Issues

Summaries of Current Laws in 21 States

Competitive Bidding

While all 21 states require competitive bidding involving more than one contractor, some have elaborated by specifically including comparisons of contractor performance histories and protections against questionable influences on the process. Generally, there are exceptions to the competitive bidding process for emergency services that contracting agencies are unable to perform in an economical and timely manner.

Connecticut

Agencies are required to find the "lowest responsible bidder," which is the "lowest of those bidders possessing the skill, ability and integrity necessary for faithful performance of the work based on the objective criteria considering past performance and financial responsibility." Conn. Gen. Stat. Sec. 4a-59.

Maryland

The Procurement Advisory Council was established to monitor the implementation of state procurement code to prevent fraud, waste, and abuse while fostering competition. The Council also ensures that the State’s procurement system utilizes the most advanced procurement methods. Md. State Finance and Procurement Code Ann. Sec 12-102.

New York

A governor’s executive order authorizes the appointment of a Procurement Integrity Officer for each state agency to monitor and deter improper lobbying influence on public contracts, including service contracts. 9 NYCRR Sec. 4.189.

Contracts on File

The Freedom of Information Act (FOIA) establishes a presumption that records in the possession of public agencies are accessible to the general public. While all contracts entered into by public agencies are public once executed, one state requires that all information pertaining to the debarment of a contractor remain in the public record for a specific amount of time following the end of the debarment period.

Minnesota

The Department of Administration maintains in the public record all information relating to a debarment for at least three years following the end of a debarment period. Contractors can be debarred for committing criminal offenses and performing unsatisfactory work. Minn. R. 1230.1150.

Affirmative Action Protection

Several states recognize that contracting out can harm its affirmative action efforts.

California

The state requires that contracts not adversely affect its affirmative action program. West’s Ann. Cal. Gov. Code Sec. 19130.

Illinois

Every party to a public contract must refrain from discrimination and comply with regulations concerning equal employment opportunities and affirmative action. 44 Ill. Adm. Code 1.2570.

Maryland

Service contract provisions may not adversely affect affirmative action efforts of the state. Md. State Personnel and Pensions Code Ann. Sec. 13-404.

General Cost Comparison

Many states requiring cost comparisons include in the calculation, other related costs in addition to just the contractor bid and the in-house cost of service delivery.

California

Costs should include all overhead costs incurred by the state for the inspection, supervision and monitoring of a contractor’s performance. In addition, any economic advantage can be outweighed by the public’s interest in having the function performed by state employees. West’s Ann. Cal. Gov. Code Sec. 19130.

Connecticut

The state auditor must verify whether the contract serves the best interest of the state in terms of efficiency, economy, and contractor qualifications. Conn. Gen. Stat. Sec. 4d-31.

Maryland

Costs should include direct costs, fringe benefits, indirect overhead costs, including the proportional share of existing administrative salaries and benefits, rent, equipment costs, utilities, and materials. Also, transition costs, including unemployment compensation and costs of performance by state employees in support of the contract, should also be included. Md. State Personnel and Pensions Code Ann. Sec. 13-405.

Massachusetts

Costs must include those related to agency monitoring and management of the contract, transition costs related to moving the operation from private to public, unemployment and retirement benefits paid to displaced public employees, and compensation for any state income tax lost for work performed outside the state. M.G.L.A. 7 Sec. 54.

Vermont

For privatization contracts, costs must include those related to the displacement of employees, such as unemployment and continued health insurance benefits and newly incurred costs for facilities, inspections and supervision. Sec. 2. 3 VSA Chapter 14.

Specific Savings Requirement

Some states require a minimum level of cost savings before services can be contracted out.

California

The savings for the contracting agency when compared to in-house operation should be substantial enough to be sustained through any private sector or state cost fluctuations that could normally be expected during the contracting period. This savings should also "clearly" justify the size and duration of the contracting agreement. West’s Ann. Cal. Gov. Code Sec. 19130.

Maryland

Service contracts are required to provide the state with a 20% or $200,000 savings (whichever is less) over the life of the contract. Md. State Personnel and Pensions Code Ann. Sec. 13-405.

Michigan

Personal Service contracts can be granted if it can be shown the contract yields a "substantial savings" over the life of the contract when compared with having the same services performed by the classified work force. Savings requirements vary according to the size of contract. For example, smaller contracts valued at $25,000 or less require annual savings of 25% over in-house performance, while larger contracts at $500,000 to $1 million require a minimum annual savings of $50,000. Michigan Department of Civil Service Rules, Chapter 7-3(d).

