An Act To Ensure the Cost-efficiency of Contracting out Services by the State
Be it enacted by the People of the State of Maine as follows:
Sec. 1. 3 MRSA §994, sub-§13 is enacted to read:
13. Review of privatization contracts. Upon the request of the State Auditor in accordance with Title 5, section 1824-B, subsection 3, paragraph D, to review proposed privatization contracts and recommend to the State Auditor whether a proposed contract should be objected to under Title 5, section 1824-B, subsection 3.
Sec. 2. 5 MRSA c. 167 is enacted to read:
CHAPTER 167
PRIVATIZATION CONTRACTS
§ 2041. Privatization contracts
1. Definitions. As used in this section, unless the context otherwise indicates, the following terms have the following meanings.
A. "Agency" means an executive office, department, division, board, commission or other office or officer in the executive branch of the government of the State.
B. "Commissioner" means the Commissioner of Administrative and Financial Services.
C. "Department" means the Department of Administrative and Financial Services.
D. "Dependent" means the spouse or child of an employee if that person would qualify for dependent status under the United States Internal Revenue Code or for whom a support order has been or could be granted under Title 19-A, Part 2 or 3.
E. "Privatization contract" or "contract" means an agreement or a combination or series of agreements with a term of no more than 5 years by which a nongovernmental person or entity agrees to provide services valued at $200,000 or more, which are substantially similar to and in lieu of services previously provided in whole or in part by employees of an agency. "Privatization contract" does not include:
(1) An agreement subsequent to an executed privatization contract, including an agreement resulting from a rebidding of the services provided under the contract;
(2) An agreement renewing or extending an executed privatization contract; or
(3) An agreement solely to provide legal, management consulting, planning, engineering or design services.
2. Requirements for privatization contract; validity and enforceability; bid process. An agency may not make a privatization contract unless the agency, in consultation with the department, has complied with the requirements of this subsection and the State Auditor does not object to the contract under subsection 3. A privatization contract made by an agency that has not complied with the requirements of this subsection, or that contains terms or conditions intended to avoid the requirements of this subsection, or that is objected to by the State Auditor under subsection 3, is invalid and unenforceable. In addition to the requirements provided under this subsection, the bid process described in this subsection is subject to the competitive bid process requirements of subchapter 1-A.
A. The agency must prepare a written statement describing the services proposed to be provided under a privatization contract, including the specific quantity and standard of quality of such services. This statement is a public record and must be made available by the agency for public inspection. The agency must file the statement with the department and transmit the statement to the State Auditor for review under subsection 3.
B. The agency must solicit competitive sealed bids for the privatization contract based upon the statement required under paragraph A. The deadline for accepting the sealed bids must be the same for all parties.
C. For each position in which a bidder will employ a person under the privatization contract and for which the duties of the employee will be substantially similar to the duties performed by an agency employee, the statement required under paragraph A must include a statement of the minimum wage rate to be paid for the position, which is the lesser of step one of the grade or classification under which the comparable agency employee is paid or, as determined by the department, the average private sector wage rate for that type of position. Every bid for a privatization contract must specifically establish the wage rate for each position under the contract, which must be no less than the minimum wage rate determined under this paragraph.
D. A bid for a privatization contract and a privatization contract must provide that the contractor pay a percentage of the costs of health insurance plans for each employee under the bid or contract that will be or is employed for 20 hours or more weekly. The percentage required under the bid or contract must be comparable to the percentage paid by the State for health insurance plans for comparable agency employees. A health insurance plan provided to an employee under a privatization contract must provide coverage to the employee and the employee's spouse and dependent children. A contractor shall submit quarterly payroll records to the agency listing the name, address, social security number, hours worked and hourly wage paid for each employee in the previous quarter. The Attorney General may bring a civil action in the Superior Court to enforce this paragraph or to prevent or remedy the dismissal, demotion or other action prejudicing any employee as a result of the employee's report of a violation of this paragraph by the contractor.
E. A privatization contract must require the contractor to offer available employee positions under the contract to qualified employees of the agency who satisfy the hiring criteria of the contractor and whose state employment is terminated as a result of the contract. The contract must require the contractor to comply with a policy of nondiscrimination and equal opportunity for all persons protected under Title 5, chapter 337 and to take affirmative steps to provide equal opportunity for those persons.
F. Prior to soliciting bids for a privatization contract under paragraph B, the agency shall prepare a comprehensive written estimate of the costs of agency employees providing, in the most cost-efficient manner, the services sought under the proposed contract. The estimate must include all direct and indirect costs of agency employees providing such services, including, but not limited to, retirement benefits, insurance and other employee benefit costs. For the purposes of this estimate, an employee organization may, at any time before the deadline for the agency to receive sealed bids under paragraph B, propose amendments to a collective bargaining agreement to which it is a party that are intended to reduce the cost estimate under this paragraph. Any amendments to a collective bargaining agreement between the agency and an employee organization that are intended to reduce the cost estimate under this paragraph must be accounted for by the agency prior to finalizing the estimate under this paragraph. The estimate required under this paragraph shall remain confidential until the deadline for the agency to receive sealed bids pursuant to paragraph B has passed, at which time the estimate shall be a public record and must be made available by the agency for public inspection, filed with the department and transmitted to the State Auditor for review under subsection 3.
