BILL REQ. #:  H-2345.1 

READ FIRST TIME 03/07/05.   

     AN ACT Relating to requiring state agencies to contract for services in a manner consistent with the state's best interests; amending RCW 39.29.008, 41.06.142, 43.19.1911, and 43.19.1932; adding new sections to chapter 39.29 RCW; adding new sections to chapter 28B.10 RCW; adding new sections to chapter 39.04 RCW; adding new sections to chapter 47.28 RCW; adding a new section to chapter 41.06 RCW; adding a new section to chapter 43.19 RCW; creating new sections; repealing RCW 43.19.700; providing an effective date; and declaring an emergency.

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

NEW SECTION.  Sec. 1   LEGISLATIVE INTENT. It is essential that the legislature and state agencies spend tax dollars in a manner that is both responsible and consistent with the best interests of the state and the nation. The legislature and state agencies should, therefore, consider indirect benefits that may be achieved when entering into state contracts for goods and services. Such benefits include, but are not limited to, job creation, capital investment, and economic stimulus. Additionally, such benefits include greater protection of privacy interests, less risk of disclosure of personal information, and avoidance of undue risk.

NEW SECTION.  Sec. 101   A new section is added to chapter 39.29 RCW to read as follows:
     BEST INTERESTS. For purposes of sections 102, 103, and 108 of this act, and RCW 39.29.008, 41.06.142, 43.19.1911, and 43.19.1932, the governor or the governor's designee, in consultation with representatives of state agency management and labor, shall develop and implement procurement policies and procedures necessary to determine whether state contracts for goods and services, and any subcontracts awarded under such contracts, are in the best interests of Washington state, its residents, and its economy. These procurement policies and procedures shall require state agencies to consider the following when making decisions to enter into contracts:
     (1) Whether the provision of goods or services to this state from a location outside of this state or the United States would be detrimental to Washington, its residents, or its economy;
     (2) Whether the acquisition of goods or services from an expatriated business entity located in a tax haven country or an affiliate of an expatriated business entity located in a tax haven country would be detrimental to Washington, its residents, or its economy. As used in this subsection:
     (a) "Expatriated business entity" means a corporation or an affiliate of the corporation incorporated in a tax haven country after September 11, 2001, but with the United States as the principal market for the public trading of the corporation's stock, as determined by the director of the office of financial management;
     (b) "Tax haven country" means a country that has no corporate income tax or an effective tax rate less than ten percent on income that does not arise in or is not derived from that country. Tax haven countries include, but are not limited to, Barbados, Bermuda, British Virgin Islands, Cayman Islands, Commonwealth of the Bahamas, Cyprus, Gibraltar, Isle of Man, the Principality of Liechtenstein, the Principality of Monaco, and the Republic of the Seychelles;
     (3) Whether the provision of goods or services to this state from a location outside of this state or the United States would be detrimental to the privacy interests of Washington residents, or risk the disclosure of personal information of Washington residents, such as social security, financial, or medical data; and
     (4) Whether the provision of goods or services to this state from a location outside of this state or the United States would constitute undue risk under Washington's risk management policies, practices, or procedures.

NEW SECTION.  Sec. 102   A new section is added to chapter 28B.10 RCW to read as follows:
     HIGHER EDUCATION. (1) Except as provided in subsection (2) of this section, contracts for goods and services entered into by the state under this chapter, and any subcontracts awarded under such contracts, must be in the state's best interests, as specified in section 101 of this act.
     (2) Subsection (1) of this section does not apply to any contract entered into under faculty research and study abroad programs authorized by a higher education institution where an opportunity to consider whether the contract is in the state's best interest does not exist and the amount of the contract is less than fifty thousand dollars.

NEW SECTION.  Sec. 103   A new section is added to chapter 39.04 RCW to read as follows:
     PUBLIC WORKS. Public works contracts entered into by the state under this chapter, and any subcontracts awarded under such contracts, must be in the state's best interests, as specified in section 101 of this act.

Sec. 104   RCW 39.29.008 and 1993 c 433 s 6 are each amended to read as follows:
     PERSONAL SERVICES. (1) Personal services may be procured only to resolve a particular agency problem or issue or to expedite a specific project that is temporary in nature. An agency may procure personal services only if it documents that:
     (((1))) (a) The service is critical to agency responsibilities or operations, or is mandated or authorized by the legislature;
     (((2))) (b) Sufficient staffing or expertise is not available within the agency to perform the service; and
     (((3))) (c) Other qualified public resources are not available to perform the service.
     (2) Personal services contracts entered into by the state under this chapter, and any subcontracts awarded under such contracts, must be in the state's best interests, as specified in section 101 of this act.

