By Lindsay S.B. No. 1785
75R1529 JRD-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to competitive contracting for public goods and services.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Subtitle F, Title 10, Government Code, is amended
1-5 by adding Chapter 2259 to read as follows:
1-6 CHAPTER 2259. COMPETITIVE CONTRACTING
1-7 SUBCHAPTER A. GENERAL PROVISIONS
1-8 Sec. 2259.001. LEGISLATIVE FINDINGS. The legislature finds
1-9 that:
1-10 (1) the protection of taxpayers requires public goods
1-11 and services to be provided at the lowest possible cost consistent
1-12 with appropriate service and safety standards;
1-13 (2) private companies under competitive contracts
1-14 often provide public goods and services at lower costs and with
1-15 lower annual cost increases;
1-16 (3) decisions about whether a public good or service
1-17 should be provided by a state agency using its own resources or
1-18 procured through a private company should be based on economic
1-19 considerations rather than on institutional considerations; and
1-20 (4) the cost-effective provision of public goods and
1-21 services requires a competitive environment and a mechanism for
1-22 competitive contracting of the goods and services.
1-23 Sec. 2259.002. DEFINITIONS. In this chapter:
1-24 (1) "Attributable fully allocated cost" means the
2-1 operating and capital costs of providing a public good or service,
2-2 including direct, indirect, and allocated costs, minus the cost of
2-3 any function that will not be competitively contracted.
2-4 (2) "In-house activity" means a good or service
2-5 produced or provided by a state agency itself.
2-6 (3) "Make or buy analysis":
2-7 (A) means a periodic analysis in which the true
2-8 costs of performing an in-house activity are compared to the true
2-9 costs of obtaining a comparable good or service from outside
2-10 vendors; and
2-11 (B) includes comparing the true costs of public
2-12 and private production methods relevant to the performance of the
2-13 activity.
2-14 (4) "Public goods and services" means any good or
2-15 service produced by a state agency under its public authority and
2-16 any product or service supportive of or ancillary to the functions
2-17 of the state agency.
2-18 (5) "State agency" has the meaning assigned by Section
2-19 2151.002.
2-20 Sec. 2259.003. EXCEPTIONS. This chapter does not apply to
2-21 an in-house activity that is:
2-22 (1) policing;
2-23 (2) regulating;
2-24 (3) teaching at a public school or public university;
2-25 (4) the performance of judicial functions; or
2-26 (5) performed by staff of the governor or by
2-27 legislative direct staff.
3-1 Sec. 2259.004. REQUIREMENT TO PERFORM MAKE OR BUY ANALYSIS
3-2 OF IN-HOUSE ACTIVITIES. (a) Each state agency shall prepare an
3-3 inventory of all its in-house activities.
3-4 (b) Each fiscal year a state agency shall perform make or
3-5 buy analyses covering in-house activities that account for at least
3-6 five percent of the money the state agency spends performing
3-7 in-house activities during the fiscal year.
3-8 (c) In addition to the routine make or buy analysis under
3-9 Subsection (b), a state agency shall perform a make or buy analysis
3-10 covering any in-house activity for which it has received a
3-11 qualifying petition of interest from a private company.
3-12 (d) A state agency is not required to perform more than one
3-13 make or buy analysis for a particular in-house activity in any
3-14 fiscal year.
3-15 Sec. 2259.005. RETENTION OF CONTROL. Each state agency
3-16 shall retain full control of service quantities, service
3-17 specifications, standards, and any other matter demonstrably
3-18 related to the delivery of a particular public good or service in a
3-19 manner consistent with the public interest.
3-20 Sec. 2259.006. NO RESTRICTIVE AGREEMENTS. A state agency
3-21 may not make and is not bound by any contract, agreement, or
3-22 assurance that restricts its ability to comply with this chapter.
3-23 (Sections 2259.007-2259.050 reserved for expansion
3-24 SUBCHAPTER B. FREE ENTERPRISE PARTICIPATION PROCESS; PETITIONS
3-25 OF INTEREST TO PERFORM IN-HOUSE ACTIVITY
3-26 Sec. 2259.051. FREE ENTERPRISE PARTICIPATION PROCESS. (a)
3-27 Each state agency shall establish a free enterprise participation
4-1 process. The state agency shall seek the widest possible
4-2 participation of interested private companies in the process.
4-3 (b) The process must include maintaining a list of
4-4 interested proposers. The list must include all organizations that
4-5 have requested to be on the list. A state agency shall advertise
4-6 for additions to its list at least annually.
