Draft EIM Policy: Minor Line Item Change Requests in Cost Reimbursement Contracts

Issue Date: 11/15/06
Date Last Revised: 6/23/08

Purpose

The purpose of this document is to establish a consistent policy regarding adjustments to a line item budget of a cost reimbursement contract that do not impact the maximum obligation or performance responsibilities of the Contractor, or do not materially change the performance expectations of the Department. This policy is written in coordination with and is subject to the Office of the Comptroller Contract Policy Amendments, Suspensions and Terminations, other applicable Contract policies and State Finance Law requirements.

Summary

Enterprise Invoice Management (EIM) streamlines the invoicing process by replacing paper submissions of invoices and claims with electronic submissions, thereby reducing the time and administrative burden of paper submissions. Similarly, EIM has streamlined overall management of cost reimbursement contracts in the "MM" object class by providing functionality within the application to request "line item edits" that allow adjustments to cost reimbursement budgets that do not change the maximum obligation of the contract.

Prior to making any change in EIM, Departments are responsible for determining and documenting whether the change is a material "amendment" or a minor "adjustment" in accordance with the following:

(1) Material Amendment:
The following are considered examples of "material" changes which would require a formal written contract Amendment using the Standard Contract Form and attaching the modified scope of performance and budget. Changes to the maximum obligation of a contract (increases or decreases); changes in dates of performance; the type, number, cost or rates of goods or services (from the type, number, rates or range of rates already included in the contract); changes in the requirements for performance (adding, deleting or altering), changes in reporting requirements (content, timing or recipients).

Budget line items (deletions, additions or changes) are usually considered a material change from what was contained in the original Contract (or as previously amended) and in most cases should be formally amended. In many Contracts, performance and costs are fixed and any change would be a "material" change in the contract, unless the contract falls under the type noted below under "Line Item Change Adjustments". Material Amendments are processed through the Massachusetts Management Accounting and Reporting System (MMARS). With the implementation of EIM, there is no change to how these amendments are processed. The Standard Contract Amendment with attached modified Scope of Performance and Budget are executed with a "wet signature" of an authorized signatory of both the Contractor and the Department. Once the Amendment is executed, the changes are then reflected in EIM.

(2) Minor Line Item Change Adjustments:
The Line item change requests covered under this policy are limited to minor transfers of authorized expenditures between line items within a cost reimbursement budget that:

  1. have a zero-dollar net effect on the contract maximum obligation, AND
  2. do not materially change the performance of the contract.

Minor line-item adjustments are appropriate for contracts in which the total range of potential and authorized performance and services, and the performance expectations for these services have been identified in the Contract Performance specifications and will not change without a formal Contract Amendment. However, the actual level of usage of each item of performance can not be identified at the beginning of each fiscal year and will be based upon either the Department's or client needs which can not be anticipated in advance and will need to be adjusted periodically as performance is needed. The Budget Line items will be identified at the start of each fiscal year based upon the Department's best estimate of anticipated need, based upon historical use, the clients currently being served and the available funds appropriated for the contract.

Departments should identify any line-items in the Budget that are not expected to change and which will require a formal amendment prior to changing. In addition, the Department may identify a percentage range of allowable adjustments which may be made under minor line-item changes, but will require a formal amendment if the percentage is exceeded.

The Department or the Contractor can initiate an adjustment to the budget line-items as the need arises using the protocols in this policy whenever the anticipated budget will need to be adjusted during the fiscal year, subject to state finance law requirements outlined in the Comptroller Fiscal Year Open and Close Instructions and other  Contract policies.

Please note that in the event new performance or services are required for a client which have not been included within the current scope of performance, even under an emergency need, that the Department and Contractor will be required to memorialize the different performance with a formal contract amendment and may not include new performance as a line-item change.

