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.