Chapter 6 – Contracts and Leases

6.1 Contracts

A contract is a written agreement for the purchase or disposal of supplies, services, insurance, equipment or construction. To be effective, a contract must include an offer and acceptance by competent parties to furnish goods and/or services for an agreed monetary consideration.

Contract Types P2P Facilitates access to Three Types of Contracts
1. Blanket Agreements. These contracts establish the commitment of a supplier to furnish the purchaser's requirements for items or services on an as-required basis. 1. Enterprise Contracts. Established by P2P, these contracts are specifically intended either for enterprise-wide purposes or for a specific department. Example: Filtered Water, Office Supplies etc.
2. Term Contracts. These contracts establish a source of supply for goods or services during a specified period of time. Often these have a discount off list price structure but have a firm start and end date. 2. Governmental Contracts and Other MFA Contracts. These contracts are entered into by other healthcare and/or governmental entities. These agreements have a "piggyback" clause acknowledged by the contractor that may be used by other non-profit entities such as the MFA.
3. Requirements Contracts. These are agreements in which the supplier agrees to supply all of the purchaser's normal requirements for an item(s) at a specified price during a specified period. Quantity and delivery dates are unknown at award.

3. Cooperative Purchase Contracts. These are contracts where two or more named entities combine their requirements in order to realize a volume cost advantage. The MFA may use these contracts even if not specifically named in the original cooperative purchase.

6.1.1 Use of MFA Contracts

Whenever P2P has executed a contract for a particular commodity or service, departments are encouraged to order from that contract. Contracts established for enterprise-wide use can be found on the Procure-to-Pay website and through the iBuy+ website.

Contracts should be processed in accordance with the Contract Process Guide. For further questions on contracts and delegation, please contact P2P or the Office of the General Counsel.

6.1.2 Execution of Contracts/Agreements

Only individuals that have received specific delegation of authority are authorized to sign contracts that bind the MFA for the purchase of goods, services, insurance or construction. 

6.2 Leases

There are two types of leases that the MFA will enter into for the purchase or use of equipment or services: capital and operational. With a Capital lease, at the end of the term of the lease, the MFA owns the item. With an operational lease, the MFA is paying for the use of the item, but as with a leased vehicle, after the term of the lease ends, the item is returned to the leasing company and the MFA is free to either lease another item or purchase the same item for its fair market value, or pre-determined price as established in the lease.

6.2.1 Lease-Purchase Decision

A lease-purchase decision is based on the results of a cost-benefits analysis of the costs to own, costs to lease, and the advantages and disadvantages of any other relevant factors [Institute for Supply Management, 2000].

Factors to be Considered: A cost-benefit analysis can take several forms, however consideration of the total costs associated with the life cycle of the equipment, to include asset management and disposal should be made prior to moving forward with a purchase. These factors include:

  • Length of time the item will be used
  • Total of rental payments for the period of time to be used
  • Outright purchase price of item
  • Transportation and installation price of item
  • Maintenance and service costs
  • Funds availability and cost of capital
  • Obsolescence due to rapid advancement of technology

Additional considerations, depending on the cost, complexity and period of use could include:

  • Alternate purchase options
  • Use by others after initial purpose has ended
  • Continued maintenance by in-house staff if purchased vs. leased