Modification of State Contracts and Grants

State Controller Policy

Effective Date: 11/06/2020

Approved by: Robert Jaros, CPA, MBA, JD, Colorado State Controller

Policy

This policy is a State Controller Contract, Grant, and Purchase Order Policy under the State Fiscal Rules promulgated pursuant to C.R.S. §24-30-202. State Agencies and Institutions of Higher Education (IHEs) shall only modify State Contracts, as defined in Fiscal Rule 3-3, and Grants, as defined in Fiscal Rule 3- 4, in accordance with this policy, except for Capital Construction (as defined in Fiscal Rule 4-1) contracts which are subject to direction from the Office of the State Architect (OSA) (Capital Construction Contracts).

What Modification Tools are Available

The following modification tools are available for State Agencies and IHEs to use when modifying a State Contract or Grant:

• Amendment. An amendment can modify any portion of a State Contract or Grant, except for the parties. An amendment and an assignment may be combined to change both the parties and other requirements of a State Contract or Grant as described in §2)a.i below.
• Assignment. An assignment is a document that is used to change the parties to a State Contract or Grant. A State Contract or Grant must be assigned when an entity with a different Federal Employer Identification Number replaces the original party to the State Contract or Grant, regardless of whether this occurred because of a sale, merger or transfer of the State Contract or Grant to a third party or a related entity or subsidiary. An amendment and an assignment may be combined as a single document to change both the parties and other terms and conditions of a State Contract or Grant, as described in §2)b.i below.
• Grant Funding Change Letter. A grant funding change letter is a document that can be used only to increase or decrease the amount of funding available under a Grant.
• Option Letter. An option letter is a document that can be used only to modify a State Contract or Grant in limited ways that are pre-approved by the State Contract or Grant. Option letters can be used to extend the State Contract or Grant term, increase or decrease the quantity of goods or services, modify State Contract or Grant rates, and initiate phases identified in a State Contract or Grant.
• Task Order. A task order is a document that can be used to define, authorize, and encumber funds for a project under a master task order contract.
• Change Order. A change order is a Capital Construction Contract modification document used to record changes in the work typically occurring during the construction phase of a project.
• Supplement. A supplement is a Capital Construction Contract modification document used specifically in contracts for professional services (as defined in §24-30-1402(6), C.R.S.) (Professional Services Contracts) to record changes in the scope of work for less than 10% of the accumulated value of the contract.
• Other Modification Tools. Some older modification tools are not available under this policy. They may be used only if they are included in a State Contract or Grant that was executed under a prior policy that permitted such modification tools. Additional modifications may be permissible in very narrow circumstances and State Agencies and IHEs shall work closely with the Central Contracts Unit (CCU) prior to entering into any other modification type.

When Each Modification Tool Can be Used

State Agencies and IHEs may use the above referenced modification tools only under the following circumstances (Note: a State Agency or IHE may never execute any modification tool for a State Contract or Grant after that State Contract or Grant has terminated or expired):

