COLORADO COMMUNITY COLLEGE SYSTEM
SYSTEM PROCEDURE

Contractual Indemnification Approval Process

SP 8-170

EFFECTIVE: September 9, 2013

REFERENCE: C.R.S. 23-5-106; BP 8-170

APPROVED: September 9, 2013

/ Nancy J. McCallin /
Nancy J. McCallin, Ph.D.
System President

Application

This procedure applies to all contracts entered into by the System Office or a state system community college.

Purpose

Board Policy (BP) 8-170 prohibits a community college and the System Office to enter into contracts containing indemnification or hold harmless provisions except under limited circumstances as identified in BP 8-170, and then only when the contract is approved in compliance with System President Procedure (SP-8-170). This Procedure sets forth the requirements for approval. It applies to all contracts, whether denominated as an agreement, memorandum of understanding, intergovernmental agreement or some other title. It does not modify or amend delegations of authority to approve and execute binding legal instruments. Any contract to indemnify or hold harmless presents economic risks that must be carefully evaluated. A contract to indemnify or hold harmless that fails to comport with BP 8-170 and this Procedure, is not permitted by law or policy.

Part 1. BP 8-170 Criteria That Must Be Established

The System Office and a community college may contract to indemnify and hold harmless a contractor when the contract meets criteria 1, 2, 3, 4, and 5 (“Approved Categorical Contract”) below:

1. The contract falls into one of the following categories (“Contract Type”):
   a. License of intellectual property, including but not limited to industrial property, which includes inventions (patents), trademarks, industrial designs, and geographic indications of source; and copyright, which includes literary and artistic works such as novels, poems and plays, films, musical works, artistic works such as drawings, paintings, photographs and sculptures, and architectural designs;
   b. Lease, license, sale or purchase of information technology goods and services;
   c. Lease, license, sale, purchase or like contract for specialized equipment, tools, services and/or supplies predominantly for research activities;
   d. License, permit or other similar contract to enter upon or utilize land or other facilities or space;
   e. Contract where only the chosen product, equipment, or service will meet the needs of the System or a community college because it is an approved sole source procurement or, after reasonable due diligence, it has specifications that others lack and there has been a determination, that the product, equipment or service is not reasonably available from another contractor and the indemnification clause is not negotiable; or,
   f. Contract where the party seeking indemnification is the federal government or a state or local government or agency thereof, and the responsible agency or entity has declined a request to remove or nullify the indemnity clause.
2. The contract is necessary and appropriate to the operation of the System Office or a community college;
3. The contract clause requiring indemnification is considered standard in the industry, or if no standard exists, is reasonable under the circumstances and is non-negotiable, as determined by System Office Legal Affairs or a designated reviewing attorney for the System Office;
4. The maximum amount of liability to which the System Office or a community college agree to be exposed under the indemnification or hold harmless clause of the contract does not exceed $200,000 (“Liability Cap”). Where the valuation is not clear, the System Vice President for Finance & Administration or Chief Financial Officer at a community college, if applicable, shall reasonably determine the value to assign and the basis for such determination will be noted as part of the approval process of the contract.
   a. Expenditure Contract: One in which the System Office or a community college spends funds for receipt of goods, services or other benefits. The maximum amount of tort and other liability under the indemnification clause of the contract may not exceed $200,000.
   b. Revenue Contract: One in which the System Office or a community college receives funds for providing goods, services or other benefits. The maximum amount of tort or other liability under the indemnification clause of the contract may not exceed the greater of $200,000 or the amount to be received by the System Office or community college under the contract.
5. The potential liability attributable to the indemnification or hold harmless clause in the contract is reasonably likely to be covered by insurance, bonds, surety instruments, reserves, a risk management fund, or other such source of funds (“Liability Coverage”).

