SENATE BILL REPORT

2SHB 2452

This analysis was prepared by non-partisan legislative staff for the use of legislative members in their deliberations. This analysis is not a part of the legislation nor does it constitute a statement of legislative intent.

As Reported by Senate Committee On:

Government Operations, Tribal Relations & Elections, February 21, 2012

Title: An act relating to centralizing the authority and responsibility for the development, process, and oversight of state procurement of goods and services.

Brief Description: Centralizing the authority and responsibility for the development, process, and oversight of state procurement of goods and services.

Sponsors: House Committee on Ways & Means (originally sponsored by Representatives Wylie, Alexander, Kenney, Haigh, Hunt, Hudgins, Harris, McCoy, Ryu, Hasegawa, Springer, Billig, Maxwell, Upthegrove and Ormsby; by request of Department of Enterprise Services).

Brief History: Passed House: 2/11/12, 55-40.

Committee Activity: Government Operations, Tribal Relations & Elections: 2/21/12 [DP].

SENATE COMMITTEE ON GOVERNMENT OPERATIONS, TRIBAL RELATIONS & ELECTIONS

Majority Report: Do pass.

Signed by Senators Pridemore, Chair; Swecker, Ranking Minority Member; Chase, Nelson and Roach.

Staff: Karen Epps (786-7424)

Background: The Department of Enterprise Services (DES) provides a variety of support services to state agencies, other governmental entities, and nonprofits.  DES is an executive branch agency, and the Director (Director) is appointed by the Governor and is subject to confirmation by the Senate.  DES combines services from the former departments of General Administration (GA) and Printing, and sections of the former departments of Personnel and Information Services (DIS). Several divisions from the Office of Financial Management (OFM) are also part of the new agency. The procurement lead groups from the departments of GA, DIS and OFM have been consolidated into DES.

ESSB 5931, from the 2011 session, directed DES to review current state procurement practices, not including public works, and provide a report to the Governor with procurement reform recommendations by December 31, 2011. In doing so, DES was directed to review national best practices and the procedures used in other states and by the federal government. Additionally, DES was directed to seek input from stakeholders and interested parties. The recommendations from DES include:

Summary of Bill: The Director is responsible for the development and oversight of policy for the procurement of goods and services by all state agencies, including standards for the use of credit cards; purchase of goods and services from Washington small businesses, microbusinesses, and minibusinesses, and minority and women-owned businesses; food procurement and food contracts; criteria for vehicle purchases; procurement processes for information technology goods and services; and implementation of an enterprise system for electronic procurement. The Director must adopt rules, policies, and guidelines governing procurement.

The Director has the sole authority to enter into master contracts on behalf of the state. The Director also has the authority to delegate authorization to purchase goods and services to agencies. Such authorization must specify restrictions as to dollar amount or specific types of goods and services, based on a risk assessment process. Delegation does not exempt the agency from conformance to the policies established by the Director. The Director may make goods and services available to support state agencies and may enter into agreements with local governments, the federal government, public benefit nonprofit organizations, or tribes to furnish goods and services. DES must ensure full cost recovery from state agencies, local governments, the federal government, public benefit nonprofit organizations, or tribes when furnishing goods and services. DES may participate in cooperative purchasing, including joint or multiparty contracts, master contracts, or convenience contracts.

DES must adopt uniform policies and procedures for the effective and efficient management of contracts by all state agencies. When establishing overall policies, standards, and procedures, the Director must account for differentiation in procurement practices and needs among state agencies and strive to establish policies, standards, and procedures that promote greater efficiency in procurement. At a minimum, the policies and procedures must include:

Agencies may not enter into a contract under which the contractor could charge additional costs for access to data generated under the contract. A contractor must provide access to data generated under the contract to the agency, the Joint Legislative and Audit Review Committee, and the State Auditor. Agencies that work with a board, commission, council, or committee must not enter into contracts with the volunteer members as a means to reimburse or otherwise pay members of a board, commission, council, or committee, except when payment is specifically authorized by statute.

DES must establish a sweat-free procurement policy and code of conduct. Every agency purchasing apparel, garments, or similar types of materials must require the contractor to certify that none of the materials were produced by sweatshop labor. The contract may not be awarded until the certification has been received by the agency.

All contracts for purchases of goods and services must continue to be based on a competitive solicitation process, which may include electronic or web-based solicitations, bids, and signatures. Exemptions from competitive solicitation, including emergency contracts, sole source contracts, and direct buy purchases, are continued. The competitive solicitation process also applies to contract amendments that substantially change the scope of work or the original contract or that substantially increase the value of the original contract. Additional exemptions from the competitive solicitation process are allowed, including:

Agencies must submit sole source contracts to DES and make the contracts available for public inspection not less than ten days before the proposed starting date of the contract. DES must approve sole source contracts before the contract becomes binding and before services may be performed. Agencies may be given an exemption from these requirements by the Director. Contracts by higher education institutions using federal funds are also exempt.

