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UT System Administration Policy Library -- Policy UTS 130
Vending Machine Contracts |
Responsible Officer: Executive Vice Chancellor for Business Affairs
Sponsoring Office: Office of General Counsel
Effective Date: February 14, 2004
Last Reviewed: May 2, 2008
Next Scheduled Review: April 1, 2010
Errors or changes to: policyoffice@utsystem.edu
CONTENTS
Policy Statement
Rationale
Scope
Website Address For This Policy
Related Statutes, Policies, Requirements Or Standards
Contacts
Definitions
Responsibilities
Procedures
Forms Tools/Online Processes
Appendix
POLICY STATEMENT
It is the policy of The University of Texas System that all contracts for vending machine services be awarded in accordance with applicable laws and rules and that those involved in the procurement process perform their responsibilities in a fiscally prudent and ethical manner.
RATIONALE
This policy provides requirements and guidelines for entering into contracts for installation and operation of vending machines for auxiliary enterprise purposes on property owned or controlled by institutions of The University of Texas System.
The Legislature authorized the location of vending machines in state-owned buildings that are not served by a vendor operating under supervision of the Texas Commission for the Blind; provided that such locations must be approved by the governing body of the agency in control of the building.
The Board of Regents' Rules and Regulations, Rule 80103, Number 2, Section 2.2 authorizes the operation of vending machines at UT institutions, under the following requirements:
The sale or offer for sale of food, drink, or any other product that may be lawfully sold by means of a vending machine that is operated by the UT System or institution or a subcontractor of either, under an approved written agreement, in an area designated in advance by the Chancellor of the UT System or the president of a institution or his or her delegate.
Vending machine installations at UT institutions are treated as "auxiliary enterprise" operations, which must be conducted in accordance with Texas Government Code, Chapter 2252, Subchapter C. The requirements mandated by Chapter 2252 are included in the UT Standard Vending Machine Agreement.
Texas Education Code, Section 51.945, requires the Board of Regents to implement policies to provide an opportunity for students to appear before any University officer or group deciding whether a food service provider should be selected or retained. The statute specifies that any contract between an institution and a food service contractor must require the contractor to hold period meetings or forums to provide students with a reasonable opportunity to discuss the contractor's performance. The Board of Regents' Rules and Regulations, Rule 50302, requires each UT institution offering degree programs to include in its Handbook of Operating Procedures a policy and procedure for student participation in selecting and monitoring on-campus food service vendors. The Rules specify minimum requirements for the institutional policies applicable to contracts for food and beverage services located in or in conjunction with student unions, residence halls, or campus-wide cafeterias, and contracts for vending machine food and beverage services.
SCOPE
All institutions and UT System Administration
WEBSITE ADDRESS FOR THIS POLICY
http://www.utsystem.edu/policy/policies/uts130.html
RELATED STATUTES, POLICIES, REQUIREMENTS OR STANDARDS
UT System Administration Policies & Standards |
Other Statutes, Policies & Standards |
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CONTACTS
If you have any questions about UT System Administration Policy UTS 130, Vending Machine Contracts, contact the following offices:
DEFINITIONS
Auxiliary enterprise: A business activity that is conducted at a state agency, provides a service to the agency, and is not paid for with appropriated money.
Contractor: An individual, association, corporation, or other business entity that operates an auxiliary enterprise or performs a service of the auxiliary enterprise.
RESPONSIBILITIES
UT Institution Staff Member(s) Contracting with Vending Machine Provider.
- Contracts with vending machine providers using Standard UT Vending Machine Agreement.
- Solicits and obtains bids from prospective contractors using a competitive process or other method that will achieve best value in vending services.
- Obtains prospective contractor's financial statement as part of its bid.
- Submits signed Vending Machine Agreements to the institutional docket coordinator for inclusion in the institutional docket.
- Forward an executed copy of the Agreement to the Texas Building and Procurement Commission, indicating that the Agreement has been approved by the Board of Regents and including a description of the location of the vending machines.
Office of General Counsel
- Review and approve contracts that deviate from the standard UT Vending Machine Agreement or that contain addenda.
Chief Business Officer
- Sign vending machine contracts, once approved by the OGC.
UT Institution Staff Member(s) Responsible for Depositing Vending Machine Funds
- Retain and deposit vending machine revenue.
PROCEDURES
1 The Standard UT Vending Machine Agreement
1.1 The recommended standard UT Vending Machine Agreement (attached) was developed by the Office of General Counsel (OGC) for institutional use for campus Vending Machine Agreements, and should be used by UT institutions for any vending machine arrangement entered into after the effective date of this policy.
The standard UT Vending Machine Agreement was drafted to cover the operation of vending machines offering typical food and beverage item; it will need to be revised if an institution plans to contract for (a) on-campus installation of coin or card-operated laundry machines, amusement games, or other machines substantially different from typical drink or snack machines; or (b) additional beverage-related services, such as fountain beverage supplies, or beverage advertising or promotional rights. The procedures outlined below for the authorization, execution, docketing, and reporting of a Vending Machine Agreement should be followed for all new Agreements and for extensions of any existing Agreements.
1.2 UT institutions issuing a solicitation for bids or proposals for vending machine services should include a copy of the attached standard UT Vending Machine Agreement form in the solicitation documents, with a statement that the selected contractor (if any) will be expected to sign the standard UT Vending Machine Agreement and comply with all applicable statutory and Regental requirements.
2 Solicitation of Vending Contractors
2.1 UT institutions should use either an appropriate competitive selection process or some other method that will achieve best value in selecting a contractor or contractors to provide vending services.