Part 2. Procedure

No contract that contains an indemnification or hold harmless provision shall be authorized or binding unless approved in accordance with this Procedure. Contracts already reviewed under this Procedure shall be maintained on the “PC Commons drive” or other similar location for reference. Requests for authorization to enter into a contract that includes any form or an indemnification or hold harmless provisions will be made using the “Request for Authorization to Indemnify” form (“Request”) in Appendix A. Any employee who agrees to an indemnification or hold harmless provision that is not authorized and approved in accordance with this Procedure shall be personally responsible for any liability or damages arising from the contract to indemnify or hold harmless.

The System Office and each community college shall designate a person to coordinate the indemnification approval process (“Contract Designee”). The Contract Designee may be the System Vice President for Finance & Administration or College Chief Financial Officer (CFO) or another person with contracting background and shall be responsible to screen the request and obtain all information necessary to prepare the Request for submission to the System Office for review. The steps to complete the Request are as follows:

Step 1

The Contract Designee shall determine the Contract Category.

Step 2

The Contract Designee shall develop, in consultation with the requesting end-user, a summary of the project.

Step 3

The Contract Designee shall identify, in consultation with the requesting end-user, the anticipated benefit to the System Office or community college.

Step 4

The Contract Designee shall identify, in consultation with the requesting end-user, the technological and programmatic risks to third parties associated with the project and the manner in which those risks will be minimized (“Risk Assessment”).

Step 5

The Contract Designee shall identify attempts to remove the indemnification or hold harmless provisions or limit liability to an amount not to exceed $200,000 or the amount received under a revenue contract, whichever is less.

Step 6

The System Vice President for Finance & Administration for System contracts or the college CFO for college contracts, in consultation with System Office Legal Affairs, shall make a written assessment of whether the amount of potential liability under the indemnification or hold harmless provision does not exceed $200,000 or the amount to be received under a revenue contract, whichever is less (“Liability Cap Assessment”).

Step 7

The System Vice President for Finance & Administration or the college CFO, in consultation with System Office Legal Affairs, shall make a written assessment of the source of funds available to cover potential liability attributable to the indemnification or hold harmless clause (“Liability Coverage Assessment”).

Step 8

Information Technology (“IT”) related contracts require System Vice President of Information Technology, Chief Information Officer approval. This approval indicates agreement with the Risk Assessment and Liability Cap Assessment from an IT perspective only. It is not an indication that System IT will provide technical support for the project, goods or services.

Step 9

System Office Legal Affairs or a designated reviewing attorney shall make a written determination as to whether the indemnification or hold harmless provision is considered standard in the industry, or, if no standard exists, is reasonable and non-negotiable, and the contract is otherwise consistent with BP 8-170.

Step 10

The System Vice President for Finance and Administration, in consultation with System Office Legal Affairs, shall approve the Request only upon a determination that the Risk Assessment, Liability Cap Assessment and the Liability Coverage Assessment are fair and reasonable.

Step 11

The System President for System contracts or College President for college contracts, shall approve the Request only upon a determination that the contract meets the requirement to be characterized as an Approved Categorical Contract and appropriately advances college or System interests in light of the totality of the circumstances.

Part 3. Procedure for Approval of Other Contracts not considered an “Approved Categorical Contracts”

If a contract does not satisfy the requirements to be an Approved Categorical Contract, as set forth above, such contract may not be entered unless the System President makes a prior written determination that the contract serves a valid public purpose and that any risks to the System Office or college that may arise from entering into the contract are sufficiently limited and outweighed by the benefits of the contract so as to warrant approval on behalf of the State Board. For college contracts, only the college president may seek such approval.

The System President may choose to submit any contract within the scope of the System President’s approval authority to the State Board for its consideration at its next regularly scheduled meeting.

Revising this Procedure

The System Office reserves the right to change any provision or requirement of this Procedure at any time and the change shall become effective immediately.

