BILL REQ. #: H-4085.1
State of Washington | 63rd Legislature | 2014 Regular Session |
READ FIRST TIME 02/05/14.
AN ACT Relating to protecting taxpayers by providing for accountability and transparency in government contracting; amending RCW 39.26.180, 43.19.008, 39.26.200, and 39.26.020; adding a new section to chapter 39.26 RCW; adding a new section to chapter 44.28 RCW; and creating new sections.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
NEW SECTION. Sec. 1 The legislature finds that contracting
government services out to private, for-profit businesses can raise
serious concerns about loss of accountability to taxpayers. Without
proper safeguards, when administrative discretion is delegated to
private contractors, taxpayers may lose control over how tax dollars
are spent. It is the intent of the legislature to increase
transparency and accountability of public contracts by requiring better
evaluation of contract performance. Such evaluation should include an
assessment of whether decisions to "contract out" government services
to the private sector are achieving their stated objectives, in terms
of cost-effectiveness, and an analysis of the extent to which such
decisions are having unintended economic and social impacts. In
addition, it is the intent of the legislature to ensure that public
contractors given access to state resources are held to ethical
standards consistent with public values.
NEW SECTION. Sec. 2 A new section is added to chapter 39.26 RCW
to read as follows:
(1) Prior to issuing a request for a proposal to contract out to
purchase from a private sector entity or nonprofit organization
services that have been customarily and historically provided by a
public employee or employees, an agency must conduct a comprehensive
impact assessment. To assist the agency in determining whether the
decision to contract out is justified, the comprehensive impact
assessment must include at a minimum the following analysis:
(a) An estimate of the cost of performance of the service by public
employees;
(b) An estimate of the cost of performance of the services if
contracted out, including the cost of allocating sufficient public
employee staff time and resources to monitor the contract and ensure
its proper performance by the contractor;
(c) A statement of the performance objectives to be achieved by
contracting with a private sector or nonprofit entity; and
(d) An assessment of the potential adverse impacts on the public
from outsourcing the contract, such as loss of employment, effect on
social services and public assistance programs, economic impacts on
local businesses and local tax revenues, and environmental impacts.
(2) An agency must prepare a written record of the basis of the
decision to contract out a service that has been customarily and
historically provided by public employees, which must include the
comprehensive impact assessment required under subsection (1) of this
section, as well as an itemization of performance standards contained
in the contract.
(a) Upon entering an agreement to contract out for a service that
has been customarily and historically provided by public employees, the
agency must provide the written record of the basis of the agency's
decision to the department.
(b) The agency must maintain the written record in the agency's
files for five years or the term of the contract, whichever is longer.
(c) Every five years or upon completion of the contract, whichever
comes first, the agency must prepare and file with the department a
report, which must include at a minimum the following information:
(i) Documentation of the contractor's performance as measured by
the itemized performance standards;
(ii) Itemization of any contract extensions or change orders that
resulted in a change in the dollar value or cost of the contract; and
(iii) A report of any remedial actions that were taken to enforce
compliance with the contract, together with an estimate of the cost
incurred by the public in enforcing such compliance.
(3) In addition to any other terms required by law, the terms of
any agreement to contract out a service that has been customarily and
historically provided by public employees must include the following:
(a) A cancellation clause allowing the state agency to cancel a
contract if the contractor fails to meet quality standards or budget
specifications;
(b) Terms ensuring periodic review of performance of the contract;
(c) Terms requiring the contractor to compensate the agency for
public sector employees' hours expended in achieving full performance
of a contract that has failed inspection, that the contractor has
failed to complete on schedule, or that has not been completed in a
manner that is consistent with quality standards;
(d) A term requiring the contractor to make available to the agency
the following information at the start of the contract's term and
updated each fiscal year:
(i) The name and license number, if applicable, of the contractor
and all subcontractors; and
(ii) A list of individuals or entities performing the services
under the contract, reflected as full-time equivalent positions,
including the hourly wage rate for each position, and the status of the
individual as an employee, subcontractor, independent contractor, or
consultant; and
(e) A waiver of confidentiality of, and agreement to provide to the
agency upon request, basic financial information related to the
contract, other than financial, commercial, or proprietary information
specifically exempted from disclosure to the public under RCW
42.56.270.