G. Where applicable, the agency shall consult with and provide adequate resources to an employee organization for the purpose of encouraging and assisting agency employees to organize and submit a bid, which may be made as part of a joint venture with other persons, to provide the services sought under the proposed privatization contract. The agency shall consider any such employee bid on the same basis as all other bids. An employee bid submitted under this paragraph is confidential and may not be disclosed by the agency, except that the agency may disclose the bid to the department or the State Auditor as may be required under this section. The provisions of sections 18, 18-A and 19 do not apply to any actions of an agency employee conducted in accordance with this paragraph.
H. After soliciting and receiving bids, the agency shall publicly designate the bidder to which it proposes to award the privatization contract. The agency shall prepare a comprehensive written analysis of the contract cost based on the designated bid, including an analysis of the costs of transition from public to private operation, additional unemployment and retirement benefits, if any, and monitoring and otherwise administering contract performance. If the designated bidder proposes to perform any or all of the contract outside of the boundaries of the State, the contract cost, as determined for the purposes of this analysis, must be increased by the amount of income tax revenue, if any, that will be lost to the State by the corresponding elimination of agency employees, as determined by the State Tax Assessor.
I. At the time that the agency publicly designates the bidder to which it proposes to award the privatization contract under paragraph H, the head of the agency and the commissioner shall each certify in writing to the State Auditor that:
(1) The agency has complied with all provisions of this section and any other applicable laws and rules;
(2) The quality of the services to be provided by the designated bidder is likely to satisfy the quality requirements included in the statement prepared under paragraph A and to equal or exceed the quality of services that could be provided by agency employees as determined under paragraph F;
(3) The contract cost as determined under paragraph H will be less than the estimated cost as determined under paragraph F, taking into account all comparable types of costs;
(4) The designated bidder and its supervisory employees have no adjudicated record of substantial or repeated willful noncompliance with any relevant federal or state law or rule, including, but not limited to, labor relations laws and rules, occupational safety and health laws and rules, nondiscrimination and affirmative action laws and rules, environmental protection laws and rules and conflicts of interest laws and rules; and
(5) The proposed privatization contract is otherwise in the public interest.
The agency and the commissioner shall include a copy of the proposed privatization contract with the certificate transmitted to the State Auditor in accordance with this paragraph.
3. Review by State Auditor; objection; request for review by Office of Program Evaluation and Government Accountability. Except as provided in paragraph D, an agency may not make a privatization contract and a privatization contract is invalid and unenforceable if, within 30 days of receiving the certificate and other documents required under subsection 2, the State Auditor objects to the proposed contract and notifies the agency in writing of the objection in accordance with this subsection.
A. An objection made under this subsection must state specifically the State Auditor's basis for finding that the agency has failed to comply with the requirements of subsection 2, including whether the State Auditor finds, based on an independent review of all relevant facts, that any of the findings required under subsection 2, paragraph I are incorrect.
B. In determining compliance by the agency with the requirements of subsection 2, the State Auditor may require the attendance and testimony of agency employees and other witnesses and the production of books, papers and other records relating to the review under this subsection.
C. The State Auditor's objection to a proposed privatization contract in accordance with this subsection is final and binding on the agency, except when the State Auditor, by written notification to the agency, withdraws the objection based on a revised certificate submitted by the agency and the commissioner. If the State Auditor withdraws an objection under this paragraph, the specific reasons for the withdrawal of the objection, as based on the State Auditor's review of the revised certificate, must be stated in the written notification to the agency.
D. No later than 30 days after receiving from the agency the certificate and other documents required under subsection 2, the State Auditor may request that the Office of Program Evaluation and Government Accountability, established under Title 3, section 991, review the proposed contract and documents with the joint standing committee of the Legislature having jurisdiction over program evaluation and government accountability matters and recommend to the State Auditor whether the proposed contract complies with the requirements of subsection 2. If, prior to the expiration of the 30-day review period, the Office of Program Evaluation and Government Accountability agrees in writing to review the proposed contract, the State Auditor is granted an additional 30 days in which to notify the agency of its objection to the proposed contract in accordance with this subsection.
E. The State Auditor may adopt rules to implement the provisions of this subsection. Rules adopted pursuant to this paragraph are routine technical rules as described in Title 5, chapter 375, subchapter 2-A.
4. Applicability. The provisions of this section do not apply to any privatization contracts executed prior to the effective date of this section.
summary
This bill implements a statutory process for the review of privatization contracts, which are agreements with a term of no more than 5 years by which a nongovernmental person or entity agrees to provide services valued at $200,000 or more, which are substantially similar to and in lieu of services previously provided in whole or in part by state agency employees. Under this process, the State Auditor is given 30 days from the date that the agency designates the bidder to which it proposes to award the privatization contract to object to, and thereby invalidate, the proposed contract for failure to comply with statutory requirements. The State Auditor is also authorized to seek a review by the Office of Program Evaluation and Government Accountability of any privatization contract.