SENATE BILL REPORT

SB 5524

BYSenators Halsan, Sellar, Garrett and Rasmussen; by request of Department of General Administration

Strengthening the regulation of personal service contracts.

Senate Committee on Governmental Operations

Senate Hearing Date(s):February 18, 1987

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

AS OF FEBRUARY 17, 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, noncompetitive 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 contracts and made several recommendations for strengthening the process.

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 noncompetitive personal service contracts.

Definitions.  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 as to the result of the 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).  "State agencies" include standing and other committees of the Legislature, as well as legislative officers and employees.

"Competitive solicitation" means 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" means documentation that the agency has solicited response from multiple firms.  "Sole source" means 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.

Exceptions.  All personal service contracts are subject to competitive solicitation except emergency contracts, sole source 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 and sole source contracts are filed with OFM and LBC and made available for public inspection within three working days.

Exemptions for personal service contracts awarded by the advertised competitive bidding process and those which recognize an employer-employee relationship are eliminated.  However, the exemptions are retained 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.

Penalties.  Violation of the competitive procurement process or the filing requirement is punishable by a civil penalty of $300.  The State Auditor is responsible for investigating violations, and the Attorney General is responsible for prosecution.

Miscellaneous provisions.  The provisions requiring reporting 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 declares an emergency and takes effect immediately.