• Amendments
  • State Agencies and IHEs may use an Amendment to make any legal change to a State Contract or Grant, except to change a party to that State Contract or Grant. A State Agency or IHE may use an amendment to change a party to the State Contract or Grant only if it is combined with an assignment.
    • If the amendment will replace an entire exhibit, then the new exhibit should be named differently to avoid confusion, such as replacing Exhibit A with Exhibit A-1. The amendment also must note that all references to the original exhibit shall be deemed to be references to the new exhibit.
  • No special language or exhibit is required in the State Contract or Grant to be able to use an amendment, but State Agencies and IHEs shall not include language that allows the parties to amend the State Contract or Grant by oral agreement or any means other than one of the modification tools described in this policy without the written approval of the CCU.
  • A State Agency or IHE may execute an amendment at any time during the term of the State Contract or Grant, though any change that either increases the maximum amount of the State Contract or Grant or increases rates so that the amounts due during a period would exceed the maximum amount of the State Contract or Grant available for that period may not be retroactive to any time prior to the execution of the amendment.
  • If a change in law or Fiscal Rule occurs subsequent to the execution of a State Contract or Grant that would impact the rights or obligations of the parties under the State Contract or Grant, such as, but not limited to, a change to the Special Provisions, the amendment must include language modifying the State Contract or Grant in accordance with the change in law or Fiscal Rule unless the State Contract or Grant has been previously amended in accordance with the change in law or Fiscal Rule.
• Assignments
  • State Agencies and IHEs must use an assignment to change the parties to a State Contract or Grant. An assignment only changes the parties to a State Contract or Grant, but cannot make any other changes. A State Agency or IHE must use an assignment with an amendment to change other portions of a State Contract or Grant.
  • No special language or exhibit is required to be included in the State Contract or Grant to be able to use an assignment.
  • A State Agency or IHE may execute an assignment at any time during the term of the State Contract or Grant.
  • If a change in law or Fiscal Rule occurs subsequent to the execution of a State Contract or Grant that would impact the rights or obligations of the parties under the State Contract or Grant, such as, but not limited to, a change to the Special Provisions, the assignment must be combined with an amendment that includes language modifying the State Contract or Grant in accordance with the change in law or Fiscal Rule unless the State Contract or Grant has been previously amended in accordance with the change in law or Fiscal Rule.
• Grant Funding Change Letter
  • State Agencies and IHEs may use a grant funding change letter only to increase or decrease the funding available under a Grant when the State Agency or IHE will have little or no control over the scope of services provided by the entity receiving the grant funds. A State Agency or IHE may use a grant funding change letter to modify the total amount of a Grant, the amount allocated to any State Fiscal Year of a Grant or the amount allocated to any line item of a Grant, but may not use it to make any other changes to the terms and conditions of the Grant, to extend the term of the Grant, or to make any modification to any agreement that is not a Grant.
  • The State Agency or IHE may use a grant funding change letter only if the Grant includes:
    • A clause substantially similar to the following: “The State, at its discretion, may unilaterally increase or decrease the total funds available under this Grant, the funds available under the Grant during any State Fiscal Year or the funds available for any specific line item described in this Grant. In order to exercise this right, the State shall provide written notice to Grantee in a form substantially equivalent to Exhibit (insert exhibit). The exercise of this right shall not be valid until it has been approved by the State Controller or designee.”
    • An exhibit showing a sample or form of the grant funding change letter, which shall be substantially similar to the Sample Grant Funding Change Letter issued by the Office of the State Controller.
  • A State Agency or IHE may execute a grant funding change letter at any time during the term of the Grant, though any increase to the amount of funding may not be retroactive to any time prior to the execution of the grant funding change letter.
• Option Letters
  • State Agencies and IHEs may use an option letter only for the following purposes:
    • Extend the term of the State Contract or Grant as provided in the State Contract or Grant.
    • Increase or decrease the quantity of goods provided at a fixed rate in the State Contract or Grant, and modify the maximum amount of the State Contract or Grant accordingly.
    • Increase or decrease the quantity of services provided at a fixed rate in the State Contract or Grant, and modify the maximum amount of the State Contract or Grant accordingly.
    • Modify existing State Contract or Grant rates if the rates are set by an entity other than the State Agency or IHE or the contractor or Grantee, such as a federal agency or the legislature, when rates are set by statutory calculation, or when the rates are determined by a third-party actuary.
    • Authorize the contractor or Grantee to begin work on a phase of the State Contract or Grant, so long as all requirements of that phase and all amounts due for the work under that phase are described in the State Contract or Grant.
    • Other changes specifically described in the State Contract or Grant that the CCU or State Controller has approved in writing.
  • In order to use an option letter for a certain purpose, the State Agency or IHE must include the following language, applicable to such purpose, in the State Contract or Grant:
    • To extend the term of the State Contract or Grant:
