Preproposal statement of inquiry was filed as WSR 03-12-096.
Title of Rule: Chapter 236-51 WAC, Competitive contracting.
Purpose: The Department of General Administration is establishing, by rule, procedures regarding competitive contracting pursuant to RCW 41.06.142.
Statutory Authority for Adoption: RCW 41.06.142 (4)(d) and chapter 43.19 RCW.
Statute Being Implemented: RCW 41.06.142(4).
Summary: The 2002 legislature passed the Personnel Systems Reform Act (PSRA) permitting any department, agency, or institution of higher education to purchase services customarily and historically provided by employees.
Proposed new chapter 236-51 WAC, Competitive contracting, establishes procedures regarding:
(1) Fair and objective submittal and evaluation of bids;
(2) The existence of a competitive market for the service;
(3) The employee business unit as a bid entity;
(4) Complaints regarding the bidding process are considered prior to award;
(5) Appeals to an administrative law judge;
(6) Conflicts of interest in the bid evaluation process; and
(7) Equitable application of bid requirements to all parties.
These rules were developed as a result of an extensive collaborative stakeholder process and research of federal, state, and municipal experiences with competitive contracting.
Name of Agency Personnel Responsible for Drafting: David Gomez, 210 11th Avenue S.W., Room 201, Olympia, WA 98504-1017, (360) 902-7489; Implementation: Bill Joplin, 210 11th Avenue S.W., Room 201, Olympia, WA 98504-1017, (360) 902-7404; and Enforcement: Rob Fukai, 200 General Administration Building, P.O. Box 41000, Olympia, WA 98504-1000, (360) 902-7200.
Name of Proponent: Department of General Administration, governmental.
Rule is not necessitated by federal law, federal or state court decision.
Explanation of Rule, its Purpose, and Anticipated Effects: Explanation: Chapter 236-51 WAC, Competitive contracting outlines the process that agencies, employees, employee business units, bidders, and potential bidders must follow when engaged in competitive contracting. The main sections of the rule cover:
• Purpose and scope.
• Preliminary steps to competitive contracting.
• Employee business units in the bid process.
• Soliciting bids.
• The bidding process.
• The complaint process.
• The award process.
• Appealing an award.
Purpose: Under RCW 41.06.142, agencies may competitively contract for services that state employees have customarily and historically provided. The law directs the Department of General Administration to adopt rules to ensure that the submittal and evaluation of bids are fair and objective, and that there exists a competitive market for the service. The Department of General Administration's objective in writing these rules is to provide clear, simple, fair, and consistent guidance in complying with the law.
Anticipated Effects: These rules will be instrumental in achieving:
• A strategic process that is aligned with similar/complementary processes such as budget and priority of government efforts and supports collective bargaining, personnel systems reform and human resources management system.
• A fair and consistently applied set of rules and processes that are easily understood by all stakeholders.
• A competitive and informed employee and vendor community.
• To encourage process improvements that result in cost savings and efficiencies in government activities.
Proposal does not change existing rules.
No small business economic impact statement has been prepared under chapter 19.85 RCW. The proposed rules impose no new or different requirements on businesses. The proposed rules primarily provide guidance to public agencies and employees in complying with the competitive contracting provisions of the Personnel Systems Reform Act of 2002. To the extent that certain provisions also apply to businesses, they are substantively the same as existing requirements in law and rule that govern purchasing and contracting by the state.
RCW 34.05.328 does not apply to this rule adoption. General administration has not elected to voluntarily apply the provisions of RCW 34.05.328 to this rule making (RCW 34.05.328 (5)(a)(ii)). As provided in RCW 34.05.328 (5)(b)(v), RCW 41.06.142 [(4)](d) explicitly and specifically directs the Department of General Administration to adopt rules and establish procedures to ensure the fair and objective submittal and evaluation of bids, and that there exists a competitive market for the service. The law further directs the rules to include (i) prohibitions against participation in the bid evaluation process by employees who prepared the business unit's bid or who perform any of the services to be contracted; (ii) provisions to ensure that no bidder receives an advantage over other bidders and that bid requirements are applied equitably to all parties; and (iii) procedures that require the contracting agency to receive complaints regarding the bidding process and to consider them before awarding the contract. Further, the law establishes an appeal process subject to the provisions of the Administrative Procedure Act, chapter 34.05 RCW.
