As a publicly-funded institution, all procurement activity at the University of Toronto should be conducted in a competitive manner to ensure the best value for public dollars. The University’s Procurement Policy requires that departments obtain supplier quotations (up to $100,000) to allow suppliers in the marketplace a fair and transparent opportunity to supply the University with goods and services. For purchases between $10k – $50k, at least 2 quotations must be obtained prior to awarding the contract.
For more information, I recommend reading this section on the Procurement website: Competitive Procurement.
However, there may be circumstances where competition is not possible (e.g. there is only one supplier in the market) in which case, a Procurement Policy Exemptions Justification (PPEJ form) must be completed with the appropriate level of detail to support the non-competitive procurement decision, as it will be referred to in the event of an internal audit review or a Freedom of Information (FOI) request.
For more information, Non-Competitive Procurement.
In terms of how to setup the contract, that really is up to your department on how. For more information, see Supplier Contracts and Agreements.