract, also known as a cost reimbursement plus a percent of cost, is a contract where a supplier is paid for allowed expenses and also paid an additional amount of money, expressed as a percentage of the base contract cost, to allow for a profit.

Time-and-material contract: Time and material contract is a contract which provides for acquiring supplies or services based on direct labor hours at specified fixed hourly rates (including wages, overhead, administrative expenses, and profit) and actual cost for materials.

6. Policy Statement

When federal funds are used in a contract the UW System shall not use cost plus percent of cost
contracts. The UW System also requires that any time and material contracts be capped with a “Not
to Exceed” dollar amount when using federal funds, in order to avoid creating a cost plus percent of
cost type contract.