Hearing Location: Seattle Monorail Project Community Room, The Securities Building, 4th Avenue Entrance, 1913 4th Avenue, Seattle, on January 8, 2004, 10:00 a.m. to noon; at the Spokane Community College District 17 Lair Student Center, Building 6, Sasquatch Room, Spokane, on Friday, January 9, 2004, 10:00 a.m. to noon; at the General Administration Building Auditorium, 210 11th Avenue, Olympia, on Wednesday, January 14, 2004, noon to 3:00 p.m.; at the General Administration Building Auditorium, 210 11th Avenue, Olympia, on Wednesday, January 14, 2004, 5:30 p.m. to 7:30 p.m.; and at the General Administration Building Auditorium, 210 11th Avenue, Olympia, on Friday, January 16, 2004, 10:00 a.m. to noon.
Assistance for Persons with Disabilities: Contact David Gomez by December 31, 2003, (360) 902-7489, firstname.lastname@example.org.
Submit Written Comments to: Bill Joplin, Assistant Director, Department of General Administration, 210 11th Avenue S.W., P.O. Box 41000, Olympia, WA 98504-1000, fax (360) 586-5898, by February 10, 2004.
Date of Intended Adoption: March 17, 2004.
December 3, 2003
R. D. Fukai
(1) As described in RCW 41.06.142(3) and 41.06.070;
(2) In the case of emergency purchases as provided for in RCW 43.19.200; or
(3) If state employees will not be displaced.
(1) "Agency" means an office, department, board, commission, institution of higher education, or other separate unit or division, however designated, of the state government and all personnel thereof; it includes any unit of state government established by law, the executive officer or members of which are either elected or appointed, upon which the statutes confer powers and impose duties in connection with operations of either a governmental or proprietary nature.
(2) "Appeal" means both a request for an adjudicative proceeding or the actual adjudicative proceeding presided over by an administrative law judge from the office of administrative hearings in accordance with chapter 34.05 RCW.
(3) "Award" means to grant a contract to a successful bidder or bidders, which occurs on the date as specified in the award notice.
(4) "Bid" means a written offer to perform services by contract in response to a solicitation.
(5) "Bidder" means a party who submits a bid or proposal for consideration by an agency issuing a solicitation.
(6) "Competitive contracting" means the process by which classified employees compete with businesses, individuals, nonprofit organizations, or other entities for the performance of services those employees have customarily and historically performed.
(7) "Complainant" means bidder or potential bidder who files a complaint about the bidding process to the agency head or designee on allowable grounds.
(8) "Conflict of interest" means having a personal or financial interest that is in conflict with the proper discharge of state duties, including the transaction of state business with an entity or individual in which a state employee has an interest.
(9) "Date of award" means the date on which the agency and the successful bidder sign the contract.
(10) "Displaced employee" means a classified employee whose position or work would be eliminated as a result of an award via the competitive contracting process.
(11) "Efficiency improvement" means the enhanced value and/or quality that an agency achieves as a result of a change to a service or the ways a service is provided. This enhancement may come at a higher cost but its relative value offsets it. Such improvements may include, but are not limited to:
(a) Reduced preparation or process time;
(b) Greater accessibility or availability of service; or
(c) Improved data quality and timeliness.
(12) "Employee business unit" means a group of employees who perform services for which an agency proposes to competitively contract and who:
(a) Notify the agency of their intent to submit a bid for the performance of those services through competitive contracting; or
(b) Receive award of a contract from the agency as a result of being the successful bidder.
(13) "Employee business unit leader" means a member of the employee business unit chosen and granted authority by the other employee business unit members to represent the interests of the employee business unit in the bid process.
(14) "Employee notice" means the notice the agency is required to provide in RCW 41.06.142 (4)(a), "At least ninety days prior to the date the contracting agency requests bids from private entities for a contract for services provided by classified employees, the contracting agency shall notify the classified employees whose positions or work would be displaced by the contract."
