BILL ANALYSIS |
C.S.H.B. 3241 |
By: Price |
State Affairs |
Committee Report (Substituted) |
BACKGROUND AND PURPOSE
Interested observers maintain that state government has made a shift over the past few decades from directly delivering services to contracting for the delivery of many of those services. These interested observers point to the increasing percentage of the state's budget that is spent through contracts, ranging in amounts from hundreds of dollars to billions of dollars. There are concerns that adequate accountability and oversight mechanisms have not been put in place to monitor the contracts.
Recent news coverage and reports from various state agencies have outlined many problems with the way state government contracts for goods and services, highlighting the need for stronger contracting solicitation safeguards, improved contract management practices, and reporting and oversight of the contracts across state government agencies.
In an effort to address these needs, C.S.H.B. 3241 seeks to enhance solicitation safeguards and contract oversight and reporting requirements, strengthen conflict of interest controls, and increase transparency and accountability so that there is knowledge about and confidence in the way state government is spending tax dollars.
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CRIMINAL JUSTICE IMPACT
It is the committee's opinion that this bill expressly does one or more of the following: creates a criminal offense, increases the punishment for an existing criminal offense or category of offenses, or changes the eligibility of a person for community supervision, parole, or mandatory supervision.
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RULEMAKING AUTHORITY
It is the committee's opinion that rulemaking authority is expressly granted to each applicable state agency in SECTION 16 of this bill and to the board of regents of each institution of higher education in SECTION 21 of this bill.
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ANALYSIS
C.S.H.B. 3241 amends the Government Code to require the state auditor, in devising the state audit plan, to consider the performance of audits on contracts entered into by the Health and Human Services Commission (HHSC) that exceed $100 million in annual value, including a contract between HHSC and a managed care organization. The bill requires the state auditor to collaborate with the financial managers in the Medicaid/CHIP division of HHSC in performing such an audit, authorizes the audit to be limited in scope to target an area of the contract that the state auditor determines poses the highest financial risk to the state, requires the audit to determine whether the entity contracting with HHSC has spent state money in accordance with the purposes authorized in the contract, and authorizes the state auditor to contract with a private auditor to perform the audit.
C.S.H.B. 3241 requires the comptroller of public accounts, in cooperation with the governor's budget and policy staff, to conduct a study examining the feasibility and practicality of consolidating state purchasing functions into fewer state agencies or one state agency. The bill requires the study to examine the cost savings to the state that may be achieved through abolishing offices or departments of state agencies that have a dedicated office or department for purchasing and through consolidating or reducing the number of vendors authorized to contract with the state to allow the state to better leverage its purchasing power. The bill requires the comptroller, not later than December 31, 2016, to prepare and deliver to the governor, the lieutenant governor, and each member of the legislature a report on the findings of the study and sets out information to be included in the report. The bill requires the comptroller to post the report on the comptroller's website by the same deadline. The bill's provisions relating to the study expire January 1, 2018.
C.S.H.B. 3241 requires a state agency, as that term is defined in statutory provisions relating to the preservation and management of state records and other historical resources, to retain in its records each contract entered into by the agency and all contract solicitation documents related to that contract and authorizes a state agency to destroy the contract and documents only after the fourth anniversary of the date the contract is completed or expires.
C.S.H.B. 3241 makes it a Class A misdemeanor offense for a former state officer or employee of a state agency who during the period of state service or employment participated on behalf of a state agency in a procurement or contract negotiation involving a person to accept employment from that person before the second anniversary of the date the officer's or employee's service or employment with the state agency ceased. This offense applies only to a state officer or employee whose service or employment with a state agency ceases on or after the bill's effective date.
C.S.H.B. 3241, in a provision specifying that the definition of "enterprise resource planning" as the term relates to state accounting procedures includes the administration of a state agency's purchasing, clarifies that purchasing includes solicitations and contracting. The bill requires state agencies to report contract and purchasing information in the uniform manner required by the comptroller. The bill authorizes a state agency in the legislative branch to elect to participate in the enterprise resource planning system developed under statutory provisions governing state agency internal accounting systems.
C.S.H.B. 3241 requires the system of training and continuing education established for state agency purchasing personnel and administered by the comptroller to include ethics training and requires the system of training, continuing education, and certification for such personnel to include training on the selection of an appropriate procurement method by project type and training conducted by the Department of Information Resources (DIR) on purchasing technologies. The bill specifies that the training and continuing education that must be received to the extent required by comptroller rule by all state agency purchasing personnel, including agencies exempted from the comptroller's purchasing authority, must include ethics training.