Sec. 3 RCW 39.26.180 and 2012 c 224 s 20 are each amended to read
as follows:
(1) The department must adopt uniform policies and procedures for
the effective and efficient management of contracts by all state
agencies. The policies and procedures must, at a minimum, include:
(a) Precontract procedures for selecting potential contractors
based on their qualifications and ability to perform, including
procedures to ensure compliance with chapter 39.19 RCW, providing for
participation of minority and women-owned businesses;
(b) Model complaint and protest procedures;
(c) Alternative dispute resolution processes;
(d) Incorporation of performance measures and measurable benchmarks
in contracts;
(e) Model contract terms to ensure contract performance and
compliance with state and federal standards, including terms to
facilitate recovery of the costs of public employee staff time that
must be expended to bring a contract into substantial compliance;
(f) Executing contracts using electronic signatures;
(g) Criteria for contract amendments;
(h) Postcontract procedures;
(i) Procedures and criteria for terminating contracts for cause or
otherwise, including procedures and criteria for terminating
performance-based contracts that are not achieving performance
standards; and
(j) Any other subject related to effective and efficient contract
management.
(2) An agency may not enter into a contract under which the
contractor could charge additional costs to the agency, the department,
the joint legislative audit and review committee, or the state auditor
for access to data generated under the contract. A contractor under
such a contract must provide access to data generated under the
contract to the contracting agency, the joint legislative audit and
review committee, and the state auditor.
(3) An agency may enter into a contract to purchase services that
have been customarily and historically provided by public employees
only upon complying with the procedures of section 2 of this act, RCW
41.06.142, and any other requirements established by law.
(4) To the extent practicable, agencies should enter into
performance-based contracts. Performance-based contracts identify
expected deliverables and performance measures or outcomes.
Performance-based contracts also use appropriate techniques, which may
include but are not limited to, either consequences or incentives or
both to ensure that agreed upon value to the state is received.
Payment for goods and services under performance-based contracts should
be contingent on the contractor achieving performance outcomes.
Agencies must monitor performance-based contracts to ensure that all
aspects of the contract are being properly performed and that
performance standards are being achieved.
(((4))) (5) An agency and contractor may execute a contract using
electronic signatures.
(((5))) (6) As used in subsection (2) of this section, "data"
includes all information that supports the findings, conclusions, and
recommendations of the contractor's reports, including computer models
and the methodology for those models.
Sec. 4 RCW 43.19.008 and 2011 1st sp.s. c 43 s 104 are each
amended to read as follows:
(1) The executive powers and management of the department shall be
administered as described in this section.
(2) The executive head and appointing authority of the department
is the director. The director is appointed by the governor, subject to
confirmation by the senate. The director serves at the pleasure of the
governor. The director is paid a salary fixed by the governor in
accordance with RCW 43.03.040. If a vacancy occurs in the position of
director while the senate is not in session, the governor shall make a
temporary appointment until the next meeting of the senate at which
time he or she shall present to that body his or her nomination for the
position.
(3) The director may employ staff members, who are exempt from
chapter 41.06 RCW, and any additional staff members as are necessary to
administer this chapter, and such other duties as may be authorized by
law. The director may delegate any power or duty vested in him or her
by chapter 43, Laws of 2011 1st sp. sess. or other law, including
authority to make final decisions and enter final orders in hearings
conducted under chapter 34.05 RCW.
(4) The internal affairs of the department are under the control of
the director in order that the director may manage the department in a
flexible and intelligent manner as dictated by changing contemporary
circumstances. Unless specifically limited by law, the director has
complete charge and supervisory powers over the department. The
director may create the administrative structures as the director deems
appropriate, except as otherwise specified by law, and the director may
employ personnel as may be necessary in accordance with chapter 41.06
RCW, except as otherwise provided by law.