      • A clause in the “Term and Effective Date” or similar section of the document that is substantially similar to the following: “The State, at its discretion, shall have the option to extend the performance under this Contract beyond the Initial Term for a period, or for successive periods, of 1 year or less at the same rates and under the same terms specified in the Contract (each such period an “Extension Term”). In order to exercise this option, the State shall provide written notice to Contractor in a form substantially equivalent to Exhibit     .” If this clause will be added to a Grant, the terminology shall be revised to match the Grant’s terminology.
      • If a State Contract is subject to the procurement code, an addition to the clause in
        §2)d.ii.1.a above that is substantially similar to the following: “Except as stated in
        §[End of Term Extension Section Number], the total duration of this Contract, including the exercise of any options to extend, shall not exceed 5 years from its Effective Date absent prior approval from the Chief Procurement Officer in accordance with the Colorado Procurement Code.”
    • To increase or decrease the quantity of either goods or services:
      • A clause in the “Payments to Contractor” or similar section that is substantially similar to the following: “The State, at its discretion, shall have the option to increase or decrease the quantity of Goods and Services based upon the rates established in this Contract, and increase the maximum amount payable accordingly. In order to exercise this option, the State shall provide written notice to Contractor in a form substantially equivalent to Exhibit (insert exhibit). Delivery of Goods and performance of Services shall continue at the same rates and terms as described in this Contract.” If this clause is added to a Grant, then the terminology shall be revised to match the Grant’s terminology.
      • To modify existing State Contract or Grant rates:
        • A clause in the “Payments to Contractor” or similar section, or in an exhibit where the rates are discussed, that is substantially similar to the following: “The rates shown in Exhibit     are determined by [Insert a description of the entity or process used to determine rates]. The State, at its discretion, shall have the option to increase or decrease the rates shown in Exhibit     , as the State determines is necessary to account for [Insert description of who will make changes or how changes will be made]. In order to exercise this option, the State shall provide written notice to Contractor in a form substantially equivalent to Exhibit     , and any new rates table or exhibit shall be effective as of the effective date of that notice unless the notice provides for a different date.” If the clause is added to a Grant, the terminology shall be revised to match the Grant’s terminology.
        • To authorize the contractor to begin work on a phase of a State Contract or Grant:
          • A clause in the document where the phases are described that is substantially similar to the following: “The State, at its discretion, shall have the option to direct Contractor to begin performance of any of the Contract phases described in [Insert section or exhibit and the proper reference for the section or sections describing the phases]. In order to exercise this option, the State shall provide written notice to Contractor in a form substantially equivalent to Exhibit     . Contractor shall begin work on each phase as of the effective date of the notice requiring Contractor to complete that phase, or a later date if one is contained in the notice, and shall complete all Work described for that phase in this Contract.” If the clause is added to a Grant, the terminology shall be revised to match the Grant’s terminology.
        • To use any option:
          • An exhibit showing a sample or form of the option letter, which shall be substantially similar to the Sample Option Letter included with this policy.
      • A State Agency or IHE may execute an option letter at any time during the term of the State Contract or Grant, though any change that either increases the contract maximum amount or increases rates so that the amounts due during a period would exceed the contract maximum amount available for that period may not be retroactive to any time prior to the execution of the option letter.
      • Option letters that decrease the quantity of goods or services may only be used in good faith and an option letter may not be used to modify the quantities of goods or services to zero in order to effectively terminate the State Contract or Grant prior to the expiration of that State Contract or Grant.
      • Option letters shall not be used in Capital Construction Contracts but may be used with approval of the OSA for Professional Services Contracts.
    • Task Orders.
      • State Agencies and IHEs may use a task order only to direct work on a project under a master task order contract. A task order may only direct work on a project that is within the scope of the master task order contract and State Agencies and IHEs may not use a task order to modify the terms, requirements or scope of the master task order contract under which the task order is issued. A task order must use rates already included in a master task order contract, and may not introduce new or modified rates. A State Agency or IHE must use an amendment to make any change to the terms, requirements, scope or rates of the master task order contract.
        • A State Agency or IHE may use a task order only if all off the following are true:
          • The task order will be issued under a master task order contract substantially similar to the Master Task Order Contract model form issued by the CCU and described in the State Controller Policy entitled “Model State Contracts and Grants”, or another State Contract containing the necessary clauses relating to the use of task orders as approved by the CCU.
          • The master task order contract contains an exhibit showing a sample or form of the task order, which shall be substantially similar to the Sample Task Order included with this policy.