APPENDIX A

Request for Approval – Contractual Indemnification

COLLEGE/SYSTEM:

Contract #:

Vendor/Customer:

Dept. Name and Contact:

Total Dollar Amount over life of the Contact:

Account #:

Contract Designee (Name, Contact Information):

Routing Instructions: Contract Designee is responsible to provide the information requested in steps 1 – 7 prior to submitting this form to the System Office for approval required in steps 8, 9 and 10. Step 11 requires College President or System President approval. [Insert Special Instructions from College]

Contract Category

• Expenditure
• Revenue
• Other

Step 1. Contract Category (To be completed by Contract Designee)

• License of intellectual property including software
• Lease, license, sale, or purchase of information technology goods and/or services
• Lease, license, sale, purchase or like contract for specialized equipment, tools, services and/or supplies predominantly for research activities
• License, permit or other similar contracts to enter upon or utilize land or other facilities or space
• Contract with a government entity or agency and a prior request to remove the indemnity clause has been denied
• Other
  • Only the chosen product/equipment/service will meet the needs of the System Office or college because it is an approved sole source procurement
  • Item has specifications that others lack and product/equipment/service is not reasonably available from another contractor and indemnification clause is non-negotiable (attempts must described in Step 5)

Step 2. Summary of the Project (To be completed by Contract Designee)

Step 3. Anticipated Benefit (To be completed by Contract Designee)

Step 4. Risk Assessment (To be completed by Contract Designee)

• Risks Identified: (i.e. injury or damage to persons, property or third party legal interests)
• Strategies to minimize risks:

For software or hardware agreements, these assessments should involve System Office Information Technology Dept.

Step 5. Attempt to remove clauses or limit liability so as not to exceed $200,000 or amount to be received under a revenue contract and the results of that attempt. (To be completed by Contract Designee)

Step 6. Liability Cap Assessment (To be completed by System Vice President for Finance & Administration or college CFO, in consultation with System Office Legal Affairs.)

• Revenue Contract:
  • Maximum amount of liability does not exceed $200,000 OR
  • Maximum amount of liability does not exceed the amount to be received under a revenue contract
• Expenditure Contract:
  • Maximum amount of liability under the indemnification clause does not exceed $200,000
• Liability Unclear:
  • If the valuation of liability is not clear, liability under the indemnification or hold harmless clause is valued not to exceed $200,000 or the maximum amount to be received under a revenue contract

Signature:

Name/Title:

Date:

Contact Information:

Comments: (Please indicate any additional actions required to minimize risks identified above)

Step 7. Liability Coverage Assessment (To be completed by System Vice President for Finance & Administration or college CFO, in consultation with System Office Legal Affairs.)

Potential liability is reasonably likely to be covered by:

• insurance
• bonds
• surety instruments
• reserves
• a risk management fund
• other such source of funds (specify)

If potential liability is to be covered from college of System Office reserves, the signature below is confirmation that the projected reserves for the life of the contract are sufficient to cover the value assigned to the potential liability

Signature:

Name/Title:

Date:

Comments:

Step 8. Information Technology Related Contracts – Review of Risk Assessment and Liability Cap Assessment

All Information Technology related contracts must be approved by the System Vice President of Information Technology, Chief Information Officer

Signature:

Title: System Vice President of Information Technology, Chief Information Officer

Date:

Comments:

Please note: This approval indicated agreement with the Risk Assessment and Liability Cap Assessment from an IT perspective only. If the System Office or college receives System IT approval to indemnify, this approval does not mean System IT will provide technical support for the project, good or services.

Step 9. Legal Review (System Office Legal Affairs)

• Indemnification clause is industry standard OR
• No standard exists and the clause is reasonable and non-negotiable and otherwise consistent with Fiscal Rules and the Procedure

Signature:

Department: System Office Legal Affairs

Date:

Step 10. Review of Risk Assessment, Liability Cap Assessment and Liability Coverage Assessments

System Vice President for Finance & Administration, in consultation with System Office Legal Affairs.

• Assessments in Steps 4, 6 and 7 are fair and reasonable.

Signature:

Title: System Vice President for Finance & Administration

Step 11. System/College President Final Review (Contract can not be executed unless both boxes are checked).

• The contract meets the requirements to be characterized as an Approved Categorical Contract. AND
• The contract appropriately advances college or System Office interests.

Signature:

Name/Title:

Date: