BILL ANALYSIS C.S.H.B. 2769 By: Romo 5-8-95 Committee Report (Substituted) BACKGROUND HB 2769 is a result of an interim report as mandated by SB 381 of the 73rd Legislature. The results of this study indicate that Texas lacks the most basic information on its own purchasing patterns and results - what it buys, when and from whom, and whether the goods and services purchased actually meet agencies' needs. For the state to take full advantage of its significant buying power, the state must know what is being bought not only through GSC but also through delegated and exempt purchases. And, while many improvements have been made in the area of vendor performance tracking, substandard vendors still continue to do business with the state merely by changing their names. Key elements have been identified that would effectively reengineer the state's procurement process. These elements encompass areas such as, expanding the authority and responsibility granted to state purchasing professionals, redefining the state's relationship with its vendors, enhancing technology to streamline the state's purchasing process, and entering into more types of state contracts. The incorporation of the aforementioned reengineering processes will provide the state with a financially efficient and streamlined state purchasing system. PURPOSE HB 2769 re-engineers key elements of the state's purchasing process. RULEMAKING AUTHORITY It is the committee's opinion that this bill grant additional rulemaking authority to the general Services Commission in SECTION 3 (Sec.3.022(h)), SECTION 6 (Sec. 3.062(a))and (Sec. 3.064(a)), SECTION 8 (Sec. 3.08(b)) and (Sec. 3.08(d)), SECTION 9 (Sec. 3.105(a)), SECTION 18 (Sec. 11.08(e), Sec. 11.10(b), and Sec 11.11(e)(1)) of this bill. It is the committee's opinion that rulemaking authority is granted to the Comptroller of Public Accounts in SECTION 22 (Sec. 2251.026) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 1.02(5), State Purchasing and General Services Act (Art. 601b, Vernon's Texas Civil Statutes)as follows: Sec. 1.02, (5), Defines "Best Value". SECTION 2. Amends Article 3, State Purchasing and General Services Act (Article 601b, Vernon's Texas Civil Statutes) by adding Section 3.011 as follows: Sec. 3.011. PROVIDING CERTAIN PURCHASES ON FEE-FOR-SERVICE BASIS. (a) Provides that the commission may provide open market purchasing services on a fee-for-service basis for state agency purchases and set the fees in an amount that recovers the commission's costs in providing the services. (b) Requires the commission to publish a schedule of its fees. Outlines what shall be included in the schedule. SECTION 3. Amends Section 3.022, State Purchasing and General Services Act (Article 601b, Vernon's Texas Civil Statutes) as follows: Sec. 3.022. COMPETITIVE SEALED PROPOSALS. (a) Provides that the commission may acquire supplies, materials, services, or equipment by following a procedure using competitive sealed proposals. Requires the state agency or institution of higher education to follow the procedures outlined by this section for the commission. (b) Requires the commission to consult with appropriate personnel of a requisitioning agency to develop specifications for a request for competitive sealed proposals under this section. (c) Requires the commission to solicit proposals by a request for proposal. (d) Requires the commission to open each proposal in a manner that does not disclose the contents of the proposal during the process of negotiating with competing offers. (e) Requires the commission to provide each offeror with an equal opportunity for discussion and revision of proposals. (f) Requires the commission to invite a requisitioning agency to participate in discussions conducted under Subsection (e) of this section. (g) Requires the commission to make a written award of a purchase or lease to the offer or whose proposal offers the best value to the state, considering the price, past vendor performance, vendor reputation, and the evaluation factors in the request for proposals, except that if the commission finds that none of the offers is acceptable, it shall refuse all offers. (h) Requires the commission to adopt rules to perform it duties as outlined in this Act. SECTION 4. Amends Article 3, State Purchasing and General Services Act by adding Section 3.045 COOPERATION WITH FEDERAL GOVERNMENT PURCHASING (a) Provides that agencies of the federal government may purchase goods/services through commission contracts. (b) Provides that to the extent permitted by federal law, the commission and other state agencies that are subject to this Act and local governments that are eligible to participate in the commissions purchasing program may purchase goods and services through federal government contracts that are established through competitive bidding. SECTION 5. Amends Section 3.061, State Purchasing and General Services Act (Article 601b, Vernon's Texas Civil Statutes), (b) Requires the commission to promulgate rules allowing purchases through group purchasing programs unless the commission determines within a reasonable period of time after receiving notification of a particular purchase that a better value is available throughout he commission.. SECTION 6. Amends Article 3, State Purchasing and General Services Act (Article 601b, Vernon;s Texas Civil Statutes) by adding Sections 3.062-3.064 as follows: Sec. 3.062. TRAINING AND CERTIFICATION OF STATE AGENCY PURCHASING PERSONNEL. (a) Requires the commission to establish and administer a system of training, continuing education, and certification for state agency personnel. Provides that the commission may adopt rules to