4-7 (c) Each year a state agency shall timely send a calendar to
4-8 each company on its list. The calendar must:
4-9 (1) specify the relevant dates and deadlines regarding
4-10 the routine make or buy analyses performed under Section
4-11 2259.004(b);
4-12 (2) specify the deadlines during the fiscal year for
4-13 submitting petitions of interest; and
4-14 (3) describe the state agency's appeals process
4-15 covering petitions of interest and requests for proposals.
4-16 Sec. 2259.052. PETITIONS OF INTEREST. (a) A private
4-17 company interested in producing a good or performing a service for
4-18 a state agency that the state agency currently produces or performs
4-19 in-house may file a petition of interest with the state agency
4-20 subject to the requirements of the state agency's free enterprise
4-21 participation process.
4-22 (b) A petition of interest must include:
4-23 (1) a description of the public good or service that
4-24 the private company seeks to provide for the state agency;
4-25 (2) a statement that the private company believes that
4-26 it can provide the same good or service under contract to the state
4-27 agency for a lower cost than the state agency's current cost;
5-1 (3) a description of the company's financial capacity
5-2 to provide the good or service; and
5-3 (4) a description of the company's technical ability
5-4 to produce the good or perform the service that includes when
5-5 possible a description of identical, similar, or other relevant
5-6 goods or services provided by the company to government or private
5-7 sector customers.
5-8 Sec. 2259.053. ACTION ON PETITION OF INTEREST. (a) Not
5-9 later than the 90th day after the date a private company's petition
5-10 of interest is received, a state agency shall determine whether
5-11 there is sufficient reason to believe that the private company has
5-12 the financial and technical ability to provide the public good or
5-13 service.
5-14 (b) Except as provided by Subsection (c), the state agency
5-15 shall make one of two findings with respect to the petition of
5-16 interest. The state agency may find that the company has sufficient
5-17 financial and technical ability to provide the public good or
5-18 service, in which event the state agency shall certify the petition
5-19 of interest. The state agency may also find that the company does
5-20 not have sufficient financial and technical ability to provide the
5-21 public good or service, in which event the state agency shall deny
5-22 the petition of interest and state in writing the justification for
5-23 its finding.
5-24 (c) If the state agency has scheduled an immediate make or
5-25 buy analysis for substantially the same public good or service
5-26 specified in a petition of interest, the state agency shall notify
5-27 the petitioner of that fact and not make a finding with respect to
6-1 the petition.
6-2 (d) If the state agency certifies the petition, the state
6-3 agency shall undertake a make or buy analysis with respect to the
6-4 public good or service specified in the petition at the first
6-5 possible opportunity within the schedule adopted under its free
6-6 enterprise participation process.
6-7 (Sections 2259.054-2259.100 reserved for expansion
6-8 SUBCHAPTER C. COMPETING PROPOSAL BY STATE AGENCY
6-9 TO KEEP WORK IN-HOUSE
6-10 Sec. 2259.101. INTERNAL PROPOSAL BY STATE AGENCY. A state
6-11 agency may compete to continue providing a public good or service
6-12 that is the subject of a make or buy analysis by submitting its own
6-13 proposal in accordance with this subchapter.
6-14 Sec. 2259.102. SEALED PROPOSAL REQUIREMENT. (a) A state
6-15 agency must submit a sealed proposal before the advertised deadline
6-16 for proposals.
6-17 (b) The state agency may not alter the proposal after that
6-18 deadline.
6-19 (c) The appropriate personnel of the state agency shall
6-20 publicly open the proposal and make it public at the time of the
6-21 deadline.
6-22 Sec. 2259.103. OBJECTIVE EVALUATION. A state agency shall
6-23 take reasonable steps to ensure an objective and fair evaluation
6-24 process, including prohibiting participation in proposal evaluation
6-25 by personnel or departments that were involved in preparing the
6-26 state agency's proposal.
6-27 Sec. 2259.104. FAIR COST COMPETITION. A state agency's
7-1 proposal price:
7-2 (1) may not be less than its attributable fully
7-3 allocated cost for performing the activity;
7-4 (2) may not be based on part-time labor provisions or
7-5 other less costly labor provisions to a greater degree than the
7-6 state agency's current practice in performing the activity; and
7-7 (3) must be consistent with currently adopted budgets
7-8 and financial plans.
7-9 Sec. 2259.105. RESTRICTIVE LABOR AGREEMENTS PROHIBITED. (a)
7-10 A state agency's proposal may not contain or involve a contract,
7-11 agreement, or assurance that creates or extends any form of
7-12 obligation for continued employment or employee compensation beyond
7-13 the period covered by the proposal, except to the extent provided
7-14 for in the retirement laws applicable to the state agency.