(15) "Fully allocated costs" means those costs associated with a service, including the cost of employees' salaries and benefits, space, equipment, materials, and other costs necessary to perform the service but does not include the state or agency's indirect overhead costs unless those costs can be attributed directly to the function in question and would not exist if that function were not performed by the state.
(16) "In writing" means written communication from one party to another including, but not limited to, electronic means.
(17) "Indirect costs" means state or agency costs linked to services which may not be assigned directly. Indirect costs include various administrative and support activities provided to a service by other units from within the agency or by other state government entities. These indirect costs are generally assigned to a service through cost allocation methods.
(18) "Notice of intent to award" means a written preannouncement of the apparent awardee(s) and the expected date of award.
(19) "Performance work statement" means a statement of the technical, functional and performance characteristics or requirements of the work to be performed. The statement identifies essential functions to be performed, determines performance factors, including the location of the work, the units of work, the quantity of work units, and the quality and timeliness of the work units.
(20) "Potential bidder" means a business, individual, nonprofit organization, employee business unit, or other entity capable of providing the services being considered for competitive contracting.
(21) "Quality assurance plan" means a plan by which an agency will monitor a contract awardee's performance to ensure that the standards of the performance work statement are met within the costs, quality of service, delivery, and other standards of the contract.
(22) "Resource plan" means a detailed written plan created by employees or the employee business unit and submitted to the agency for approval for the use of state resources, including funds, facilities, tools, property, employees and their time needed for:
(a) Employees to work independently or outside an agency resourced effort to prepare an alternative within the sixty-day window, as described in RCW 41.06.142 (4)(a); or
(b) The employee business unit to prepare its bid.
(23) "Responsible bidder" means a bidder who has the capability in all respects to perform in full the contract requirements and meet the elements of responsibility defined in RCW 43.19.1911(9).
(24) "Sealed bid" means a bid that is submitted in a manner to prevent its contents from being revealed or known before the deadline for submission of all bids.
(25) "Solicitation" means the process of notifying potential bidders that the agency desires to receive competitive bids or proposals for furnishing services. This includes references to the actual document used in that process, such as the bid or request for proposal and any amendments to such documents.
(26) "State employee" or "employee" mean an employee in the classified service subject to the provisions of chapter 41.06 RCW.
PRELIMINARY STEPS TO COMPETITIVE CONTRACTING
(2) For the purposes of this chapter, a competitive market exists when there are two or more separate businesses, individuals, nonprofit organizations, or other entities capable of providing the services being considered for competitive contracting.
(3) Agencies shall not consider an employee business unit as an entity capable of providing the service when determining the existence of a competitive market for that service.
(1) A statement that the agency will pursue competitive contracting of specified services;
(2) The agency's determination that a competitive market exists;
(3) The date that the agency intends to solicit bids;
(4) A statement that employees whose position or work will be displaced have sixty days from the date of notification to offer alternatives to competitive contracting as described in RCW 41.06.142 (4)(a) and an agency contact for submitting alternatives;
(5) The amount and type of state resources allocated by the agency to assist employees in developing alternatives within the time frame described in subsection (4) of this section; and
(6) A statement that employees whose positions or work will be displaced may compete in competitive contracting as one or more employee business units.
EMPLOYEE BUSINESS UNITS IN THE BID PROCESS
(1) A list of those employees forming the employee business unit;
(2) The employee business unit leader(s); and
(3) A resource plan outlining the employee business unit's requirement for use of state resources needed to prepare the employee business unit's bid.
The agency shall not consider a bid from an employee business unit if:
(a) The employee business unit notifies the agency after the agency has issued the solicitation; or
(b) The employee business unit did not provide the agency with the required information.
(2) An employee business unit shall not use state resources to prepare their bid prior to receiving the agency's response as provided in subsection (1) of this section.