Sec. 105   RCW 41.06.142 and 2002 c 354 s 208 are each amended to read as follows:
     CIVIL SERVICE. (1) Any department, agency, or institution of higher education 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 department, agency, or institution of higher education has determined that the contract, and any subcontracts awarded under such contract, are in the state's best interests, as specified in section 101 of this act;
     (b) The invitation for bid or request for proposal contains measurable standards for the performance of the contract;
     (((b))) (c) 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))) (d) 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))) (e) The department, agency, or institution of higher education 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))) (f) The department, agency, or institution of higher education has determined that the contract results in savings or efficiency improvements. The contracting agency must consider the consequences and potential mitigation of improper or failed performance by the contractor.
     (2) Any provision contrary to or in conflict with this section in any collective bargaining agreement in effect on July 1, 2005, is not effective beyond the expiration date of the agreement.
     (3) Contracting for services that is expressly mandated by the legislature or was authorized by law prior to July 1, 2005, including contracts and agreements between public entities, shall not be subject to the processes set forth in subsections (1) and (4) through (6) of this section.
     (4) Competitive contracting shall be implemented as follows:
     (a) At least ninety days prior to the date the contracting agency requests bids from private entities for a contract for services provided by classified employees, the contracting agency shall notify the classified employees whose positions or work would be displaced by the contract. The employees shall have sixty days from the date of notification to offer alternatives to purchasing services by contract, and the agency shall consider the alternatives before requesting bids.
     (b) If the employees decide to compete for the contract, they shall notify the contracting agency 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 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. Such rules shall 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 no bidder receives an advantage over other bidders and that bid requirements are applied equitably to all parties; and (iii) procedures that require the contracting agency to receive complaints regarding the bidding process and to consider them before awarding the contract. Appeal of an agency'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.
     (e) 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 shall 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.
     (f) A department, agency, or institution of higher education 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 agency 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 a department, agency, or institution of higher education 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, 2007, on the results of the audit.

