IML C.S.S.B. 1066 75(R)BILL ANALYSIS PUBLIC HEALTH C.S.S.B. 1066 By: Zaffirini (Delisi) 5-14-97 Committee Report (Substituted) BACKGROUND Based on TPR's 1994 report, Gaining Ground, the 1995 Legislature adopted purchasing reforms for state medical schools, university hospitals, and some state health related programs. These measures reflected a shift in the state's purchasing philosophy to a "best value" methodology, allowing agencies flexibility in choosing the most appropriate purchasing methods for each transaction. TPR's most recent report, Disturbing the Peace, recommends that state law require all agencies with health related programs to adopt "best value" purchasing practices, and that the Health and Human Services Commission (HHSC) oversee this process. TPR further recommends that certain local medical providers that participate in the state's Disproportionate Hospital Share Program, and other entities providing services for TDH and TXMHMR participate in this cost-saving effort. PURPOSE C.S.S.B. 1066 outlines provisions regarding purchasing of goods and services by health and human services agencies, by certain other agencies with health related programs, and by certain public and private local providers to maximize savings of state funds through procurement reform. RULEMAKING AUTHORITY It is the committee's opinion that this bill grants rulemaking authority to health and human services agencies, subject to the rules of the Health and Human Services Commission (HHSC), and to the Texas Workers' Compensation Commission in SECTION 1 (Sec. 2155.144(g), Government Code); to HHSC in SECTION 1 (Sec. 2155.144(h), Government Code); to certain public hospitals in SECTION 2 (Sec. 32.043(e), Human Resources Code); to HHSC or the appropriate agency operating part of the medical assistance program (department), with the assistance of HHSC and the General Services Commission, in SECTION 2 (Sec. 32.044(d), Human Resources Code); to certain state agencies and local units of government in SECTION 4 (Sec. 12.055(f), Health and Safety Code); and to certain state agencies, local agencies, local mental health authorities, and local mental retardation authorities in SECTION 5 (Sec. 533.016(f), Health and Safety Code). Furthermore, it is the committee's opinion that SECTION 3 (Section 12.052(a) and (b), Health and Safety Code), establishes that rules governing the expenditure of funds received by certain local units of government and certain state agencies remain in effect except as provided by Section 12.055, Health and Safety Code, as added by this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Subchapter C, Chapter 2155, Government Code, by adding Section 2155.144, as follows: Sec. 2155.144. PROCUREMENTS BY HEALTH AND HUMAN SERVICES AGENCIES AND WORKERS' COMPENSATION COMMISSION. Provides that this section applies only to the Health and Human Services Commission (HHSC), to each health and human services agency, and to the Texas Workers' Compensation Commission. Provides that an agency to which this section applies is delegated the authority to purchase its goods and services, except as provided by this section. Requires an agency to acquire goods or services by the procurement method approved by HHSC that provides the best value to the agency. Requires the agency to document that it considered all relevant factors. Allows the agency to consider certain relevant factors. Requires the agency to consult with and receive approval from HHSC before considering factors other than price and meeting specifications, if the agency acquires goods or services with a value that exceeds $100,000. Allows the state auditor to audit the agency's acquisitions of goods and services. Allows the agency to adopt rules and procedures for the acquisition of goods and services under this section. Requires HHSC to adopt rules and procedures for the acquisition of goods and services under this section that apply to all health and human services agencies, including rules adopted with HHSC's assistance that allow an agency to make purchases through a group purchasing program except when a better value is available through another procurement method. Requires the rules of those agencies to be consistent with the rules of the HHSC. Requires HHSC to coordinate and encourage certain procurement practices. Allows HHSC to transfer certain procurement functions. Requires certain state agencies and institutions to assist HHSC. Provides that to the extent of any conflict, this section prevails over any other state law relating to the procurement of goods and services except a law relating to contracting with historically underutilized businesses or persons with disabilities. Defines "health and human services agency." SECTION 2. Amends Subchapter B, Chapter 32, Human Resources Code, by adding Sections 32.043 and 32.044, as follows: Sec. 32.043. PROCUREMENT RULES FOR PUBLIC DISPROPORTIONATE SHARE HOSPITALS. Allows certain public hospitals to procure goods and services in accordance with this section. Provides that a purchase of goods or services made in accordance with this section is considered to satisfy any state law requiring purchases by competitive bidding or competitive proposals. Requires the public hospital to acquire goods or services by any method approved by HHSC that provides the best value. Requires the public hospital to document that it considered all relevant factors. Allows the public hospital to consider relevant factors. Allows the state auditor or HHSC, or an appropriate agency operating part of the medical assistance program (department), to audit the public hospital's acquisitions of certain goods and services. Allows the public hospital to adopt rules and procedures for the acquisition of goods and services under this section. Sec. 32.044. GROUP PURCHASING FOR DISPROPORTIONATE SHARE HOSPITALS. Allows certain public or private hospitals to purchase goods and services in accordance with this section. Provides that a purchase of goods or services made in accordance with this section is considered