Budget-Line Item adjustments do not require a formal Standard Contract Amendment Form or a "wet signature", but will be recorded in EIM. For audit purposes, all changes made through EIM should be identified as part of the Contract file so that these can be viewed, either on paper, or electronically through EIM. As with material amendments, line-item adjustments should be completed contemporaneously with the need for the change and should not be viewed as merely an administrative afterthought. Departments that save line-item amendments until late in the fiscal year, or do not manage line-item adjustments as part of routine contract management as performance needs change may be subject to audit findings.

Provider staff who submit line item change requests in EIM must have "Authorized" status for the contract being modified. Purchasing agency contract management staff receives electronic notification of the request and are required to review the request. Requests can be approved or rejected by the contract manager. Approvals are registered electronically and will result in the execution of a contract modification in EIM creating a new version of the contract fiscal obligations. These steps create an electronic audit trail of fiscal actions and actors in the system. Line item changes neither affect MMARS nor effect changes in performance, funding, obligations nor changes in terms, but identify distribution of payments and line-item authorizations.

In accordance with the Amendments, Suspensions and Terminations, a Standard Contract Amendment Form must be executed and filed in addition to any required or optional attachments whenever there is a "material" change to the performance requirements listed under the Contract, the performance expectations of the Department or the performance obligations of the Contractor.

For example, changes in dates of performance; the type, number, cost or rates of goods or services; the requirements for performance (adding, deleting or altering), reporting requirements (content, timing or recipients); budget line items (deletions, additions or changes) are usually considered a material change from what was contained in the original Contract (or as previously amended) and should be formally amended. In many Contracts, performance and costs are fixed and any change would be a "material" change in the contract.

Adjustments to budget line items or performance may not be a " material" change depending upon how the Contract and Procurement was structured and if the Contract contains language that "minor" adjustments can be made without a formal Amendment provided both parties confirm the changes in writing or via email. For example, some Contracts have performance requirements that change based upon volume of use or need and will need flexibility throughout the Contract. Other Contracts purchase "availability" of services, maintenance, beds, hours or goods, which may or may not be fully utilized during a fiscal year and may be adjusted to allow utilization of other listed budget items.

The Commonwealth of Massachusetts Standard Contract Form issued jointly by the Executive Office of Administration and Finance, Office of the Comptroller, and the Operational Services Division states the following"

"Minor adjustments to the scope and budget that do not materially impact the maximum obligation or performance responsibilities of the Contractor, or do not materially change the performance expectations of the Department do not require a formal Amendment, but it is presumed that the terms of performance (scope) and costs (budget) will be updated as part of the Contract file, unless already identified under the Contract."

Please note that this policy does not change the documentation requirements in the event of an emergency. For emergency performance, the same documentation is required as back up documentation, depending upon the type of amendment, however, the Department is authorized to take the necessary actions to tend to the emergency (subject to legislative authority and funding) and follow up with the appropriate documentation as soon as possible.

APPENDIX A: Minor Line Item Change Procedure

  1. The Provider and Department review this policy and determine whether the type of change needed qualifies as a Material Change or a Minor Line-Item Adjustment. If a material change, the Standard Contract Amendment Form is executed with amended attachments (Scope of Performance, Budget or Both, POS attachments).

  2. The Provider (vendor) user with authorized status completes an amendment request in EIM, and submits the request.

  3. The EIM Service notifies via e-mail the designated Agency Contract Manager of the request.

  4. The Agency Contract Manager reviews the data and makes a preliminary decision to approve or deny the request.

  5. The Agency Contract Manager then verifies the request via email or telephone with the Provider user who has authorized status. The Agency Contract Manager notifies the Provider user of the decision to approve or deny the request.

  6. If approved, the Agency Contract Manager with contract edit and update permissions creates a new version of the contract in EIM and notifies other agency staff as appropriate.

  7. The Agency Contract Manager will then update the Contract File file with the appropriate back up documentation as follows:

    1. For material changes, an executed copy of the Standard Contract Amendment Form and amended attachments, and a paper copy of the Contract Amendment History Report that documents any line item budget transfers. This report is available through the EIM Service.

    2. For minor line-item adjustments, a paper copy of the Contract Amendment History Report that documents the line item budget transfers. This report is available through the EIM Service.

 


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