Vermont

Privatization contracts (contracts valued at $20,000 or more per year and require the loss of at least one classified state employee) must provide savings of 10% over the life of the contract. Sec. 2. 3 VSA Chapter 14.

Labor Standards

Some states require contractors to compensate their personnel using prevailing wage and benefit standards similar to public employees.

California

Contractor wages must be "at the industry level and [must] not significantly undercut state pay rates." West’s Ann. Cal. Gov. Code Sec. 19130.

Illinois

Contractor employees must be paid prevailing wages and benefits and work under "conditions prevalent in the location where the work is to be performed." This applies to contracting in the areas of public works, printing, janitorial services, window washing and security guard services. 44 Ill. Adm. Code 1.2560.

Massachusetts

Contractors are required to provide their employees wages and benefits comparable to those paid to state employees performing similar services. The wages and benefits must be included in the bid and must be reported to the contracting agency on a quarterly basis. M.G.L.A. 7 Sec. 54.

Rhode Island

"The rates of wages to be paid the various classes of service employees in the performance of the contract or any subcontract thereunder shall be based upon the prevailing rates for employment in the state." R.I. Gen. Laws Sec. 36-16.1-1.

Washington

Prevailing rates must be paid on public works and public building service maintenance contracts. Rev. Code Wash. (ARCW) Sec. 39.12.020.

Displaced Employee Assistance and Safeguards

Some states require contractors to provide assistance to public employees displaced as a result of contracting out. Other states go further by prohibiting certain contracts that would displace existing state employees.

California

Civil service employees cannot be laid off, demoted, transferred involuntarily, transferred to a new class or new location involuntarily, or have their work hours reduced, as a result of a personal service contract. West’s Ann. Cal. Gov. Code Sec. 19130.

Connecticut

State employees displaced as a result of an information or telecommunications contract, must be hired by the contractor, unless placed in another state job. If the contractor’s benefits are less than the benefits provided to state employees, the state will compensate for the difference or provide benefits for two years. Conn. Gen. Stat. Sec. 4d-31 to 4d-48.

Florida

The Department of Children and Family Services requires contractors to give "priority consideration" to laid off employees. Also, contracting agencies are required to establish a reemployment assistance task force. FSA Sec. 414.37.

Maryland

The contracting agency must provide a plan of assistance that includes efforts to place affected employees in other state jobs, and requires contractors to hire displaced employees, if feasible. In addition, affected employees must be notified before the contract is signed or 6 months before they would be adversely affected, whichever is earlier. Md. State Personnel and Pensions Code Ann. Sec. 13-405.

Minnesota

For service contracts, the commissioner must determine that no current state employee is able and available to perform the service. Minn. Stat. Sec. 16C.09.

Disqualify Contractors with Criminal Records

Certain states disqualify contractors with a history of violating the law.

Hawaii

The Hawaii Procurement Code gives the chief procurement officer, in consultation with the contracting agency and attorney general, the authority to "debar," or disallow, certain contractors from bidding on public contracts for up to 3 years if it is shown that the contractor has violated business related laws. HRS Sec. 103D-702.

Massachusetts

Contractors can have "no adjudicated record of substantial or repeated willful noncompliance with any relevant federal or state regulatory statute." M.G.L.A. 7 Sec. 54.

Minnesota

Contractors may be disqualified or "debarred" from bidding if it is shown that they have a past criminal record related to contracting or other business related offenses. The period for this debarment can last from one to three years depending on the severity of the offense. Minn. R. 1230.1150.

Disqualify Contractors with Records of Poor Performance

Some states prohibit the participation of, or at least tag, contractors that have poorly performed public service contracts in the past.

Connecticut

No contract may be awarded to a business or individual that failed to perform or breached a public contract within the last 5 years. Conn. Gen. Stat. Sec. 4d-31 to 4d-48.

Hawaii

The chief procurement officer may disqualify contractors that have provided unsatisfactory work in the past. HRS Sec. 103D-702.

Iowa

In contract procurement for the Department of Elder Affairs, "consideration shall be given to such matters as contractor integrity, record of past performance, financial and technical resources, or accessibility to other necessary resources." 321 IAC 5.14(231).

