Section 0690-03-01-.17 - NECESSARY OR PROHIBITED CONTRACT CLAUSES AND RULE EXCEPTIONS(1) The purpose of this Rule is to prescribe the necessary and prohibited contract clauses for contracts subject to these Rules. The form and content of all contract clauses shall be established by Central Procurement Office Policy. This Rule shall also prescribe a procedure for approving exceptions or modifications to contract clauses prescribed or prohibited by this Rule or Central Procurement Office Policy.(2) Necessary Contract Clauses for All Contract Types.(a) Term. All contracts subject to these Rules shall specify the term of the contract. The term of the contract shall include the commencement date of the contract, the termination date, and any renewals of the contract via an amendment. Contracts subject to these Rules may only be renewed in writing, signed by the appropriate State official, and delivered electronically or through regular mail to the Contracting Party. One time purchases do not require the term to be specified.(b) Maximum Liability for Goods or Services. All contracts subject to these Rules shall specify the maximum liability of the State for goods and services under the contract, including the Contracting Party's direct or indirect costs.(c) Payment for Goods or Services.1. All contracts subject to these Rules shall contain a provision that clearly sets forth the circumstances giving rise to the State's obligation to make payments for goods received or services performed. All contracts shall contain specific rates and prices and shall state that the rates and prices are firm for the duration of the contract unless specifically addressed in the contract.2. All contracts shall generally provide that the State is only obligated to pay for goods received or services performed, which are acceptable to the State, prior to the date of the State's payment. Advance payments under the contract prior to receipt of goods or performance of services should be avoided, but advance payments may be authorized by the Chief Procurement Officer if doing so is in the best interests of the State and in accordance with applicable law.3. All contracts shall provide that payments made by the State under the contract shall first be certified by an authorized State official that goods received are acceptable in quantity and quality or that the contractor's performance of services is satisfactory and that the Contracting Party is entitled to payment under the contract. This certification shall be documented by the appropriate Procuring Agency staff's written approval of each invoice submitted for payment.4. All contracts subject to these Rules that require an incentive payment shall detail the terms and conditions giving rise to the Contracting Party's entitlement to an incentive payment.(d) Non- Discrimination. All contracts subject to these Rules shall contain a provision that prohibits the Contracting Party from discriminating against an individual on the basis of race, creed, color, religion, sex, age, handicap or disability, national origin or other protected class under State or federal law with respect to employment or other opportunities with the Contracting Party.(e) Immigration. All contracts subject to these Rules shall contain a provision requiring a Contracting Party to certify that the Contracting Party has not knowingly utilized the services of illegal immigrants in the performance of its contract with the State for goods or services.(f) Necessary Signatories. All contracts subject to these Rules shall specify that a contract shall not be effective until it is signed by all necessary signatories of the parties. The State's necessary signatories shall be established by Central Procurement Office Policy or may be established by statute.(g) Contract Documents. All contracts subject to these Rules shall specify the documents that comprise the contract, in order of priority, between the State and any of its Contracting Parties.(h) Entire Agreement, Amendments, Modifications, Renewals or Extensions. All contracts subject to these Rules shall contain a provision that provides that the contract reflects the entire agreement of the parties and that there are no other prior or contemporaneous agreements that modify, supplement or contradict any of the express terms of the contract. All contracts shall further provide that any amendments , modifications, renewals or extensions to the contract shall be in writing and signed by all parties who signed the Base Contract.(i) Choice of Law and Venue. All contracts subject to these Rules shall provide that the contract shall be governed by the Laws of Tennessee and that the Tennessee Claims Commission or the State or federal courts in Tennessee shall be the venue for resolving disputes or disagreements under the contract.(j) Retention of Records and Audit. A contract for the purchase of materials, supplies, equipment or services shall include the following clause regarding the contractor's requirement to retain and maintain books and records related to work performed or money received under the contract:1. The state shall be entitled to audit the books and records of a contractor or any subcontractor under any contract or subcontract other than a firm fixed-price contract, to the extent that any such books and records relate to the performance of such contract or subcontract. Such books and records shall be maintained by the contractor for a period of three (3) years from the date of final payment under the prime contract and by the subcontractor for a period of three (3) years from the date of final payment under the subcontract, unless a shorter period is otherwise authorized in writing.2. All contracts shall include this provision and such provision cannot be amended or removed without the written consent of the Comptroller of the Treasury.(k) Independent Contractor. All contracts subject to these Rules shall provide that the Contracting Party is not an agent of the State, but rather, holds the status of an independent contractor.(l) Force Majeure. All contracts subject to these Rules shall contain a provision that relieves the contracting parties of performance in the event of a force majeure, which includes, by way of example, acts of God, war, or civil unrest.