BILL REQ. #:  H-0348.3 

Read first time 01/16/13.   Referred to Committee on Government Operations & Elections.

     AN ACT Relating to providing accountability to procurement policy; amending RCW 39.26.020, 39.26.050, 39.26.080, 39.26.090, 39.26.125, 39.26.140, and 43.19.011; and reenacting and amending RCW 39.26.010.

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

Sec. 1   RCW 39.26.010 and 2012 c 224 s 2 are each reenacted and amended to read as follows:
     The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Agency" means any state office or activity of the executive and judicial branches of state government, including state agencies, departments, offices, divisions, boards, commissions, institutions of higher education as defined in RCW 28B.10.016, and correctional and other types of institutions.
     (2) "Bid" means an offer, proposal, or quote for goods or services in response to a solicitation issued for such goods or services by the department or an agency of Washington state government.
     (3) "Bidder" means an individual or entity who submits a bid, quotation, or proposal in response to a solicitation issued for such goods or services by the department or an agency of Washington state government.
     (4) "Businesses owned and operated by persons with disabilities" means any for-profit business certified under chapter 39.19 RCW as being owned and controlled by persons who have been either:
     (a) Determined by the department of social and health services to have a developmental disability, as defined in RCW 71A.10.020;
     (b) Determined by an agency established under Title I of the federal vocational rehabilitation act to be or have been eligible for vocational rehabilitation services;
     (c) Determined by the federal social security administration to be or have been eligible for either social security disability insurance or supplemental security income; or
     (d) Determined by the United States department of veterans affairs to be or have been eligible for vocational rehabilitation services due to service-connected disabilities, under 38 U.S.C. Sec. 3100 et seq.
     (5) "Client services" means services provided directly to agency clients including, but not limited to, medical and dental services, employment and training programs, residential care, and subsidized housing.
     (6) "Community rehabilitation program of the department of social and health services" means any entity that:
     (a) Is registered as a nonprofit corporation with the secretary of state; and
     (b) Is recognized by the department of social and health services, division of vocational rehabilitation as eligible to do business as a community rehabilitation program.
     (7) "Competitive solicitation" means a documented formal process providing an equal and open opportunity to bidders and culminating in a selection based on predetermined criteria.
     (8) "Contractor" means an individual or entity awarded a contract with an agency to perform a service or provide goods.
     (9) "Debar" means to prohibit a contractor, individual, or other entity from submitting a bid, having a bid considered, or entering into a state contract during a specified period of time as set forth in a debarment order.
     (10) "Department" means the department of enterprise services.
     (11) "Director" means the director of the department of enterprise services.
     (12) "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.
     (13) "Goods" means products, materials, supplies, or equipment provided by a contractor.
     (14) "In-state business" means a business that has its principal office located in Washington.
     (15) "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.
     (16) "Master contracts" means a contract for specific goods or services, or both, that is solicited and established by the department in accordance with procurement laws and rules on behalf of and for general use by agencies as specified by the department.
     (17) "Microbusiness" means any business entity, including a sole proprietorship, corporation, partnership, or other legal entity, that: (a) Is owned and operated independently from all other businesses; and (b) has a gross revenue of less than one million dollars annually as reported on its federal tax return or on its return filed with the department of revenue.
     (18) "Minibusiness" means any business entity, including a sole proprietorship, corporation, partnership, or other legal entity, that: (a) Is owned and operated independently from all other businesses; and (b) has a gross revenue of less than three million dollars, but one million dollars or more annually as reported on its federal tax return or on its return filed with the department of revenue.
     (19) "Public agency" means any agency, political subdivision, or unit of local government of this state including, but not limited to, municipal corporations, quasi-municipal corporations, special purpose districts, and local service districts; any agency of the state government; any agency of the United States; and any Indian tribe recognized by the federal government.
     (20) "Purchase" means the acquisition of goods or services, including the leasing or renting of goods.
     (((20))) (21) "Services" means labor, work, analysis, or similar activities provided by a contractor to accomplish a specific scope of work.
     (((21))) (22) "Small business" means an in-state business, including a sole proprietorship, corporation, partnership, or other legal entity, that:
     (a) Certifies, under penalty of perjury, that it is owned and operated independently from all other businesses and has either:
     (i) Fifty or fewer employees; or
     (ii) A gross revenue of less than seven million dollars annually as reported on its federal income tax return or its return filed with the department of revenue over the previous three consecutive years; or
     (b) Is certified with the office of women and minority business enterprises under chapter 39.19 RCW.
     (((22))) (23) "Sole source" means a contractor providing goods or services of such a unique nature or sole availability at the location required that the contractor is clearly and justifiably the only practicable source to provide the goods or services.
     (((23))) (24) "Washington grown" has the definition in RCW 15.64.060.

