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.