7-15 (b) This section does not authorize a state agency to
7-16 contract with its employees to a greater extent than the state
7-17 agency is authorized to do so under other law.
7-18 Sec. 2259.106. EQUAL CONTRACT ADMINISTRATION. A state
7-19 agency, if its proposal to keep work in-house is accepted, must be
7-20 bound by the same terms, conditions, and standards, including
7-21 performance standards, that would have applied to a private company
7-22 awarded the contract under the request for proposals process.
7-23 Sec. 2259.107. COST CONTROL REQUIRED. (a) A state
7-24 agency's costs may not, if its proposal to keep work in-house is
7-25 accepted, rise at any point during the contract period by an amount
7-26 greater than the amount specified for the corresponding period in
7-27 the state agency's proposal.
8-1 (b) If the state agency's cost performance does not comply
8-2 with this requirement, the state agency shall issue a new request
8-3 for proposals to provide the public good or service not later than
8-4 the 90th day after the date the state agency first fails to comply.
8-5 (Sections 2259.108-2259.150 reserved for expansion
8-6 SUBCHAPTER D. MAKE OR BUY ANALYSIS OF IN-HOUSE ACTIVITY;
8-7 RESULT OF ANALYSIS
8-8 Sec. 2259.151. REQUEST FOR PROPOSALS AND EVALUATION
8-9 REQUIREMENTS. (a) A state agency shall begin a make or buy
8-10 analysis by issuing a request for proposals to provide the public
8-11 good or service.
8-12 (b) The state agency shall then evaluate the proposals
8-13 received from private companies and, if applicable, shall also
8-14 evaluate its own internal proposal.
8-15 Sec. 2259.152. REQUEST FOR PROPOSALS PROCESS. (a) A state
8-16 agency shall seek the widest reasonable distribution of each
8-17 request for proposals. At a minimum, it shall send a request for
8-18 proposals to each entity on its list of interested proposers and to
8-19 each additional entity that requests the specific request for
8-20 proposal.
8-21 (b) The state agency shall advertise each request for
8-22 proposals in accordance with its general procurement policy not
8-23 later than the 10th day after the date the request is issued.
8-24 (c) The state agency may not require the submission of
8-25 proposals before the 45th day after the date the request for
8-26 proposals is first advertised.
8-27 (d) A request for proposals must clearly specify the good or
9-1 service to be procured and must include a draft contract.
9-2 Sec. 2259.153. EVALUATION OF PROPOSALS. (a) A state agency
9-3 shall review proposals in two steps.
9-4 (b) The state agency shall first review the financial
9-5 qualifications and technical aspects of a proposal to determine
9-6 whether the proposal represents a responsive and responsible
9-7 proposal.
9-8 (c) The state agency shall then review the cost aspects of
9-9 the responsive and responsible proposals.
9-10 Sec. 2259.154. AWARD OF CONTRACT OR DECISION TO KEEP WORK
9-11 IN-HOUSE. A state agency, as a result of each request for
9-12 proposals process, shall:
9-13 (1) award a contract to provide the good or service to
9-14 the private provider whose responsible and responsive proposal
9-15 offers the lowest cost; or
9-16 (2) continue to perform the activity in-house in
9-17 accordance with its own proposal, if the proposal of the state
9-18 agency is responsible and responsive and offers the lowest cost.
9-19 (Sections 2259.155-2259.200 reserved for expansion
9-20 SUBCHAPTER E. REQUIREMENTS AND GOALS APPLICABLE TO ALL
9-21 OUTSIDE PROCUREMENTS
9-22 Sec. 2259.201. APPLICABILITY. This subchapter applies to
9-23 all contracts for the procurement of goods and services by a state
9-24 agency.
9-25 Sec. 2259.202. REQUIREMENT TO PERIODICALLY COMPETE FOR
9-26 CONTRACT. A good or service provided to a state agency under a
9-27 competitively awarded contract shall be subjected to the
10-1 competitive contracting process at least once every five years.
10-2 The period of a contract to provide a good or service to a state
10-3 agency, including renewal options, may not exceed five years.
10-4 Sec. 2259.203. CHANGE IN PAYMENT AMOUNT. (a) A contract
10-5 payment amount to a private contractor or another state agency may
10-6 not be changed except as provided in the competitively awarded
10-7 contract for the good or service.