(5) Until June 30, 2018, at the beginning of each fiscal biennium,
the office of financial management shall conduct a review of the
programs and services that are performed by the department to determine
whether the program or service may be performed by the private sector
in a more cost-efficient and effective manner than being performed by
the department. In conducting this review, the office of financial
management shall:
(a) Examine the existing activities currently being performed by
the department, including but not limited to an examination of services
for their performance, staffing, capital requirements, and mission.
Programs may be broken down into discrete services or activities or
reviewed as a whole; and
(b) Examine the activities to determine which specific services are
available in the marketplace and what potential for efficiency gains or
savings exist.
(i) As part of the review in this subsection (5), the office of
financial management shall select up to six activities or services that
have been determined as an activity that may be provided by the private
sector in a cost-effective and efficient manner, including for the
2011-2013 fiscal biennium the bulk printing services. The office of
financial management may consult with affected industry stakeholders in
making its decision on which activities to contract for services.
Priority for selection shall be given to agency activities or services
that are significant, ongoing functions.
(ii) The office of financial management must consider the
consequences and potential mitigation of improper or failed performance
by the contractor.
(iii) For each of the selected activities, the department shall use
a request for information, request for proposal, or other procurement
process to determine if a contract for the activity would result in the
activity being provided at a reduced cost and with greater efficiency.
This must include, but is not limited to, consideration of the cost of
the agency staff time and resources that may be required to monitor and
ensure proper performance of the contract by the contractor.
(iv) The request for information, request for proposal, or other
procurement process must contain measurable standards for the
performance of the contract.
(v) If contracting out will afford taxpayers a cost savings of ten
percent or more of the contract value, the department may contract with
one or more vendors to provide the service as a result of the
procurement process.
(vi) If the office of financial management determines via the
procurement process that the activity cannot be provided by the private
sector at a reduced cost of ten percent or more and greater efficiency,
the department of enterprise services may cancel the procurement
without entering into a contract and shall promptly notify the
legislative fiscal committees of such a decision.
(vii) The department of enterprise services, in consultation with
the office of financial management, must establish 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. No contracts may be renewed without
a review of these measures.
(viii) The office of financial management shall prepare a biennial
report summarizing the results of the examination of the agency's
programs and services. In addition to the programs and services
examined and the result of the examination, the report shall provide
information on any procurement process that does not result in a
contract for the services. The biennial report must include updates
reporting any unanticipated costs incurred as a result of contracting
out pursuant to this section and an estimate of staff hours devoted by
employees of the office of financial management and department of
enterprise services in conducting the program review required by this
section. During each regular legislative session held in odd-numbered
years, the legislative fiscal committees shall hold a public hearing on
the report and the department's activities under this section.
(ix) The joint legislative audit and review committee shall conduct
an audit of the implementation of this subsection (5), and report to
the legislature by January 1, 2018, on the results of the audit. The
report must include an analysis and estimate of additional costs or
savings to taxpayers as a result of the contracting out provisions.
This analysis must, at a minimum, include the following:
(A) An estimate of the cost of performance of the selected
activities, if the activities had been performed by public employees;
(B) An estimate of the cost of performance of the contract by the
contractor, including the cost of any change orders or contract
revisions and the costs of allocating sufficient public employee staff
time and resources to monitor the contract and ensure its proper
performance by the contractor;
(C) An analysis of the extent to which performance objectives were
achieved by outsourcing the contract; and
(D) An assessment of potential adverse impacts on the public of
outsourcing the contract.
Sec. 5 RCW 39.26.200 and 2013 2nd sp.s. c 34 s 1 are each amended
to read as follows:
(1)(a) The director shall provide notice to the contractor of the
director's intent to debar with the specific reason for the debarment.
The department must establish the debarment process by rule.
(b) After reasonable notice to the contractor and reasonable
opportunity for that contractor to be heard, the director has the
authority to debar a contractor for cause from consideration for award
of contracts. The debarment must be for a period of not more than
three years.