administer this section. (b) Requires that all state agency personnel must receive the training and continuing education to the extent required by rule of the commission. (c) Requires the commission to set and collect a fee form state agencies that employ purchasing personnel who are trained, educated, or certified under this section. (d) Provides that the commission may provide training, continuing education, and certification under this section to purchasing personnel employed by a political subdivision or other public entity of the state. Requires the commission to collect fees described by Subsection (c) for training, education, or certification under this subsection. (e) Provides that the commission may provide training and continuing education under this section using its own personnel, through contracts with private entities and by agreement with a public entity. (f) Requires the commission to provide at least three levels of training under this section. (g) Requires the basic training level to include an introduction to contract purchasing methods and processes and informal bidding processes, practical instruction in the use of automated information tools used in the use of automated information tools used in the purchasing process, instruction in receipting and payment processes and requirements and instruction in any other processes and issues that the commission considers appropriate for introductory purchasing training. (h) Requires the second training level to include advanced instruction in formal and informal bidding methods, an introduction to negotiation methods and to when negotiation is allowed, instruction in writing specifications, instruction in the criteria for determining which product or service offers the best value for the state and instruction in any other processes and issues that the commission considers appropriate for the second level of purchasing training. (i) Requires the third training level must include instruction in complex negotiations, instruction in purchasing through the use of requests for proposals, and instruction in any other processes and issues that the commission considers appropriate for advanced purchasing training. (j) Requires the commission to prescribe the circumstances under which a state agency may delegate authority to approve purchases. (k) The commission shall provide at least 2 levels of certification. (l) Requires the commission to provide at least 24 hours of continuing education. (m) Requires the commission's prerequisites for receiving a level one purchaser certification to include completion of the second training level, passage of a written examination, and a minimum number of years of purchasing experience prescribed by the commission. (n) Requires the commission's prerequisites for receiving a level two purchaser certification include completion of the third training level, passage of a written and an oral examination, and a minimum of three years of purchasing experience. Sec. 3.063. PURCHASING PARTNERSHIPS BETWEEN AGENCIES. (a) Requires that the commission manage a program that provides for establishing purchasing partnerships between state agencies under which one agency will make certain purchases for another agency. An agency is not required to enter into a purchasing partnership under this section. (b) Requires the commission to identify agencies that are willing to enter into purchasing partnerships with another agency and attempt to appropriately match agencies for a purchasing partnership based on factors such as whether an agency employs a certified purchaser, the number and expertise of an agency, the existence or nature of an agency's automated purchasing tools, and the types of goods and services typically purchased by an agency. Sec. 3.064. BUYING UNDER CONTRACT ESTABLISHED BY AGENCY OTHER THAN COMMISSION. (a) Requires the commission to adopt rules specifying the circumstances under which it is advantageous for the state to allow other agencies to make purchases under the contract: (b) Provides that a state agency that is a party to a contract with a vendor who is able to supply goods or services to other agencies under the contract shall, if commission rules allow other agencies to make purchases under the contract: (1) inform the commission of the term of the contract and the capabilities of the vendor; and (2) post notice of the existence and terms of the contract on the procurement marketplace. SECTION 7. Amends Section 3.08, State Purchasing and General Services Act (Article 601b, Vernon's Texas Civil Statutes) as follows: (a) Provides that state agencies are delegated authority to purchase supplies, materials, and equipment if the purchase does not exceed $25,000. (b) Provides that the commission by rule delegate to state agencies the authority to purchase supplies, materials, or equipment if the purchase exceeds $25,000. In delegating this purchasing authority, the commission shall consider factors relevant to a state agency's ability to perform purchasing functions. (c) Requires the commission to monitor the purchasing practices of state agencies. Provides that eh commission may revoke for cause all or part of the purchasing authority that the commission delegated to a state agency. Requires the commission to adopt rules to administer this subsection. (d) Provides that the commission by rule may delegate to the comptroller the commission authority under Section 3.15. (e) Provides that competitive bidding, whether formal or informal, is not required for a purchase by a state agency if the purchase does not exceed $2,500, or a greater amount prescribed by rules of the commission. (f) Provides