SENATE BILL REPORT

ESSB 5365

BYSenate Committee on Governmental Operations (originally sponsored by Senators Talmadge, Zimmerman, Barr, Gaspard, Owen, Rasmussen, Deccio, Johnson and Nelson; by request of Legislative Budget Committee)

Strengthening the regulation of personal service contracts.

Senate Committee on Governmental Operations

Senate Hearing Date(s):February 11, 1987; February 18, 1987; March 4, 1987

Majority Report:  That Substitute Senate Bill No. 5365 be substituted therefor, and the substitute bill do pass.

      Signed by Senators Halsan, Chairman; Garrett, Vice Chairman; DeJarnatt, Talmadge, Zimmerman.

Senate Staff:Barbara Howard (786-7410); Eugene Green (786-7405)

                  March 12, 1987

AS PASSED SENATE, MARCH 11, 1987

BACKGROUND:

State agencies enter into personal service contracts with consultants for a variety of professional services, including accounting and auditing, administrative analysis, engineering and architecture, training, and research, surveys and appraisals. Competition is not required for the award of most such contracts, but they must be filed with the Office of Financial Management (OFM) and the Legislative Budget Committee (LBC).  A 1986 statute required that all agencies of the executive and judicial branches provide an annual report of all of their personal contracts to OFM and LBC.

A preliminary report on the first three months of the reporting system confirmed several of the findings in the new statute: that definitions in the current law are not sufficiently clear; that many personal service contracts cover activities such as client services which are not traditionally considered consulting; and that new, non-competitive contracts for the period represented expenditures of $6.3 million.

Over the summer, a Governor's Task Force of representatives from 12 agencies examined the issues relating to personal service and made several recommendations for strengthening the process. In reviewing the draft proposals, the Legislative Budget Committee recommended that the legislation be strengthened even further.

SUMMARY:

A new statement of intent declares that the state establish a policy of open competition for all personal service contracts and provide for legislative and executive review of all non- competitive personal service contracts.

Several major changes are made in the definitions. Covered services must be performed by a consultant defined as an individual or firm not subject to the control of the agency except for the result of work under contract. "Personal service" means a specific study, project, task or other work statement, including client services (such as medical and dental services or employment and training programs), but not including purchased services (such routine and continuing services as physical plant operation, security, and routine data processing services such as data entry).

"Competitive solicitation" is a formal documented process providing an equal and open opportunity for qualified parties to be selected on the basis of criteria such as fees or costs, experience and reputation, responsiveness and quality of previous performance.  "Evidence of competition" requires documentation that the agency has solicited response from multiple firms.  "Sole source" is a consultant whose professional or technical expertise or location is so unique that the consultant is justifiably the only practicable source to provide the service.

Sole source contracts must be filed with OFM and LBC and made available for public inspection at least 10 working days before the proposed starting date.  Documented justification for sole source contracts must be provided to OFM and LBC when the contract is filed.  Such contracts must be approved by OFM in consultation with LBC before any contract is binding and before any services may be performed.  If the total amount of sole source contracts between an agency and the same consultant exceeds $10,000 in a 24-month period, the approval requirements apply.

Personal service contracts that establish an employer- employee relationship between the contracting agency and a consultant are prohibited.

All personal service contracts are subject to competitive solicitation except emergency contracts, specific classes of contracts exempted by the Director of OFM in consultation with LBC, or contracts of less than $10,000. Contracts between $2,500 and $10,000 must have documented evidence of competition.  Emergency contracts are filed with OFM and LBC and made available for public inspection within three working days.

Exemptions are also allowed for services where the tariff is established by the Utilities and Transportation Commission, intergovernmental agreements with governmental entities (not public corporations), contracts for a standard fee, and contracts necessary for collaborative research if prior approval is granted by the funding source.

The civil penalty of $300 for any state officer or employee failing to comply with the provisions of the process is continued.  The State Auditor is responsible for investigating violations, and the Attorney General is responsible for prosecution.

Reporting requirements are amended to conform to the new process.  Agencies are required to file their reports of personal service contracts to the Office of Financial Management no later than October 31 for the previous fiscal year.  In turn, OFM prepares and submits an annual report to LBC on or before January 1 each year.  Three obsolete sections are repealed.

Fiscal Note:      available

Effective Date:The bill contains an emergency clause and takes effect immediately.

Senate Committee - Testified: Meredith Jennings, Department of General Administration; Matt Temmel, Legislative Budget Committee; Clyde Slemmer, DOT