(2) The director must debar a contractor where there has been a
finding of one or more of the following causes:
(a) Conviction within the previous five years for commission of a
criminal offense as an incident to obtaining or attempting to obtain a
public or private contract or subcontract, or in the performance of
such contract or subcontract;
(b) Conviction or a final determination in a civil action under
state or federal statutes of fraud, embezzlement, theft, forgery,
bribery, falsification or destruction of records, receiving stolen
property, violation of the federal false claims act, 31 U.S.C. Sec.
3729 et seq., or the state medicaid fraud false claims act, chapter
74.66 RCW, tax evasion, or any other offense indicating a lack of
business integrity or business honesty that currently, seriously, and
directly affects responsibility as a state contractor, where such
conviction of final determination occurred within the previous five
years;
(c) Conviction within the previous five years under state or
federal antitrust statutes arising out of the submission of bids or
proposals; and
(d) Two or more violations within the previous five years of the
national labor relations act as determined by the national labor
relations board or court of competent jurisdiction;
(3) The director may debar a contractor based on a finding of one
or more of the following causes:
(a) Conviction for commission of a criminal offense as an incident
to obtaining or attempting to obtain a public or private contract or
subcontract, or in the performance of such contract or subcontract;
(b) Conviction or a final determination in a civil action under
state or federal statutes of fraud, embezzlement, theft, forgery,
bribery, falsification or destruction of records, receiving stolen
property, violation of the federal false claims act, 31 U.S.C. Sec.
3729 et seq., or the state medicaid fraud false claims act, chapter
74.66 RCW, tax evasion, or any other offense indicating a lack of
business integrity or business honesty that currently, seriously, and
directly affects responsibility as a state contractor;
(c) Conviction under state or federal antitrust statutes arising
out of the submission of bids or proposals;
(d) Two or more violations ((within the previous five years)) of
the ((federal)) national labor relations act as determined by the
national labor relations board or court of competent jurisdiction;
(e) Violation of contract provisions, as set forth in this
subsection, of a character that is regarded by the director to be so
serious as to justify debarment action:
(i) Deliberate failure without good cause to perform in accordance
with the specifications or within the time limit provided in the
contract; or
(ii) A recent record of failure to perform or of unsatisfactory
performance in accordance with the terms of one or more contracts,
however the failure to perform or unsatisfactory performance caused by
acts beyond the control of the contractor may not be considered to be
a basis for debarment;
(f) Violation of ethical standards set forth in RCW 39.26.020; and
(g) Any other cause the director determines to be so serious and
compelling as to affect responsibility as a state contractor, including
debarment by another governmental entity for any cause listed in
regulations.
(((3))) (4) The director must issue a written decision to debar.
The decision must:
(a) State the reasons for the action taken; and
(b) Inform the debarred contractor of the contractor's rights to
judicial or administrative review.
Sec. 6 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. A
contractor who has access to public resources due to a contract with an
agency may not use the public resources for private benefit or gain,
except to the extent directly contemplated by and specified in the
performance objectives of the contract.
(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.
NEW SECTION. Sec. 7 A new section is added to chapter 44.28 RCW
to read as follows:
(1) By December 31, 2015, and every two years thereafter, the joint
committee must review the performance of contracts related to two
projects in which services historically and traditionally performed by
public sector employees were outsourced to private sector or nonprofit
entities. The purpose of the performance review is to determine the
extent to which contracting these services out to the private sector
has resulted in the savings, efficiencies, and performance objectives
that were projected at the time that the outsourcing decision was made.
(2) The first two projects reviewed under this section must be the
contract outsourced to the Washington health benefit exchange call
center and the department of licensing's utilization of private driving
schools to administer driver's examinations. Upon request, the
department of enterprise services must provide the joint committee a
list of other contracts relating to services historically and
traditionally performed by public sector employees.
(3) State agencies, including those who are parties to the projects
listed above, the employment security department, and the department of
revenue, must provide to the joint committee any wage, employment, or
other data requested, the disclosure of which is not otherwise
prohibited by law.
NEW SECTION. Sec. 8 This act may be known and cited as the
"taxpayer protection act."