for certain supplies and materials that may not be purchased. (g) Provides that large purchases may not be divided into small lot purchase in order to meet the specified dollar limits. (h) Requires that agencies making purchases under this section for which competitive bidding is required must attempt to obtain at least three competitive bids from sources which normally offer for sale the merchandise being purchased and must comply with Section 3.101 of this Article. SECTION 8. Amends Section 3.101, State Purchasing and General Services Act (Article 601b, Vernon's Texas Civil Statutes), by adding Subsections (k) and (l) as follows: (k) Requires the commission to require information about an applicant's past history as a vendor with the state in the uniform registration form. (l) Requires the commission to include in the uniform registration forma statement about the applicability of relevant criminal law, including Section 37.10, Penal Code, to entering information on the form and to presenting documentation in connection with the form. SECTION 9. Amends Article 3, State Purchasing and General Services Act (Article 601b, Vernon's Texas Civil Statutes) by adding Sections 3.103-3.106 as follows: Sec. 3.103. BEST VALUE STANDARD FOR PURCHASE OF GOODS OR SERVICES. (a) Requires each state agency including the commission to purchase goods and services that provide the best value for the state. (b) Provides that in determining the best value for the state, the commission or other state agency making a purchase is not restricted to considering price alone but also may consider any other factor relevant to evaluating the value to the state of a good order service. Provides examples. Sec. 3.104. REQUIREMENT TO SPECIFY VALUE FACTORS IN REQUEST FOR BIDS OR PROPOSALS. (a) Requires the commission or other state agency making the purchase to specify in the request for bids the factors other than price, past vendor performance, or vendor reputation that the commission or agency will consider in determining which bid offers the best value for the state. (b) Provides that for a purchase made through competitive sealed proposals, the commission or other state agency making the purchase: (1) must specify the known factors other than price, past vendor performance, or vendor reputation in determining the best value for the state; (2) may concurrently inform each vendor that make proposal on the contract of any additional factors the commission or agency will consider in determining which proposal offers the best value for the state. Sec. 3.105. PROTEST PROCEDURES. Requires the commission to develop and adopt by rule protest procedures for resolving vendor protests relating to purchases made by the commission. Requires each state agency to adopt protest procedures for resolving vendor protests relating to purchases made by the agency. Sec. 3.106. BARRING VENDOR FROM PARTICIPATION IN STATE CONTRACTS. (a) Provides that the commission may bar a vendor from participating in state contracts that are subject to this Act, including contract for which purchasing authority is delegated to a state agency under this Act. Provides for incidents where such a bar may take place. (b) Requires the commission to bar a vendor from participating in state and sate agency contracts under this section for a period that is commensurate with the seriousness of the vendor's action and the extent to which the state's interests were damaged. (c) Requires the commission to adopt rules to administer this section. SECTION 10 Amends Sections 3.11(b), (d), (e), (f), (g), and (h), State Purchasing and General Services Act (Article 601b, Vernon's Texas Civil Statutes). (a) NOTICE. Provides that in addition to any electronic dissemination of invitations to bid required or allowed under law, notice inviting bids shall be published at least once in at least one newspaper of general circulation in the state and at least seven days preceding the last for the receipt of bids. (b) CENTRALIZED MASTER BILL LIST. Requires the commission to maintain a centralized master bidders list. Provides that the commission may use the centralized bidders list for any purchase. (d) BID OPENING PROCEDURE. Requires that bids be submitted to the commission, sealed, and identified as bids on the envelope, except that when the commission considers that the electronic information capabilities of the state and of the vendor community are sufficient, the commission may also allow facsimile or on-line transmission of bids. (e) AWARD OF CONTRACT. Requires the commission to award contracts to the bidder offering the best value for the state while conforming to the specifications required. Provides that in the commission shall determine which bidder offers the best value for the state in accordance with Sections 3.103 and 3.104 of this Act. (f) REJECTION OF BIDS. Requires a bid that contains material failures to comply with specification requirements, be rejected and the contract be awarded to the bidder offering the best value for the state. (g) BID RECORD. Provides that a statement of the basis for placing the order with the successful bidder and the factors considered in determining which bidder offered the best value for the state be prepared by the purchasing division. (h) TIE BIDS. Requires that tie bids, the value to the state being equal, be awarded under rules and regulations to be adopted by the commission. SECTION 11 Sections 3.12(b), (c), (e), and (f), State Purchasing and ?general Services Act (Article 601b, Vernon's Texas Civil Statutes). (b) MINIMUM NUMBER OF BIDS. Requires that open market purchases, whenever possible, be based on at least three competitive