(m) Conflicting Terms and Conditions. All contracts subject to these Rules shall contain a provision that resolves conflicts between the contract's terms and conditions, the solicitation documents, the proposals and any amendments to the contract.(n) Notice. All contracts subject to these Rules shall require a designated point of contact for the State and the Contracting Party to facilitate notice to the other party.(o) Termination. All contracts subject to these Rules may contain provisions whereby the contract can be terminated by the State for breach. Termination for breach provisions shall specify the circumstances giving rise to breach, the time period of notice, and the cure period, if any.(p) Termination for convenience provisions shall specify the time period of notice and payments to the Contracting Party up to the date of termination. All contracts subject to these Rules shall contain a Termination for lack of funding clause. All termination provisions shall specify the means by which notice of termination of the contract is communicated.(q) Printing Contracts. All printing contracts subject to these Rules shall comply with T.C.A. § 12-7-103(d) by including a provision whereby the Contracting Party agrees that no publication shall be printed unless a printing authorization number has been obtained and affixed to the contract.(r) Annual Report and Audit. All grant contracts subject to these Rules shall contain a provision pertaining to an annual report and audit of the grantee. The Comptroller of the Treasury shall prescribe the wording of the provision to be used.(s) Monitoring. All contracts subject to these Rules shall contain a provision that states that the contractor's activities conducted and records maintained pursuant to the subject contract shall be subject to monitoring and evaluation by the Comptroller of the Treasury. The Comptroller of the Treasury shall prescribe the wording of the provision to be used.(t) Debarment and Suspension.1. All contracts subject to these Rules shall contain a provision concerning the circumstances under which a contracting party may be considered debarred or suspended from doing business with the State. This contract provision shall act as a certification that the contracting party:(i) Is not presently debarred, suspended, proposed for debarment, declared ineligible, or voluntarily excluded from covered transactions by any federal or state department or agency;(ii) Has not, within a three (3) year period preceding the contract, been convicted of, or had a civil judgment rendered against the contracting party from commission of fraud, or a criminal offence in connection with obtaining, attempting to obtain, or performing a public (federal, state, or local) transaction or grant under a public transaction; violation of federal or state antitrust statutes or commission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements, or receiving stolen property;(iii) Is not presently indicted or otherwise criminally or civilly charged by a government entity (federal, state, or local) with commission of any of the offenses detailed above; and(iv) Has not within a three (3) year period preceding the contract had one or more public transactions (federal, state, or local) terminated for cause or default.2. The Debarment and Suspension provision shall further require the Contractor to provide immediate written notice to the State if at any time the contracting party learns that the contracting party has failed to disclose information or that due to changed circumstances, its principals, affiliates or subcontractors are excluded or disqualified from contracting with any government entity.(3) Prohibited Contract Clauses. The following terms shall not be included in a contract:(a) Indemnification and Hold Harmless. Contract provisions requiring the State to indemnify and hold a Contracting Party harmless are prohibited.(b) Limitation of Liability.1. All limitations of liability must comply with T.C.A. § 12-3-701 and Central Procurement Office Policy. Limitations of Liability that do not comply with T.C.A. § 12-3-701 or Central Procurement Office Policy are prohibited.2. Contractual provisions limiting a Contracting Party's liability for intentional torts, criminal acts, or fraudulent conduct are prohibited.3. Contractual provisions that limit a Contracting Party's liability to an amount less than two times the value of the contract are subject to approval by the Chief Procurement Officer and are otherwise prohibited without the Chief Procurement Officer's approval. The Chief Procurement Officer must make a finding that limiting a Contracting Party's liability to less than two times the value of the contract is in the best interests of the State.(c) Bonus Payments. Bonus payment provisions are prohibited for all contracts subject to these Rules.(4) Rule Exception Procedure. The Central Procurement Officer may approve exceptions to these Rules or Central Procurement Office Policy as follows:(a) The Procuring Agency may request, and the Chief Procurement Officer may authorize or initiate an amendment to an existing contract or a modification of a solicitation, at any stage of the procurement or contract negotiation process, in circumstances where the Chief Procurement Officer determines that doing so is in the best interests of the State.(b) If the Procuring Agency considers it necessary to modify a necessary contract clause, it shall submit a request to the Chief Procurement Officer to modify a necessary contract clause.1. The request for modification of a necessary contract clause shall contain justification that addresses the following:(i) The text of the new clause sought to be used;(ii) If applicable, the risks to the State created by the new clause, and the impact on the State by allowing the new clause;(iii) The conditions in the market place that justify modification of the necessary contract clause; and(iv) The anticipated impact on the State's procurement if modification to the necessary contract clause is not allowed.(c) The Chief Procurement Officer shall have the authority to approve the language submitted or may authorize acceptance of the modification under alternative language. Any approval shall be in writing and detail the specific alternative language approved.Tenn. Comp. R. & Regs. 0690-03-01-.17
Original rule filed October 22, 2013; effective January 20, 2014.Authority: T.C.A. §§ 4-56-102, 4-56-105, 4-56-108, 12-3-305, 12-3-309, 12-3-509, 12-3-602, 12-3-701, 12-4-110, and 12-4-124.