Sec. 106   RCW 43.19.1911 and 2003 c 136 s 6 are each amended to read as follows:
     GOODS AND PURCHASED SERVICES. (1) Preservation of the integrity of the competitive bid system dictates that after competitive bids have been opened, award must be made to that responsible bidder who submitted the lowest responsive bid pursuant to subsections (7) and (9) of this section, unless there is a compelling reason to reject all bids and cancel the solicitation.
     (2) Every effort shall be made to anticipate changes in a requirement before the date of opening and to provide reasonable notice to all prospective bidders of any resulting modification or cancellation. If, in the opinion of the purchasing agency, division, or department head, it is not possible to provide reasonable notice, the published date for receipt of bids may be postponed and all known bidders notified. This will permit bidders to change their bids and prevent unnecessary exposure of bid prices. In addition, every effort shall be made to include realistic, achievable requirements in a solicitation.
     (3) After the opening of bids, a solicitation may not be canceled and resolicited solely because of an increase in requirements for the items being acquired. Award may be made on the initial solicitation and an increase in requirements may be treated as a new acquisition.
     (4) A solicitation may be canceled and all bids rejected before award but after bid opening only when, consistent with subsection (1) of this section, the purchasing agency, division, or department head determines in writing that:
     (a) Unavailable, inadequate, ambiguous specifications, terms, conditions, or requirements were cited in the solicitation;
     (b) Specifications, terms, conditions, or requirements have been revised;
     (c) The supplies or services being contracted for are no longer required;
     (d) The solicitation did not provide for consideration of all factors of cost to the agency;
     (e) Bids received indicate that the needs of the agency can be satisfied by a less expensive article differing from that for which the bids were invited;
     (f) All otherwise acceptable bids received are at unreasonable prices or only one bid is received and the agency cannot determine the reasonableness of the bid price;
     (g) No responsive bid has been received from a responsible bidder; or
     (h) The bid process was not fair or equitable.
     (5) The agency, division, or department head may not delegate his or her authority under this section.
     (6) After the opening of bids, an agency may not reject all bids and enter into direct negotiations to complete the planned acquisition. However, the agency can enter into negotiations exclusively with the lowest responsible bidder in order to determine if the lowest responsible bid may be improved. Until December 31, 2007, for purchases requiring a formal bid process the agency shall also enter into negotiations with and may consider for award the lowest responsible bidder that is a vendor in good standing, as defined in RCW 43.19.525. An agency shall not use this negotiation opportunity to permit a bidder to change a nonresponsive bid into a responsive bid.
     (7) In determining the lowest responsible bidder, the agency shall consider any preferences provided by law to Washington products and vendors and to RCW 43.19.704, and further, may take into consideration the quality of the articles proposed to be supplied, their conformity with specifications, the purposes for which required, and the times of delivery.
     (8) Each bid with the name of the bidder shall be entered of record and each record, with the successful bid indicated, shall, after letting of the contract, be open to public inspection.
     (9) In determining "lowest responsible bidder", in addition to price, the following elements shall be given consideration:
     (a) Whether the contract, and any subcontracts awarded under such contract, are in the state's best interests, as specified in section 101 of this act;
     (b) The ability, capacity, and skill of the bidder to perform the contract or provide the service required;
     (((b))) (c) The character, integrity, reputation, judgment, experience, and efficiency of the bidder;
     (((c))) (d) Whether the bidder can perform the contract within the time specified;
     (((d))) (e) The quality of performance of previous contracts or services;
     (((e))) (f) The previous and existing compliance by the bidder with laws relating to the contract or services;
     (((f))) (g) Such other information as may be secured having a bearing on the decision to award the contract: PROVIDED, That in considering bids for purchase, manufacture, or lease, and in determining the "lowest responsible bidder," whenever there is reason to believe that applying the "life cycle costing" technique to bid evaluation would result in lowest total cost to the state, first consideration shall be given by state purchasing activities to the bid with the lowest life cycle cost which complies with specifications. "Life cycle cost" means the total cost of an item to the state over its estimated useful life, including costs of selection, acquisition, operation, maintenance, and where applicable, disposal, as far as these costs can reasonably be determined, minus the salvage value at the end of its estimated useful life. The "estimated useful life" of an item means the estimated time from the date of acquisition to the date of replacement or disposal, determined in any reasonable manner. Nothing in this section shall prohibit any state agency, department, board, commission, committee, or other state-level entity from allowing for preferential purchase of products made from recycled materials or products that may be recycled or reused.

Sec. 107   RCW 43.19.1932 and 1989 c 185 s 2 are each amended to read as follows:
     CORRECTIONS. (1) Except as provided in subsection (2) of this section, the department of corrections shall be exempt from the following provisions of this chapter in respect to goods or services purchased or sold pursuant to the operation of correctional industries: RCW 43.19.180, 43.19.190, 43.19.1901, 43.19.1905, 43.19.1906, 43.19.1908, 43.19.1911, 43.19.1913, 43.19.1915, 43.19.1917, 43.19.1919, 43.19.1921, 43.19.1925, and 43.19.200.
     (2) Contracts for goods and services entered into by the state under this chapter, and any subcontracts awarded under such contracts, must be in the state's best interests, as specified in section 101 of this act.

NEW SECTION.  Sec. 108   A new section is added to chapter 47.28 RCW to read as follows:
     TRANSPORTATION. Contracts for goods and services entered into by the state under this chapter, and any subcontracts awarded under such contracts, must be in the state's best interests, as specified in section 101 of this act.

NEW SECTION.  Sec. 109   A new section is added to chapter 39.29 RCW to read as follows:
     (1) The requirement in sections 102, 103, and 108 of this act, and RCW 39.29.008, 41.06.142, 43.19.1911, and 43.19.1932, that goods and services under certain contracts, and subcontracts under such contracts, be in the state's best interests does not apply to:
     (a) Goods and services under such contracts if the director of the office of financial management determines that the only practicable source of the goods or services is clearly and justifiably located outside the United States. This exception to the requirement may apply, by way of illustration and not as a limitation, to goods or services related to the establishment and operation of foreign offices created for the purpose of promoting overseas trade and commerce;
     (b) Goods and services under a contract entered into under faculty research and study abroad programs authorized by a higher education institution where an opportunity to consider whether the contract is in the state's best interest does not exist and the amount of the contract is less than fifty thousand dollars; and
     (c) Goods and services related to the marketing of Washington state agricultural commodities under contracts entered into by foreign trade officers or consultants on behalf of the Washington state department of agriculture.
     (2) By September 1st of each year, the director of the office of financial management shall provide the house of representatives commerce and labor committee and the senate labor, commerce, research and development committee, or their successor committees, with a list of contracts entered into in the previous fiscal year for which he or she determined that the only practicable source of the goods or services was clearly and justifiably located outside the United States.