(1) Direct costs; which are costs that the service consumes or expends and thus are chargeable to the service. These direct costs include, but are not limited to:
(a) Salaries, wages, overtime, and benefits of employees directly performing the service;
(b) Purchased services, supplies and materials;
(c) Space, rents, and leases;
(d) Equipment and depreciation;
(e) One-time, transition, or start-up costs; and
(2) Indirect costs that would be reduced or eliminated if the service currently being provided by employees were instead provided by an outside contractor.
(3) Inflation assumptions.
(1) Authority to contractually obligate the employee business unit;
(2) Receiving and submitting notices (including the notice to the agency of employee business unit formation);
(3) Participating in any presolicitation conference;
(4) Signing solicitation documents and submittals;
(5) Seeking clarifications and amendments of solicitations;
(6) Acknowledging award and conducting negotiations;
(7) Filing complaints;
(8) Filing appeals; and
(9) Committing to a performance agreement or quality assurance plan.
(1) Complete bidder instructions;
(2) Submittal requirements;
(3) Performance work statement;
(4) Cost and noncost evaluation criteria;
(5) Name and address of the person designated to receive complaints and appeals;
(6) Agency's plan for publication and notice of award/intent to award; and
(7) Contract requirements, which shall include, but are not limited to:
(a) Compliance and adherence to a quality assurance plan;
(b) Measurable standards for the performance of the contract;
(c) Methods used to measure contract performance, costs, service delivery quality, and other contract standards;
(d) Terms and conditions;
(e) Provisions requiring an entity other than an employee business unit to consider employment of state employees who may be displaced by the contract;
(f) Cancellation provisions for improper or failed performance;
(g) Complaint process; and
(h) Appeal process.
(2) The total cost of contracting shall not include solicitation related costs such as, but not limited to:
(a) An evaluator's time;
(b) Bid-related expenses; or
(c) The cost of complaints or appeal.
(3) The most responsive employee and nonemployee business unit's bid shall include, but is not limited to:
(a) Bid price. The nonemployee business unit's bid price will include any applicable state tax paid by the agency on the purchase of services;
(b) Required one-time, transition, or start-up costs for implementing the proposal and recognized during the contract in the year those costs would be incurred; and
(c) Inflation assumptions.
(4) An agency shall adjust the bids of the most responsive employee and nonemployee business unit in accordance with the following factors:
(a) The agency's conversion or transition costs relative to each bid;
(b) Contract administration costs incurred by the agency to administer either contract. Contract administration costs may differ depending on the performance monitoring requirements of the agency;
(c) Revenue impact to the state resulting from increased tax base or collections that result from a nonemployee business unit performing the service. Examples include, but are not limited to, state sales and use, business and occupation, inventory, fuel, and real estate tax; provided that a revenue impact does not mean, nor imply, that any added fees or charges for state services may be part of a bid.
(5) Agencies shall consider costs associated with the state's assumed risks in the evaluation of bid costs. If the agency cannot reasonably estimate the state's assumed risk costs, the agency shall structure the solicitation to eliminate these costs from the evaluation process. These costs include, but are not limited to:
(a) Insurance. Agencies shall calculate casualty, liability and property insurance premiums in cost estimates and enter these costs as appropriate for assets and risk coverage.
(b) Performance bonds. When a solicitation requires nonemployee business unit bidders to provide a performance bond, the agency shall exclude the cost from the nonemployee business unit's bid price. The solicitation bid structure should facilitate the elimination of this cost from the nonemployee business unit's bid.
(2) In addition to using methods and systems provided above, agencies may post or otherwise publicize competitive contracting solicitations, amendments, notice of intent to award, notice of award, or notice of cancellation via other methods and/or systems of their choosing.
THE BIDDING PROCESS
(2) The agency shall ensure that bids remain sealed until the opening date and time specified in the solicitation.
(3) The agency shall open all sealed bids at the same time.
(4) Bidders shall submit bids to the agency no later than the opening date and time, and at the place specified, in the solicitation. An agency shall reject any bid received at a place different than, or on a date and time later than, what was specified in the solicitation.
(5) The agency may modify bid submission dates. When modifying the time allowed for submitting a bid, the agency shall issue an amendment as required by WAC 236-51-310 and provide notice consistent with WAC 236-51-320.
(2) Evaluators cannot have a personal or financial interest in the outcome of the award.
