Contracts: Vendor or Employee

Campus units may consider filling a need for temporary services through the use of an employment or vendor contract. Following is a quick reference guide to assist units in selecting the appropriate program to fill the service need.

Different Service Types: Vendor and employment contracts offer different types of support.

  • Outside Vendor: An organization or person ("vendor") providing professional services or organizational development. A vendor independently directs all individuals involved in the project.[1],[2]
    • Procurement handles contracts for professional services to deliver expertise on a non-internal matter: a marketing proposal, custom programming, or construction oversight. This vendor controls the result of work.[3]
    • Business Contracts Office (BCO) has provided for the occasional needs in organizational development: analysis of internal work process or business strategy. This vendor controls work result and manner.[4]
  • Contract Employee: An individual hired and supervised as an employee to provide services under a contract for a specific time period normally no longer than three years.

Decision – Vendor or Employee: Choosing vendor or employment contract includes some key questions.

  • Behavioral Control. Will the department want to direct when, where, and how to work. If yes, it is likely an employment contract.
  • Financial Control. Is service provider’s fee (profit) contingent on a contractually specified outcome. If yes, it likely a vendor contract.
  • Relationship. Will an ongoing and regularized relationship exist between service provider and department - consider whether the service provider will provide services to multiple employers. If yes, it is likely a vendor contract.
  • IRS Guidelines. Procurement offers the basics in Securing the Services of Independent Consultants  (PDF), that includes an Independent Contractor Pre-Hire Worksheet at the end to assist in this decision.

Questions? Departments are welcome to contact either Procurement Services or Central Human Resources.

Steps to Implement: Vendor and employment contracts are implemented in different ways.

  • Vendor Agreements are managed on the business side.
    • Departments seeking Professional Services will want to create a Purchase Requisition (PR).
    • For professional services, departments will create a Purchase Requisition (PR).
    • Campus buyers can then review existing contracts on campus or secure a new vendor.
    • Campus buyers will assist Departments to ensure price is competitive. This includes providing support to Departments when fulfilling the University requirement that the designated "Responsible Administrative Official" (RAO) determine payment is reasonable for the services. If payment would exceed $50,000, at least three bids are considered if possible.[5],[6] Campus buyers will guide Departments through the process.
    • Vendors must show proof of insurance[7], no employer-employee relationship[8],[9] and no conflict of interest  (PDF).
    • Departments seeking Organizational Development can obtain additional assistance by contacting Development staff  who will check existing contracts, and direct you to the Business Contract Office (BCO) to amend or to create a one-time agreement.
  • Employment Contracts are managed on the HR side. For more detailed information, see Contract for Employment.
    • Employment Contracts provide a special form of employment relationship for professional employees for fixed periods of time.
    • Departments will want to begin the Employment contract process by preparing a position description and forwarding it to Compensation to classify the position.
    • Employment Services or staff in your shared services center will assist departments to recruit for the new contract position.
    • Your Human Resources consultant can draft the contract to provide with your employment offer letter. Contact Employee Relations for more information.

Other Questions about your Services Decision? Contact either Procurement Services or Central Human Resources.

[1] Specified in Business & Finance Bulletin 77  (PDF) (BUS-77) for independent contractors, including professional services.
[2] Specified in BUS-34  (PDF) for independent consultants, including organizational development.
[3] BUS-77  (PDF), above.
[4] BUS-34  (PDF), above.
[5] BUS-34  (PDF), above.
[6] Outlined for all vendors in Buying Services.
[7] See BUS-63  (PDF) for insurance requirements.
[8] BUS-77  (PDF), above.
[9] BUS-34  (PDF), above.