bids, and be awarded to the bidder offering the best value for the state. (c) NOTICE INVITING BIDS. Adds facsimile, on-line transmissions, and posting on electronic bulletin boards to the list of ways for the commission to solicit bids. (e) AGENCY REVIEW. Provides that if, after review of the bids and evaluation of the quality of products offered in the bids, the state agency determines that the bid selected by the commission does not in its opinion offer the best value for the state, it may file with the commission a written recommendation that the award be made to the bidder determined to offer the best value for the state. (f) STATEMENT OF AWARD. Requires that a statement of the basis for placing the order with the successful bidder and the factors considered in determining the bid offering the best value for the state be prepared by the purchasing division. SECTION 12 Amends Section 3.16, State Purchasing and General Services Act (Article 601b, Vernon's Texas Civil Statutes) Subsection (a) and adds Subsections (c) and (d). (a) Allows the comptroller to issue a single warrant directly to the vendor when the state owes a vendor for services/products. (c) The comptroller may allow an agency to schedule payments that the comptroller shall make to the vendor. (d) Allows the comptroller to require the vendors to provide certain information as allowed under law. SECTION 13 Amends Section 3.17(a), State Purchasing and General Services Act by adding that the advisory committee on procurement and the vendor advisory committee shall cooperate with the commission when establishing uniform standards. SECTION 14 Amends Section 3.20, State Purchasing and General Services Act, as follows: Sec. 3.20. PREFERENCE FOR PRODUCTS OF RETARDED OR HANDICAPPED PERSONS. Requires the commission to test products of retarded or handicapped persons to the extent necessary to ensure quality and delivery performance. SECTION 15 Amends Section 3.22, State Purchasing and General Services Act Article 601b, Vernon's Texas Civil Statutes) by requiring the commission to test products of blind persons to the extent necessary to ensure quality and delivery performance. SECTION 16 Amends Section 3.23, State Purchasing and General Services Act (Article 601b, Vernon's Texas Civil Statutes) by requiring the commission to test products of The Texas Department of Criminal Justice tot he extent necessary to ensure quality and delivery performance. SECTION 17 Amends Article 3, State Purchasing and General Services Act (Article 601b, Vernon;s Texas Civil Statutes) by adding Sections 3.34 and 3.35. Sec. 3.34. ADVISORY COMMITTEE ON PROCUREMENT. (a) Requires the commission to establish as advisory committee on procurement. (b) Requires the committee to be composed of officers or employees of state agencies, including institutions of higher education and political subdivisions. Requires the commission to set staggered terms for the members of the committee. (c) Provides that the committee may establish its own rules of operation. (d) Requires the committee to recommend improvements in commission or state agency purchasing practices. Sec. 3.35. VENDOR ADVISORY COMMITTEE. (a) Requires the commission to establish a vendor advisory committee. (b) Provides that the committee be composed of vendors who have done business with the state. (c) Provides that the committee may establish its own rule of operation. SECTION 18 Article 11, State Purchasing and General Services Act (Article 601b, Vernon's Texas Civil Statutes) is amended by adding Sections 11.08-11.10 as follows: Sec. 11.08. ELECTRONIC BULLETIN BOARD POSTING OF NOTICE FOR PROCUREMENT EXCEEDING $25,000. (a) Provides that this section applies to each agency making a procurement that will exceed $25,000 in value and (1) without regard to the source of funds the agency will use for the procurement; and (2) including a procurement that: (A) is a procurement by a state agency but is otherwise exempt from the commissions purchasing authority or the application of this Act; (B) is made under a delegated purchasing authority; (C) is related to a construction project; (D) is a procurement of professional of consulting services. (b) Requires the commission to send to the comptroller for posting on the comptroller's Windows on State Government electronic bulletin board information as prescribed by this section about commission or other state agency procurement that will exceed $25,000 in value. (c) Requires the commission to include certain information for each procurement that the commission or another state agency will make that is estimated to exceed $25,000 in value. (d) Requires each state agency that will award a procurement contract estimated to exceed $25,000 in value to send a report to the commission. Outlines report. (e) Provides that the commission may adopt rules, prescribe forms, and require information to administer this section. (f) Provides that this section does not affect whether the commission or other state agency is required to award a procurement contract through competitive bidding, competitive sealed proposals, or another method. Sec. 11.09 ELECTRONIC PROCUREMENT DATABASE. (a) Establishes that the commission shall establish and manage an electronic procurement database. Establishes guidelines Sec. 11.10. ELECTRONIC PROCUREMENT MARKETPLACE. (a) Requires the commission to establish and manage as electronic procurement marketplace. (b) Requires the commission to design the procurement marketplace as an interactive gateway for state procurement. (c) Provides that the commission may adopt rules relating tot he design and use of the procurement marketplace. (d) Requires the