      • A State Agency or IHE may execute a task order at any time during the term of the master task order contract, though no work under a task order may extend past the termination or expiration of the master task order contract.
      • State Agencies and IHEs may modify the work on the project directed under a task order through the use of a task order amendment. Task order amendments maybe used only to make changes to the task order that are within the scope of and at the same rates included in the original master task order contract under which the task order was issued.
      • Task Orders shall not be used in Capital Construction Contracts but may be used with OSA approval for Professional Services Contracts.
    • Change Orders and Supplements related to Capital Construction. State Agencies and IHEs may use Change Orders or Supplements with Capital Construction Contracts if the following conditions are satisfied: (a) the Change Order or Supplement is done in accordance with OSA State Building Program Policies and Procedures for drawing and specification change work; (b) the Change Order or Supplement accumulated value is less than or equal to the contingency identified in the construction contract or professional services contract for change orders or 10% of the professional services contract for supplements; and (c) the Change Order or Supplement is within the general scope of the contract. If proposed change work exceeds the construction contract contingency or the 10% accumulated value of the professional services contract, or if any of the conditions above are not met, the State Agency or IHE shall issue a formal contract amendment.
  • What can be Used for a Modification. State Agencies and IHEs shall use the following forms for each modification tool:
    • Amendments. A form substantially similar to the Contract Amendment model form issued by the CCU for all amendments.
      • An amendment to an intergovernmental grant agreement that uses the Intergovernmental Grant Agreement model as permitted under the State Controller Contract, Grant and Purchase Order policy entitled “Model State Contracts and Grants”, shall be in a form substantially similar to either the Contract Amendment model form or the Intergovernmental Grant Amendment model form issued by the CCU.
      • Assignments. A form substantially similar to the Contract Assignment model form issued by the CCU for all assignments.
      • Grant Funding Change Letters. A form substantially similar to the Grant Funding Change Letter model form issued by the CCU that is included as an exhibit to the Grant.
      • Option Letters. A form substantially similar to the Option Letter model form issued by the CCU that is included as an exhibit to the State Contract or Grant.
      • Task Orders. A form substantially similar to the Task Order model form issued by the CCU that is included as an exhibit to the master task order contract.
        Change Orders and Supplements. A form or forms identified in the OSA’s Change Order Management Guidelines policy, issued in accordance with OSA State Building Program Policies and Procedures.
  • Who must Sign the Modification. State Agencies and IHEs shall ensure that each individual signing a modification has the proper authority to sign that document in accordance with all State Controller Policies. The following parties shall sign the following modifications for the modification to be effective:
    • Amendments. An amendment shall be signed by each of the parties to the State Contract or Grant being amended and the State Controller or a properly authorized delegate. IT Contracts must be amended in accordance with the IT Contracts Policy. Additionally, if the State Contract being amended is for a Major Information Technology Project, then the Chief Information Officer or a delegate shall also sign the amendment.
      • If the amendment uses the Intergovernmental Grant Amendment model form, the State Agency or IHE who is a party to the Grant and the State Controller or a properly authorized delegate shall sign the amendment.
    • Assignments. An assignment shall be signed by each of the original parties to the State Contract or Grant, the entity to which the State Contract or Grant is being assigned (the assignee), and the State Controller or a properly authorized delegate. If the State Contract being assigned is for a Major Information Technology Project, then the Chief Information Officer or a delegate shall also sign the assignment.
    • Grant Funding Change Letters. A grant funding change letter shall be signed by the State Agency or IHE who is a party to the Grant and the State Controller or a properly authorized delegate.
    • Option Letters. The State Agency or IHE who was a party to the State Contract or Grant and the State Controller or a properly authorized delegate shall sign option letters. If the State Contract that the option letter modifies is for information technology goods or services, then the Chief Information Officer (CIO) or a delegate shall approve the option letter. Such approval shall be represented in the form of a signature or other means established by the Governor’s Office of Information Technology.
    • Task Orders. A task order shall be signed by each of the parties to the master task order contract under which the task order is issued and the State Controller or a properly authorized delegate. If the State Contract under which the task order is issued is for a Major Information Technology Project, then the Chief Information Officer or a delegate also shall sign the task order.
    • Change Orders and Supplements. A Change Order or Supplement shall be signed by each of the parties to the Capital Construction Contract or Professional Service Contract under which the Change Order or Supplement is issued, the State Buildings Program signatory or authorized delegate, the State Controller or a properly authorized delegate, and, if required, the State Agency or IHE’s legal counsel.
• Other Approvals on Modification Forms. State Agencies and IHEs shall comply with all other applicable rules and policies regarding State Contracts and Grants, including obtaining all necessary approvals, such as approvals related to personal services reviews and approvals of applicable central approvers.