NEW SECTION.  Sec. 201   A new section is added to chapter 39.29 RCW to read as follows:
     PRICE PREFERENCES. (1) The governor or the governor's designee, in consultation with representatives of state agency management and labor, shall develop and implement procurement policies and procedures necessary to give Washington businesses a price preference when determining the lowest responsible bidder on civil service contracts and contracts for public works, personal services, purchased services, information services, highway design and construction, and materials, supplies, and equipment.
     (2) These procurement policies and procedures shall:
     (a) Establish a process for determining whether a business is a Washington business;
     (b) Establish a process for giving a Washington business a price preference of five percent;
     (c) Specify that the price paid for goods or services provided by a Washington business will be the price offered for the goods and services and not the price as adjusted pursuant to (b) of this subsection; and
     (d) Be consistent with rules designed to provide for some reciprocity in bidding between Washington and other states adopted pursuant to RCW 43.19.704.
     (3) For purposes of this section, "Washington business" means:
     (a) A business whose principal place of business is located in Washington;
     (b) A business that pays a majority of its payroll, in dollar volume, to residents of Washington;
     (c) A business that employs Washington residents as a majority of its employees;
     (d) A business that makes significant capital investments in Washington;
     (e) A business that has a substantial positive economic impact on Washington; or
     (f) An employee business unit as defined in RCW 41.06.142.

NEW SECTION.  Sec. 202   A new section is added to chapter 28B.10 RCW to read as follows:
     HIGHER EDUCATION. Contracts for goods and services that are entered into by the state under this chapter and that are subject to competitive bidding requirements must be awarded in a manner consistent with section 201 of this act.

NEW SECTION.  Sec. 203   A new section is added to chapter 39.04 RCW to read as follows:
     PUBLIC WORKS. Public works contracts that are entered into by the state under this chapter and that are subject to competitive bidding requirements must be awarded in a manner consistent with section 201 of this act.

NEW SECTION.  Sec. 204   A new section is added to chapter 39.29 RCW to read as follows:
     PERSONAL SERVICES. Personal services contracts that are entered into by the state under this chapter and that are subject to competitive bidding requirements must be awarded in a manner consistent with section 201 of this act.

NEW SECTION.  Sec. 205   A new section is added to chapter 41.06 RCW to read as follows:
     CIVIL SERVICE. Contracts under RCW 41.06.142 must be awarded in a manner consistent with section 201 of this act.

NEW SECTION.  Sec. 206   A new section is added to chapter 43.19 RCW to read as follows:
     GOODS AND PURCHASED SERVICES. Contracts for goods and services that are entered into by the state under this chapter and that are subject to competitive bidding requirements must be awarded in a manner consistent with section 201 of this act.

NEW SECTION.  Sec. 207   A new section is added to chapter 47.28 RCW to read as follows:
     TRANSPORTATION. Contracts for goods and services that are entered into by the state under this chapter and that are subject to competitive bidding requirements must be awarded in a manner consistent with section 201 of this act.

NEW SECTION.  Sec. 301   RCW 43.19.700 (In-state preference clauses -- Finding -- Intent) and 1983 c 183 s 1 are each repealed.

NEW SECTION.  Sec. 302   PART HEADINGS, CAPTIONS NOT LAW. Part headings and captions used in this act are not any part of the law.

NEW SECTION.  Sec. 303   APPLICABILITY. This act does not apply to contracts entered into before July 1, 2005.

NEW SECTION.  Sec. 304   If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION.  Sec. 305   If any part of this act is found to be in conflict with federal requirements that are a prescribed condition to the allocation of federal funds to the state, the conflicting part of this act is inoperative solely to the extent of the conflict and with respect to the agencies directly affected, and this finding does not affect the operation of the remainder of this act in its application to the agencies concerned. Rules adopted under this act must meet federal requirements that are a necessary condition to the receipt of federal funds by the state.

NEW SECTION.  Sec. 306   This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect immediately, except for section 105 of this act, which takes effect July 1, 2005.