commission to make the procurement information available to political subdivisions through the procurement marketplace on a fee-for-service basis. Sec. 11.11. ELECTRONIC COMMERCE NETWORK USING ELECTRONIC DATA INTERCHANGE. (a) Requires the commission to base the network on the standard protocol developed by the American National Standards Institute known as electronic data interchange. (b) Provides that the commission may enter into contracts with one or more public or private entities to establish or support various elements of the network. (c) Requires the commission to charge fees for network services. (d) Provides that he commission may allow political subdivisions and other public entities to participate in the electronic commerce network. (e) Provides that the commission may adopt rules to administer this section and require participating state agencies, political subdivisions, and other public entities to designate a network coordinator. SECTION 19 Amends Article 15, State Purchasing and General Services act (Article 601b, Vernon's Texas Civil Statutes) by adding Section 15.11. Sec. 15.11. CONSOLIDATING OR CONTRACTING FOR MATERIALS MANAGEMENT FUNCTIONS. (a) Requires the council to study the materials management functions of state agencies. (1) order two or more state agencies to consolidate between them warehousing, inventory control, or other materials management functions; or (2) order a state agency to obtain under a contract with another state agency to a private commercial source the agency's warehousing, inventory control, or other materials management functions. (b) Requires state agencies to consolidate or contract for materials management functions in the manner directed by the council. SECTION 20 Amends Section 321.013, Government Code, by adding subsection (k) which provides for the State Auditor to conduct periodic audits of purchasing practices of state agencies. Audits must include a compliance report with applicable Historically Underutilized Business statutes. SECTION 21 Amends Chapter 2102, Government Code, by adding Section 2102.013 which requires the internal auditor to frequently audit the purchasing practices of state agencies. SECTION 22 Amends Section 2251.026, Government Code, by requiring the comptroller to compute interest imposed upon the state agency and make appropriate payments. Provides that the comptroller may adopt rules to administer this section if necessary. This section takes effect on September 1, 1997. SECTION 23 Amends Section 271.083, Local and Government Code by providing that a local government may participate in the purchasing program of the commission, to the extent the commission deems feasible, and states the responsibilities of the local government. SECTION 24 (a) Requires the state auditor and the advisory committee of procurement established by this Act to study how classification levels of responsibility and accountability to state personnel should be revised under the changes in law made under this Act. Requires for a report to be made to the 75th Legislature. SECTION 25 Provides that the commission may conduct pilot studies for regional contracts and no-stock contracts. SECTION 26 Requires the Legislative Budget Board and the divisions of the governor's office that works with budget nd planning issues to study and consider: (1) ways to obtain information about planned state procurement. (2) ways to use that information to increase the state's buying power. SECTION 27 Requires the General Services Commission to gradually phase in the changes in law made by this Act. SECTION 28 Repeals Sections 3.0221 and 3.09(d), State Purchasing and General Services Act SECTION 29 Repeals Section 2251.041, Government Code. SECTION 30 Effective date: Except as otherwise provided by this Act, the effective date shall be September 1, 1995. SECTION 25 Emergency Clause. COMPARISON OF ORIGINAL TO SUBSTITUTE SECTION 4 COOPERATION WITH FEDERAL GOVERNMENT PURCHASING is added in the substitute. Expands the list of relevant factors to be considered when making purchases in Sec. 3.103. In SECTION 10, subsection (a) is deleted relating to publishing a notice inviting bids. A centralized Master Bidders List is added in the new subsection (b). SECTION 13 is amended by adding consultation with the advisory committee on procurement and the vendor advisory commission when determining uniform standards. SECTION 18 of the substitute is a reorganized version of Section 3 from the original bill. SECTION 21 relating to auditing of agency purchasing is added in the substitute. SECTION 22 relating to payment of intrest by state agencies is added. SECTION 23 is added. SECTIONS 24, 25, 26, 27 are renumbered sections from the original bill. SECTION 28 and 29 repealing certain statutes are added. SUMMARY OF COMMITTEE ACTION Pursuant to posting of public hearing the House Committee on State Affairs convened in public hearing on April 24, 1995 to consider HB 2769. The chair laid out HB 2769 and recognized Rep. Romo to explain the bill. The committee considered a complete substitute which was not adopted. The following persons testified neutrally on the bill: Pat Martin representing himself; and Cordell Cameron representing himself. The Chair recognized Rep. Romo to close. The Chair left HB 2769 pending. HB 2769 was considered by the committee in a formal meeting on May 5, 1995. The Chair laid out HB 2769. The committee considered a complete substitute for the bill. The substitute was adopted without objection. The bill was reported favorably as substituted with the recommendation that it do pass and be printed, which prevailed by a vote of 13 aye, 0 nay, 1 PNV, and 1 absent.