In developing the desired qualifications and selecting a contractor, a UT institution shall comply with Board of Regents' Rules and Regulations, Rule 50302, Number 2, Section 1 and its institutional policy concerning student participation in selection of food service providers.
Institutions should solicit and obtain bids from prospective contractors far enough in advance of the projected starting date to allow sufficient time for (1) a review of the proposed Agreement by the OGC, if necessary; and (2) the negotiation and execution of the Agreement prior to the projected starting date for the contractor's operations.
2.2 An institution's Vending Machine Agreement should normally have a term of either two years or four years, with the expiration date coinciding with end of the State fiscal year or biennium. The standard Agreement form provides that the term may be extended for an additional two years beyond the original term.
2.3 Institutional officers should note the requirements of Sections 2252.062, 2252.063, and 2252.064, Texas Government Code, concerning the contractor's submittal of financial statements, posting of a performance bond, and reporting of sales information. Those statutory requirements are specified in the standard UT Vending Machine Agreement form, and should be stated in an institution's bid specifications.
Institutions should obtain a prospective contractor's financial statement as part of its bid. Note that the standard UT Vending Machine Agreement requires the contractor to pay a royalty to UT based on a percentage of gross receipts before exclusion of sales tax. Institutions should ensure that this requirement is clearly indicated in bidding specifications.
3 Contract Processing Procedures
3.1 Contracting. Institutions entering into vending machine contracts using the standard UT Vending Machine Agreement, with no modifications except completing the blanks, need not obtain review as to legal form from the OGC prior to execution. Contracts that deviate in any way from the standard UT Vending Machine Agreement or that contain addenda must be reviewed and approved as to form by the OGC prior to execution only if such approval is required under the Contract Review Procedures set forth in the OGC Contracting Guidelines.
If OGC approval of a contract is required or otherwise desired, an institution should submit the proposed Agreement, along with all pertinent bidding information (if any), to the OGC for review and approval.
Agreements are normally signed by the chief business officer of the institution or a delegate after review and approval by the OGC.
3.2 Docketing.
Institutions should submit signed Vending Machine Agreements to the Board of Regents Office for inclusion on the institutional docket, to comply with the requirements Texas Government Code, Section 2203.005(a).
After the Board of Regents' approval of the docket in which a Vending Machine Agreement is included, it is the responsibility of the institution to forward an executed copy of the Agreement to the Texas Building and Procurement Commission, indicating that the Agreement has been approved by the Board of Regents and including a description of the location of the vending machines, as required by Texas Government Code, Section 2203.005(b).
3.3 Renewing Contracts.
Renewals by UT institutions of vending machine contracts that (1) do not modify in any way the form of the original contract and (2) are documented by using the standard UT Extension and Amendment of Vending Machine Services Agreement Form (attached) without modifying the substance of that form, do not require the approval of the OGC.
Renewals that either modify the form of the original contract or are documented by an instrument other than the standard UT Extension and Amendment form, require prior approval from OGC only if such approval is required under the Contract Review Procedures set forth in the OGC Contracting Guidelines.
4 Use of Funds Derived from Vending Machines Operations
4.1 All revenue earned from auxiliary enterprises at institutions of higher education should be retained and deposited (or invested) by each institution under Texas Education Code, Sec. 51.003 and Sec. 51.0031.
FORMS AND TOOLS/ONLINE PROCESSES
Standard Vending Machine Agreement form
Standard Extension and Amendment form
APPENDIX
Legal Opinion regarding Use of Funds Derived from Vending Machines Operations
Texas Government Code, Sec. 2203.005(c) requires that all rentals, commissions, or other net revenue received by an agency from vending machines will be accounted for as state money and deposited to the credit of the general revenue fund unless the disposition of the revenue is governed by other law. This section also requires each agency to account for its vending machine revenue in the agency's annual report.
However, the 1999 bill enacting this statute stated that "This Act does not affect the authority of an institution of higher education to collect, account for, and control local funds and institutional funds in the manner authorized by Subchapter A, Chapter 51, Education Code." Certain statutes in Chapter 51 of the Texas Education Code provide for the disposition of the vending machine revenue received by institutions of higher education. The list set forth in Texas Education Code, Sec. 51.002 identifying those monies to be retained by institutions does not specifically include either "revenue from vending machines" or the larger category of funds to which those revenues are typically considered to belong, that is "revenue from auxiliary enterprises." However, Texas Education Code, Sec. 51.008 states that it prevails over Sec. 51.002, and Sec. 51.008 does specify that institutions of higher education will deposit into the State Treasury all receipts "derived from all sources except auxiliary enterprises, noninstructional services,....." and several other excepted sources.
Therefore, based on the cited provisions in the Texas Education Code, and in accordance with long-standing practice, all revenue earned from auxiliary enterprises at institutions of higher education should be retained and deposited (or invested) by each institution under Texas Education Code, Sec. 51.003 and Sec. 51.0031.
Furthermore, revenues from vending machines are within the category of "institutional funds," as defined in Texas Education Code, Sec. 51.009, and therefore are among the funds referred to in the bill that enacted Texas Government Code, Sec. 2203.005(c), which says the bill does not affect an institution's authority to collect and control local funds and institutional funds in the manner authorized by Texas Education Code, Subchapter A, Chapter 51. It is the opinion of OGC of The University of Texas System that the 1999 enactment of Texas Government Code, Sec. 2203.005(c) did not affect the preexisting law concerning disposition of revenue from vending machines at institutions of higher education.
