S-1954

AN ACT Relating to managed competition within the department of transportation; adding a new section to chapter 41.06 RCW; and creating new sections.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The legislature finds that managed competition has been used in a number of cities around the country as a method to unleash creative ideas from the work force and has potentially led to improvements and greater efficiencies. Managed competition has been most successful in localities where the work force is able to engage in full-scope collective bargaining. A process of managed competition, therefore, should maintain a level playing field between the public and private sectors and should ensure that any competitive comparisons include comparable wages, medical, pension, and any other benefits enjoyed by the respective private or public sector workers.

NEW SECTION. Sec. 2. A new section is added to chapter 41.06 RCW to read as follows:

(1) The department of transportation may purchase services, including services that have been customarily and historically provided by employees in the classified service under this chapter, by contracting with individuals, nonprofit organizations, businesses, employee business units, or other entities if the following criteria are met:

(a) The invitation for bid or request for proposal contains measurable standards for the performance of the contract;

(b) Employees in the classified service whose positions or work would be displaced by the contract are provided an opportunity to offer alternatives to purchasing services by contract and, if these alternatives are not accepted, compete for the contract under competitive contracting procedures in subsection (4) of this section;

(c) The contract with an entity other than an employee business unit includes a provision requiring the entity to consider employment of state employees who may be displaced by the contract;

(d) The department has established a contract monitoring process to measure contract performance, costs, service delivery quality, and other contract standards, and to cancel contracts that do not meet those standards; and

(e) The department has demonstrated that the contract results in savings or efficiency improvements. The department must consider the consequences and potential mitigation of improper or failed performance by the contractor.

(2) A provision contrary to or in conflict with this section in a collective bargaining agreement in effect on the effective date of this act is not effective beyond the expiration date of the agreement.

(3) Contracting for services that was authorized by law before the effective date of this act is not subject to the processes set forth in subsections (1) and (4) through (6) of this section.

(4) Competitive contracting must be implemented as follows:

(a) At least ninety days before the date the department requests bids from private entities for a contract for services provided by classified employees, the department shall notify the classified employees whose positions or work would be displaced by the contract. The employees will have sixty days from the date of notification to offer alternatives to purchasing services by contract, and the department shall consider the alternatives before requesting bids.

(b) If the employees decide to compete for the contract, they shall notify the department of their decision. Employees must form one or more employee business units for the purpose of submitting a bid or bids to perform the services.

(c) The director of personnel, with the advice and assistance of the department of general administration, shall develop and make available to employee business units training in the bidding process and general bid preparation.

(d) The implementation process must also be based upon inclusion of the following minimum bid items: (i) Current certified prevailing wages established by the department of labor and industries for the classification of work to be performed under the proposed contract; (ii) an overhead factor of not less than sixty-six percent of the base prevailing wage rates; and (iii) equipment charges that reflect the current fair market value rate.

(e) The director of general administration, with the advice and assistance of the department of personnel, shall, by rule, establish procedures to ensure that bids are submitted and evaluated in a fair and objective manner and that there exists a competitive market for the service. The rules must include, but not be limited to: (i) Prohibitions against participation in the bid evaluation process by employees who prepared the business unit's bid or who perform any of the services to be contracted; (ii) provisions to ensure that no bidder receives an advantage over other bidders and that bid requirements are applied equitably to all parties; and (iii) procedures that require the department to receive complaints regarding the bidding process and to consider them before awarding the contract. Appeal of the department's actions under this subsection is an adjudicative proceeding and subject to the applicable provisions of chapter 34.05 RCW, the Administrative Procedure Act, with the final decision to be rendered by an administrative law judge assigned under chapter 34.12 RCW.

(f) An employee business unit's bid must include the fully allocated costs of the service, including the cost of the employees' salaries and benefits, space, equipment, materials, and other costs necessary to perform the function. An employee business unit's cost may not include the state's indirect overhead costs unless those costs can be attributed directly to the function in question and would not exist if that function were not performed in state service.

(g) The department of transportation may contract with the department of general administration to conduct the bidding process.

(5) As used in this section:

(a) "Employee business unit" means a group of employees who perform services to be contracted under this section and who submit a bid for the performance of those services under subsection (4) of this section.

(b) "Indirect overhead costs" means the pro rata share of existing department administrative salaries and benefits, and rent, equipment costs, utilities, and materials associated with those administrative functions.

(c) "Competitive contracting" means the process by which classified employees of the department of transportation compete with businesses, individuals, nonprofit organizations, or other entities for contracts authorized by subsection (1) of this section.

(6) The joint legislative audit and review committee shall conduct a performance audit of the implementation of this section, including the adequacy of the appeals process in subsection (4)(d) of this section, and report to the legislature by January 1, 2005, on the results of the audit.

NEW SECTION. Sec. 3. Since managed competition is a relatively new, untested concept at the state level, it is the intent of the legislature that managed competition for transportation operations and maintenance functions will occur contingent upon civil service reform legislation becoming law.