Minnesota

Contractors may be disqualified or "debarred" from bidding if it is shown that they have performed poorly on past contracts. The period of the debarment can last from one to three years depending on severity of the problems related to the contractor’s performance. Minn. R. 1230.1150.

Wisconsin

Contractors that have performed contracts poorly may be reported to the Department of Administration so that future contracts are not awarded to those contractors whose past performance was found to be unsatisfactory. Wis. Stat. Sec 16.705 (1999).

Regular Reporting by Contracting Agency

Many states are required to report the number, size and amount of contracts on a regular basis.

Florida

For contracts involving child support services, a quality assurance program must be established, that includes regular and annual reporting. This program must be funded through savings generated from contracting out. FSA 409.25575.

Minnesota

For service contracts, the contracting agency is required to develop and implement a written plan providing for personnel to monitor the contractor’s performance, periodically review interim reports by the contractor, and evaluate the effectiveness of the service provided. Minn. Stat. Sec. 3.225.

Wisconsin

The Department of Administration shall, "annually submit to the governor, the joint committee on finance, the joint legislative audit committee and the chief clerk of each house of the legislature for distribution to the appropriate standing committees, a report on the number, value and nature of contractual service procurements authorized for each agency during the preceding fiscal year." Wis. Stat. Sec. 16.705 (1999).

Contract Term Limits

Certain states limit the duration of contracts. However, it is unclear from the various statutes, whether competitive bidding or a meaningful evaluation of the contractor’s performance is required to renew a contract.

Minnesota

For service contracts, the combined duration including amendments cannot exceed 5 years, "unless otherwise provided for by law." The term of the original contract cannot exceed two years unless the commissioner determines that a longer duration is in the best interest of the state. Minn. Stat. Sec. 16C.08.

Vermont

Personal Service contracts for projects requiring special professional experience, such as architectural and engineering services, are limited to 2 years. Contracts for services that are "urgent, temporary or occasional," such that the hiring and training of state employees would render obtaining the services imprudent, are limited to 90 days. Sec. 2. 3 VSA Chapter 14.

Assessment of Economic Impact on Community

Some states require an analysis of the impact contracting would have on the local economy.

Massachusetts

The required cost comparison includes the loss of state income tax revenue for work related to the contract that is performed outside the state. M.G.L.A. 7 Sec. 54.

Minnesota

A cost-benefit analysis must be performed for any work which involves a contract or contracts which in aggregate equal an amount greater than $5,000,000. The purpose of the analysis is to determine whether the services contracted are a "positive benefit to the public." Minn. Stat. 16C.065.

Notice to Unions

California

Any state agency proposing to contract out must give notice to the State Personnel Board and to all employee organizations that represent employees performing the work. West’s Ann. Cal. Gov. Code Sec. 19131.

Vermont

State agencies must provide the collective bargaining agent written notice of any intent to contract out, at least 35 days prior to the start of the bidding process. Sec. 2.3 VSA Chapter 14.

Other Requirements

Illinois

Corrections privatization is prohibited. The State is prohibited from contracting out the management or operation of its correctional facilities. 730 ILCS 140.

Maryland

State policy is against contracting out

"The policy of this State is to use state employees to perform all state functions in state-operated facilities in preference to contracting with the private sector to perform those functions." Md. State Personnel and Pensions Code Ann. Sec. 13-402.

Massachusetts

Labor unions permitted to bid on contracts

Labor unions are permitted to bid on contracts and must be provided with resources to assist in bid preparation. M.G.L.A.7 Sec. 54.

Minnesota

Must advertise in-house before contracting out

Before an agency may seek approval of a professional or technical services contract valued at more than $25,000, it must certify to the commissioner that it has publicized the contract by posting notice at appropriate worksites within agencies. The agency must also certify that it has made reasonable efforts to determine that no state employee or agency could have performed the work. Minn. Stat. Sec. 16C.07.

New Jersey

Cost overruns are assumed by contractor

Contracts in water supply and wastewater require cost overruns to be assumed by the contractor. These cost overruns may be due to underestimation, unforeseen circumstances, changes in operating procedures or technical failure of the facilities. N.J.S.A. 58:26-15.

Wisconsin

State must show service cannot be performed in-house

Contracting agencies must provide written "justification" that shows among other things that state workers are being properly utilized and there must be an evaluation of the "feasibility of using limited term appointments," before outsourcing the service. Wis. Stat. Sec. 16.705.

 

Compiled August 2000.

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