10-8 (b) Payment changes in a contract must be limited to
10-9 indices, escalators, deflators, changes in service level, and other
10-10 expressly stated or calculable amounts that are consistent with the
10-11 proposal of the private contractor or of the other state agency
10-12 that is awarded the contract.
10-13 (c) A state agency may not increase payment to an in-house
10-14 or private provider of services except in the manner explicitly
10-15 stated in the terms of the contract. Contract rates must be fixed
10-16 or indexed to a specific indicator.
10-17 Sec. 2259.204. CHANGING FROM COMPETITIVE PROCUREMENT TO
10-18 NONCOMPETITIVE PROCUREMENT OR TO IN-HOUSE PERFORMANCE. A state
10-19 agency that has procured a good or service through a competitive
10-20 process may not:
10-21 (1) procure the good or service from an external
10-22 source through a noncompetitive process; or
10-23 (2) begin to produce the good or perform the service
10-24 in-house without first conducting a make or buy analysis and
10-25 competitively selecting its own proposal in accordance with this
10-26 chapter.
10-27 Sec. 2259.205. STATE AGENCY REQUIREMENTS RELATING TO PRIVATE
11-1 EMPLOYMENT. A state agency may not establish any requirement
11-2 relating to conditions of employment for employees of its
11-3 contractors other than those required by applicable local, state,
11-4 and federal law.
11-5 Sec. 2259.206. CAPITAL FACILITIES AND EQUIPMENT. (a) Each
11-6 state agency shall make its capital facilities and equipment
11-7 available for operation by a private contractor that is providing
11-8 the state agency with a good or service under a competitive
11-9 contract to the maximum extent feasible, subject to supervision by
11-10 the state agency.
11-11 (b) A state agency may deny a private contractor the use of
11-12 its capital facilities and equipment only if the state agency
11-13 itself would not be able to use the facilities or equipment in
11-14 relation to providing the good or service if it were providing the
11-15 good or service in-house.
11-16 Sec. 2259.207. INTERIM CONTRACTS. (a) If the public
11-17 interest requires it, a state agency may execute interim standby
11-18 competitive contracts with one or more private contractors to
11-19 provide any good or service on an interim basis.
11-20 (b) Any good or service provided under an interim standby
11-21 contract must be subjected to the competitive contracting process
11-22 within six months after the date the interim standby contract is
11-23 awarded.
11-24 Sec. 2259.208. CONTRACTING GOALS. (a) Contracts should be
11-25 limited in size so that no one operator or group of operators
11-26 controls a major portion of providing a good or service. The
11-27 legislature finds that this practice tends to preserve competition,
12-1 limit the potential for corruption, and protect the public from the
12-2 risk of loss of service in case of contract default.
12-3 (b) To foster a healthy competitive environment, contracts
12-4 should be of limited duration.
12-5 (c) Contract expiration dates should be rotated and, as much
12-6 as possible, should be distributed throughout the calendar year to
12-7 avoid disruption of services and to promote the most effective use
12-8 of administrative time.
12-9 (d) Contracts should be flexible in that a contractor should
12-10 guarantee a range of unit prices for a range of service levels,
12-11 without the need for a change in contract, to allow for service
12-12 flexibility and help ensure that if one contractor defaults,
12-13 another could provide substitute service.
12-14 (e) Contracts and requests for proposals should be precise
12-15 and unambiguous. Notwithstanding the need for flexibility, requests
12-16 for proposals must accurately specify total revenue miles, total
12-17 revenue hours, days of operation, and each component of operation
12-18 and performance, including performance standards and penalties,
12-19 that would affect the response to a request for proposals or the
12-20 performance of a contractor.
12-21 (f) Advertisements of requests for bids or proposals should
12-22 be widely distributed to encourage competition, and a state agency
12-23 should allow sufficient time for requests for materials before
12-24 prebid conferences and allow periods for questions and answers.
12-25 (g) Sufficient time should be allowed between the award of
12-26 the contract and the start of service to minimize the risks of
12-27 limiting competition and increasing costs and of contract defaults.
13-1 SECTION 2. State agencies shall fully comply with Chapter
13-2 2259, Government Code, as added by this Act, as soon as practicable
13-3 and not later than September 1, 1998.
13-4 SECTION 3. This Act takes effect September 1, 1997.
13-5 SECTION 4. The importance of this legislation and the
13-6 crowded condition of the calendars in both houses create an
13-7 emergency and an imperative public necessity that the
13-8 constitutional rule requiring bills to be read on three several
13-9 days in each house be suspended, and this rule is hereby suspended.