to satisfy any state law requiring purchases by competitive bidding or competitive proposals. Allows a state or local governmental entity to allow the public or private hospital to purchase goods or services by participating in one or more of the entity's contracts for the purchase of goods or services. Requires the department, with the assistance of HHSC and the General Services Commission to adopt rules under this section. Sets forth provisions regarding application of this section to private hospitals. SECTION 3. Amends Sections 12.052(a) and (b), Health and Safety Code, to provide that the expenditure of funds received by local units of government from the Texas Department of Health (TDH) is governed by Chapter 783, Government Code, rather than Article 4413(32g), V.T.C.S. (Uniform Grant and Contract Management Act of 1981), and the rules adopted under that law, except as provided by Section 12.055. Provides that the expenditure of funds received by other state agencies from TDH is governed by Subtitle D, Title 10, Government Code, rather than Article 601b, V.T.C.S. (State Purchasing and General Services Act), and the rules adopted under that law, except as provided by Section 12.055. SECTION 4. Amends Subchapter E, Chapter 12, Health and Safety Code, by adding Sections 12.055 and 12.056, as follows: Sec. 12.055. CERTAIN PROCUREMENTS MADE WITH DEPARTMENT FUNDS. Allows a state agency or local unit of government that expends funds received from TDH for the acquisition of goods and services to satisfy the requirements of Section 12.052 or of another state law requiring procurements by competitive bidding or competitive sealed proposals by procuring goods or services with those funds in accordance with Section 12.056 or in accordance with Section 2155.144, Government Code if the entity is a state agency subject to that law; Section 32.043 or 32.044, Human Resources Code, if the entity is a public hospital subject to those laws; or this section, if the entity is not covered by Subdivision (1) or (2). Requires a state agency or local unit of government under Subsection (a)(3) to acquire goods or services by a method approved by HHSC that provides the best value to the state agency or local unit of government. Requires a state agency or local unit of government to document that the state agency or local unit of government considered all relevant factors under Subsection (c) in making the acquisition. Allows the state agency or local unit of government to consider relevant factors in determining the best value subject to Subsection (d). Requires certain state agencies to consult with and receive approval of HHSC before considering certain factors. Allows the state auditor or TDH to audit the state agency's or local unit of government's acquisitions of goods and services under this section. Allows the state agency or local unit of government to adopt rules and procedures for the acquisition of goods and services. Sec. 12.056. PARTICIPATION IN DEPARTMENT PURCHASING CONTRACTS OR GROUP PURCHASING PROGRAM. Allows the TDH to allow a state agency, local unit of government, or private entity that expends funds received by the TDH to purchase goods or services using those funds by participating in a contract TDH has made to purchase goods or services or a group purchasing program established or designated by TDH that offers discounts to providers of health services. SECTION 5. Amends Subchapter A, Chapter 533, Health and Safety Code, by adding Sections 533.016 and 533.017, as follows: Sec. 533.016. CERTAIN PROCUREMENTS OF GOODS AND SERVICES BY SERVICE PROVIDERS. Allows certain state and local agencies and certain local mental health and mental retardation authorities to satisfy certain state law requirements by procuring goods or services in accordance with this or other sections as specified. Allows an agency or authority under Subsection (a)(3) to acquire goods or services by any procurement method that provides the best value to the agency or authority. Requires the agency or authority to document that the agency or authority considered all relevant factors under Subsection (c) in making the acquisition. Allows the agency or authority to consider all relevant factors in determining the best value subject to Subsection (d). Requires the state agency to consult with and receive approval from HHSC before considering factors other than price and meeting specifications if a state agency to which this section applies acquires goods or services with a value that exceeds $100,000. Allows the state auditor or the Texas Department of Mental Health and Mental Retardation (TXMHMR) to audit the agency's or authority's acquisitions of certain goods and services under this section. Allows the agency or authority to adopt rules and procedures for the acquisition of goods and services under this section. Sec. 533.017. PARTICIPATION IN DEPARTMENT PURCHASING CONTRACTS OR GROUP PURCHASING PROGRAM. Allows TXMHMR to allow certain state and local agencies and certain local mental health and mental retardation authorities that expend public money to purchase goods or services by participating in a contract TXMHMR has made to purchase goods or services or a group purchasing program established or designated by TXMHMR that offers discounts to these providers. SECTION 6. Effective date is September 1, 1997. SECTION 7. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE The committee substitute adds "or relating to the procurement of goods and services from persons with disabilities" to expand the exemption granted to historically underutilized businesses throughout the original bill to equally recognize the preference program currently existing for disabled persons. CSSB 1066 adds this language in the following sections: SECTION 1. CSSB 1066 adds the specified language to Sec. 2155.144(d)(6) and (j). SECTION 2. CSSB 1066 adds the specified language to Sec. 32.043(c)(6). SECTION 4. CSSB 1066 adds the specified language to Sec. 12.055(c)(6). SECTION 5. CSSB 1066 adds the specified language to Sec.