Sec. 2   RCW 39.26.020 and 2012 c 224 s 3 are each amended to read as follows:
     (1)(a) A state officer or employee of an agency who seeks to acquire goods or services or who participates in those contractual matters is subject to the requirements in RCW 42.52.150.
     (b) A contractor who contracts with an agency to perform services related to the acquisition of goods and services for or on behalf of the state is subject to the requirements in RCW 42.52.150.
     (2) No person or entity who seeks or may seek a contract with a state agency may give, loan, transfer, or deliver to any person something of economic value for which receipt of such item would cause a state officer or employee to be in a violation of RCW 42.52.040, 42.52.110, 42.52.120, 42.52.140, or 42.52.150.
     (3) State policy is that existing procurement contracts must not be terminated early so that a public agency may use a state master contract or state sole source contract under this chapter unless sufficient savings and efficiencies are expected to outweigh the costs and risks associated with early termination.

Sec. 3   RCW 39.26.050 and 2012 c 224 s 6 are each amended to read as follows:
     (1) In addition to the powers and duties provided in chapter 43.19 RCW, the department shall make available goods and services to support state agencies, and may enter into agreements with any other local or federal governmental agency or entity or a public benefit nonprofit organization, in compliance with RCW 39.34.055, and any tribes located in the state, to furnish such products and services as deemed appropriate by both parties.
     (2) The department shall ensure full cost recovery from state agencies, other local or federal governmental agency or entity, public benefit nonprofit organizations, or any tribes located in the state, for activities performed pursuant to subsection (1) of this section. Cost recovery must ensure that the department is reimbursed its full cost for providing the goods and services furnished as determined by the department. Cost recovery may be collected through the state agency, other governmental entity, nonprofit organization, or through the contractor.
     (3) All governmental entities of this state may enter into agreements under this section with the department, unless otherwise prohibited.
     (4) Any public agency choosing to make purchases pursuant to a contract issued under this section may not terminate an existing contract with a different business early in order to use the new contract unless savings or efficiencies clearly demonstrate that the taxpayers will receive a benefit under the new contract.

Sec. 4   RCW 39.26.080 and 2012 c 224 s 9 are each amended to read as follows:
     (1) The director is responsible for the development and oversight of policy for the procurement of goods and services by all state agencies under this chapter. When establishing policies, standards, and procedures, the director shall 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. The policies, standards, and procedures should discourage public agencies from terminating existing contracts in order to use a state sole source contract, a state goods and services contract, or a state master contract unless the public agency can clearly demonstrate expected savings and efficiencies that outweigh the cost and risk of early termination.
     (2) The director is authorized to adopt rules, policies, and guidelines governing the procurement, contracting, and contract management of any and all goods and services procured by state agencies under this chapter.
     (3) The director or designee is the sole authority to enter into master contracts on behalf of the state. The governor has the authority to terminate any state contract in accordance with state law, federal law, or contractual provisions.

Sec. 5   RCW 39.26.090 and 2012 c 224 s 10 are each amended to read as follows:
     The director shall:
     (1) Establish overall state policies, standards, and procedures regarding the procurement of goods and services by all state agencies;
     (2) Develop policies and standards for the use of credit cards or similar methods to make purchases;
     (3) Establish procurement processes for information technology goods and services, using technology standards and policies established by the office of the chief information officer under chapter 43.41A RCW;
     (4) Enter into contracts or delegate the authority to enter into contracts on behalf of the state to facilitate the purchase, lease, rent, or otherwise acquire all goods and services and equipment needed for the support, maintenance, and use of all state agencies, except as provided in RCW 39.26.100;
     (5) Have authority to delegate to agencies authorization to purchase goods and services. The authorization must specify restrictions as to dollar amount or to specific types of goods and services, based on a risk assessment process developed by the department. Acceptance of the purchasing authorization by an agency does not relieve the agency from conformance with this chapter or from policies established by the director. Also, the director may not delegate to a state agency the authorization to purchase goods and services if the agency is not in substantial compliance with overall procurement policies as established by the director;
     (6) Develop procurement policies and procedures, such as unbundled contracting and subcontracting, that encourage and facilitate the purchase of goods and services from Washington small businesses, microbusinesses, and minibusinesses, and minority and women-owned businesses to the maximum extent practicable and consistent with international trade agreement commitments;
     (7) Develop and implement an enterprise system for electronic procurement;
     (8) Provide for a commodity classification system and provide for the adoption of goods and services commodity standards;
     (9) Establish overall state policy for compliance by all agencies regarding:
     (a) Food procurement procedures and materials that encourage and facilitate the purchase of Washington grown food by state agencies and institutions to the maximum extent practicable and consistent with international trade agreement commitments; and
     (b) Policies requiring all food contracts to include a plan to maximize to the extent practicable and consistent with international trade agreement commitments the availability of Washington grown food purchased through the contract;
     (10) Develop guidelines and criteria for the purchase of vehicles, high gas mileage vehicles, and alternate vehicle fuels and systems, equipment, and materials, that reduce overall energy-related costs and energy use by the state, including investigations into all opportunities to aggregate the purchasing of clean technologies by state and local governments, and including the requirement that new passenger vehicles purchased by the state meet the minimum standards for passenger automobile fuel economy established by the United States secretary of transportation pursuant to the energy policy and conservation act (15 U.S.C. Sec. 2002); ((and))
     (11) Develop and enact rules to implement the provisions of this chapter;
     (12) Limit contracts for services and goods to terms no more than three years with all potential extensions not to exceed ten years; and
     (13) Develop a process whereby the department uses price quotes from local businesses to determine current prices and labor rates prior to granting contractual increases. Findings must be posted publicly ten days prior to the department authorizing any contractual increase. Only with the governor's approval may a contract be increased in amounts exceeding the estimated real gross domestic product growth rate for the year as forecast by the Washington state economic and revenue forecast council.