Once a bid has been accepted, an agency may require the successful bidder to submit a bond to the agency in an amount and with surety or sureties determined by the agency. Bidders who regularly do business with the state must be permitted to file an annual bid bond in an amount established by the agency. An annual bid bond must be acceptable as surety in lieu of furnishing surety with individual bids. Agencies may also require performance bonds, protest bonds, or other bonds deemed necessary.

Agencies with procurement authority must develop clear and transparent complaint and protest processes. A complaint process allows for the complaint to be submitted and a response provided before the deadline for bid submissions. A protest process must include a protest period after the apparent successful bidder is announced but before the contract is signed. The Director may grant authority for an agency to sign a contract before the protest process is completed under exigent circumstances.

The Director has the authority to debar any contractor based on one or more of the following causes:

A decision to debar must be issued by the Director in writing, must state the reasons for the action taken, and must inform the debarred contractor of the right to a judicial or administrative review.

DES must provide expertise and training on best practices for state procurement. Training or certification programs, or both, must be established, and state agency employees responsible for procurement must complete the training or certification programs beginning July 1, 2013. DES may approve existing training or certification programs at state agencies. Additionally, DES must work with agencies with existing training programs when establishing programs or approving existing programs to ensure coordination and minimize additional costs associated with training requirements. By July 1, 2015, no agency employee may execute or manage contracts unless the training and certification requirements have been met. DES may exempt an employee or a group of employees from the training or certification requirement.

The ethics laws relating to limitations on gifts that apply to all state officers and employees also apply to a contractor who provides goods and services for, or on behalf of, the state. Any person or entity who seeks or may seek a contract with a state agency may not give, loan, transfer, or deliver to any person something of economic value that would cause a state officer or employee to be in violation of ethics laws pertaining to assisting in transactions, compensation for official duties or nonperformance, compensation for outside duties, gifts, or limitation on gifts.

Records related to state procurements are public records subject to disclosure under the Public Records Act. Agencies must provide on an annual basis a list of all contracts that the agency has entered into or renewed. DES must maintain a list of all contracts entered into by agencies.

Appropriation: None.

Fiscal Note: Available.

Committee/Commission/Task Force Created: No.

Effective Date: The bill takes effect on January 1, 2013.

Staff Summary of Public Testimony: PRO: This is a good government bill that consolidates procurement statutes, streamlines the process, and makes the state agency procurement more transparent. It also makes the procurement process more competitive. This bill will improve state agency procurement and contracting. By consolidating the numerous and disparate authorities into one and eliminating unnecessary distinctions, this bill will improve the way the Health Care Authority does its business. This bill goes a long way into moving state purchasing into the era of e-commerce by providing for such things as electronic bid submission and e-signatures. This bill provides flexibility for state agencies. This bill provides the potential to save millions of dollars and goes a long way to provide accountability and transparency into the contracting system. This bill has a recognition of the importance of the small business community. This bill continues the policies that are in place to support small business in state procurement. Combining purchasing departments will aid all businesses in the state, but especially small businesses. Open competition and transparency for all contracts for goods and services will help both sides of the contract by making the process more transparent and fair. More transparent pricing will save the state money. Provisions for purchasing Washington State products from small businesses allows state dollars to be reinvested locally.

OTHER: In 2003 GA started administering the sign language interpreter contracts, but because of lack of experience, they sought help from the Office of the Deaf and Hard of Hearing. There is a need for a change in Section 10 to replace sensory impaired with deaf, hard of hearing and deaf-blind as they are the only people with disabilities using sign language interpreters. Another exemption should be added providing that the authority to purchase auxiliary aids and services on behalf of deaf, hard or hearing, and deaf-blind applicants and recipients of state services rests with the Department of Social and Health Services. There needs to be more permission for other agencies to provide sign language interpreters for the deaf. The Office of the Deaf and Hard of Hearing has the expertise in what the industry practices are, prevailing rates, and all related knowledge about accommodations and can best write the contracts for deaf, deaf-blind, and hard of hearing.

Persons Testifying: PRO: Tim Gugerty, Ro Marcus, DES; Brian Jensen, Health Care Authority; Frank Lemos, Office of Minority and Women Business Enterprises Ad Hoc Committee; Alia Griffing, WA Federation of State Employees; Jim King, Independent Business Assn.

OTHER: G. Leon Curtis, citizen.