(3) Evaluators shall sign declaratory statements certifying that they have no conflicts of interest and assuring confidentiality.
(4) Evaluators shall use only the evaluation criteria stated in the solicitation in evaluating bids.
THE COMPLAINT PROCESS
(1) Complainant's name, address, and telephone number;
(2) Identification of the specific grounds for filing the complaint; and
(3) The relevant facts, arguments, exhibits, and supporting evidence known to the complainant and related to each identified ground.
(1) The manner in which the solicitation was conducted;
(2) Undue constraint of competition by requirements of the solicitation;
(3) Inadequate and/or improper criteria in the solicitation document;
(4) Bias or discrimination; or
(5) Conflict of interest.
THE AWARD PROCESS
(2) Agencies shall notify all bidders of the intent to award consistent with WAC 236-51-320.
(1) Determining if the bid may be improved;
(2) Clarifying elements of the bid that are not sufficiently precise or direct; or
(3) Securing better terms and conditions for the agency.
(2) The award notice shall include the right to appeal, the appeal deadline, and the address for submitting an appeal. See WAC 236-51-700.
(1) The award will not achieve anticipated cost savings or efficiency improvements as required by RCW 41.06.142 (1)(e);
(2) The solicitation did not include all factors for the agency to determine cost savings or efficiency improvements;
(3) No responsive bid has been received from a responsible bidder;
(4) The solicitation and evaluation process was not fair, equitable, and objective; or
(5) There have been changes in business or market conditions that significantly impact the agency's original intent to competitively contract the service.
APPEALING AN AWARD
(1) Unsuccessful bidders with regard to elements of the bid submittal and evaluation process;
(2) Complainants with regard to an agency response to their complaint; or
(3) Displaced or potentially displaced employees with regard to an agency's:
(a) Adherence to the statutory notice requirements of RCW 41.06.142 (4)(a); or
(b) Determination of the existence of a competitive market as provided in RCW 41.06.142 (4)(d).
(1) Appellant's name, contact person, and/or representative with respective address, and telephone numbers;
(2) Identification and brief description of the grounds relied on for filing an appeal and a brief description of the issues to be resolved.
(2) The agency shall provide the office of administrative hearings with the following information:
(a) The name of the agency contact in the matter and any contact information;
(b) The name of the appellant and any contact information, including address and telephone number;
(c) The name and any contact information for other bidders;
(d) The name and address of the agency contact for billing purposes; and
(e) The name and address of the agency contact where the file should be sent after the office of administrative hearings closes the appeal.
(3) The agency shall transmit all appeals to the headquarters of the office of administrative hearings in Olympia, Washington.
(2) Bidders may intervene as a party to the appeal if they file a petition for intervention with the office of administrative hearings and all parties within ten business days after the issuance of the notice of hearing. The administrative law judge may limit intervention under RCW 34.05.443.
(3) The administrative law judge may schedule a prehearing conference.
(4) Hearings shall be scheduled for the earliest possible date available for the administrative law judge that does not result in prejudice to the parties.
(5) The hearing shall be recorded electronically at the discretion of the administrative law judge unless specified otherwise in law or rule.
(6) No transcript is required unless specified otherwise in law or rule.
(7) In any appeal under this chapter, the administrative law judge shall apply the model rules of procedure set forth in chapter 10-08 WAC, irrespective of the provisions of WAC 10-08-001(4) or other agency procedural rules.
(2) If the administrative law judge finds for the appellant, the administrative law judge shall:
(a) Remand back to the agency for reconsideration or action if the appeal was from an unsuccessful bidder with regard to the bid submittal and evaluation process;
(b) Remand back to the agency for reconsideration or action if the appeal was from a complainant with regard to their complaint; or
(c) Remand back to the agency to start the bidding process over if the appeal was from a displaced or potentially displaced employee with regard to:
(i) The statutory notice requirements of RCW 41.06.142 (4)(a); or
(ii) The determination of the existence of a competitive market as provided in RCW 41.06.142 (4)(d).
(3) The decision of the administrative law judge in any appeal under this chapter shall be considered a final order.