Sec. 6   RCW 39.26.125 and 2012 c 224 s 14 are each amended to read as follows:
     All contracts must be entered into pursuant to competitive solicitation, except for:
     (1) Emergency contracts;
     (2) ((Sole source contracts that comply with the provisions of RCW 39.26.140;
     (3))) Direct buy purchases, as designated by the director. The director shall establish policies to define criteria for direct buy purchases. These criteria may be adjusted to accommodate special market conditions and to promote market diversity for the benefit of the citizens of the state of Washington;
     (((4))) (3) Purchases involving special facilities, services, or market conditions, in which instances of direct negotiation is in the best interest of the state;
     (((5))) (4) Purchases from master contracts established by the department or an agency authorized by the department;
     (((6))) (5) Client services contracts;
     (((7))) (6) Other specific contracts or classes or groups of contracts exempted from the competitive solicitation process when the director determines that a competitive solicitation process is not appropriate or cost-effective;
     (((8))) (7) Off-contract purchases of Washington grown food when such food is not available from Washington sources through an existing contract. However, Washington grown food purchased under this subsection must be of an equivalent or better quality than similar food available through the contract and must be able to be paid from the agency's existing budget. This requirement also applies to purchases and contracts for purchases executed by state agencies, including institutions of higher education as defined in RCW 28B.10.016, under delegated authority granted in accordance with this chapter or under RCW 28B.10.029;
     (((9))) (8) Contracts awarded to companies that furnish a service where the tariff is established by the utilities and transportation commission or other public entity;
     (((10))) (9) Intergovernmental agreements awarded to any governmental entity, whether federal, state, or local and any department, division, or subdivision thereof;
     (((11))) (10) Contracts for services that are necessary to the conduct of collaborative research if the use of a specific contractor is mandated by the funding source as a condition of granting funds;
     (((12))) (11) Contracts for architectural and engineering services as defined in RCW 39.80.020, which shall be entered into under chapter 39.80 RCW;
     (((13))) (12) Contracts for the employment of expert witnesses for the purposes of litigation; and
     (((14))) (13) Contracts for bank supervision authorized under RCW 30.38.040.

Sec. 7   RCW 39.26.140 and 2012 c 224 s 16 are each amended to read as follows:
     (1) Agencies must submit sole source contracts to the department and make the contracts available for public inspection not less than ten working days before the proposed starting date of the contract. Agencies must provide documented justification for sole source contracts to the department when the contract is submitted, and must include evidence that the agency posted the contract opportunity at a minimum on the state's enterprise vendor registration and bid notification system.
     (2) The department must approve sole source contracts before any such contract becomes binding and before any services may be performed or goods provided under the contract. These requirements shall also apply to all sole source contracts except as otherwise exempted by the director.
     (3) The director may provide an agency an exemption from the requirements of this section for a contract or contracts. Requests for exemptions must be submitted to the director in writing.
     (4) Contracts awarded by institutions of higher education from nonstate funds are exempt from the requirements of this section.
     (5) Sole source contracts for goods and services may not have a contractual term of more than three years with all potential extensions not to exceed ten years.
     (6) Any public agency choosing to make purchases pursuant to a contract issued under this section may not terminate an existing contract with a different business early in order to use the new contract unless savings or efficiencies clearly demonstrate that the taxpayers will receive a benefit under the new contract.

Sec. 8   RCW 43.19.011 and 2011 1st sp.s. c 43 s 201 are each amended to read as follows:
     (1) The director of enterprise services shall supervise and administer the activities of the department of enterprise services and shall advise the governor and the legislature with respect to matters under the jurisdiction of the department.
     (2) In addition to other powers and duties granted to the director, the director shall have the following powers and duties:
     (a) Enter into contracts on behalf of the state to carry out the purposes of this chapter;
     (b) Accept and expend gifts and grants that are related to the purposes of this chapter, whether such grants be of federal or other funds;
     (c) Appoint deputy and assistant directors and such other special assistants as may be needed to administer the department. These employees are exempt from the provisions of chapter 41.06 RCW;
     (d) Adopt rules in accordance with chapter 34.05 RCW and perform all other functions necessary and proper to carry out the purposes of this chapter;
     (e) Delegate powers, duties, and functions as the director deems necessary for efficient administration, but the director shall be responsible for the official acts of the officers and employees of the department;
     (f) Apply for grants from public and private entities, and receive and administer any grant funding received for the purpose and intent of this chapter; ((and))
     (g) Adopt policies, contractual provisions, or guidance to prevent early termination of existing contracts by public agencies choosing to use state contracts; and
     (h) Perform other duties as are necessary and consistent with law.
     (3) The director may establish additional advisory groups as may be necessary to carry out the purposes of this chapter.