C.S.H.B. 3241 requires each state agency, after a contract is completed or otherwise terminated, to review the vendor's performance under the contract and requires the agency, using the vendor performance tracking system described under the bill's provisions, to report to the comptroller on the results of the review. The bill exempts from this requirement an enrollment contract described by a certain provision of the Texas Administrative Code as it exists on September 1, 2015. The bill requires the comptroller to evaluate a vendor's performance based on the information reported by the agency and criteria established by the comptroller. The bill requires the comptroller to establish an evaluation process that allows vendors who receive an unfavorable performance review to protest any classification given by the comptroller. The bill requires the comptroller to include the performance reviews in a vendor performance tracking system and authorizes state agencies to use the vendor performance tracking system to determine whether to award a contract to a vendor reviewed in the database. The bill requires the comptroller to make the vendor performance tracking system accessible to the public on the comptroller's website.
C.S.H.B. 3241 removes the authorization for a state agency to purchase goods or services directly from a vendor under a contract listed on the multiple award contract schedule developed by the comptroller and instead authorizes a state agency purchasing goods or services under such a contract, for a purchase with a value of $50,000 or less, to directly award a contract to a vendor included on the schedule without submission of a request for pricing to other vendors on the list; requires the agency, for a purchase with a value of more than $50,000 but not more than $150,000, to submit a request for pricing to at least three vendors included on the schedule in the category to which the purchase relates; and requires the agency, for a purchase with a value of more than $150,000 but not more than $1 million, to submit a request for pricing to at least six vendors included on the schedule in the category to which the purchase relates or all vendors on the schedule if the category has fewer than six vendors. The bill prohibits a state agency purchasing goods or services under such a contract from purchasing goods or services that have a total value exceeding $1 million. The bill specifies that the price listed for a good or service under a multiple award contract is a maximum price and authorizes a state agency to negotiate a lower price for goods or services under a contract listed on the schedule.
C.S.H.B. 3241 requires a state agency contracting to purchase an information technology commodity item to use the list compiled and maintained by DIR of such commodity items available for purchase through DIR that have a lower price than the prices for such commodity items otherwise available to state agencies as follows: for a contract with a value of $50,000 or less, the agency may directly award the contract to a vendor included on the list without submission of a request for pricing to other vendors on the list; for a contract with a value of more than $50,000 but not more than $150,000, the agency must submit a request for pricing to at least three vendors included on the list in the category to which the contract relates; and, for a contract with a value of more than $150,000 but not more than $1 million, the agency must submit a request for pricing to at least six vendors included on the list in the category to which the contract relates or all vendors on the schedule if the category has fewer than six vendors. The bill prohibits a state agency from entering into a contract to purchase a commodity item if the value of the contract exceeds $1 million.
C.S.H.B. 3241 requires a state agency, for a contract awarded by DIR under statutory provisions governing the purchase of information technology commodity items that requires the agency to develop and execute a statement of work to initiate service under the contract, to consult with DIR before submission of the statement of work to a vendor and to post each statement entered into by the agency on the agency's website in the manner required by DIR rule. The bill defines "statement of work" to mean a document that states the requirements for a contract specific to the vendor under that contract that are not specified in a contract awarded by DIR for contracts more than $50,000. The bill specifies that a statement of work executed by a state agency under such a contract is not valid and prohibits money from being paid to the vendor under the terms of the statement of work unless DIR first signs the statement of work.
C.S.H.B. 3241 prohibits a state agency from hiring, or entering into an employment contract, a professional services contract, or a consulting services contract with, an individual who is a former or retired employee of a private vendor under which the individual will perform services for the agency related to the individual's former duties for the vendor for which the vendor contracted with the agency before the second anniversary of the last date on which the individual was employed by the vendor.
C.S.H.B. 3241 requires each state agency employee or official who is involved in procurement or in contract management for a state agency to disclose to the agency any potential conflict of interest specified by state law or agency policy that is known by the employee or official with respect to any contract with a private vendor or bid for the purchase of goods or services from a private vendor by the agency. The bill prohibits a state agency from entering into a contract for the purchase of goods or services with a private vendor with whom any of the following agency employees or officials have a financial interest: a member of the agency's governing body; the governing official, executive director, general counsel, chief procurement officer, or procurement director of the agency; or a family member related to such an employee or official within the second degree by affinity or consanguinity. The bill establishes that a state agency employee or official has a financial interest in a person, defined in statute as a corporation, organization, government or governmental subdivision or agency, business trust, estate, trust, partnership, association, and any other legal entity, if the employee or official owns or controls, directly or indirectly, an ownership interest of at least one percent in the person, including the right to share in profits, proceeds, or capital gains, or if the employee or official could reasonably foresee that a contract with the person could result in a financial benefit to the employee or official. The bill establishes that such a prohibited financial interest does not include a retirement plan, a blind trust, insurance coverage, or an ownership interest of less than one percent in a corporation.
C.S.H.B. 3241 requires each state agency, for each contract for the purchase of goods or services from a private vendor, to post on its website each contract the agency enters into, including contracts entered into without inviting, advertising for, or otherwise requiring competitive bidding before selection of the contractor, until the contract expires or is completed; the statutory or other authority under which a contract that is not competitively bid is entered into without compliance with competitive bidding procedures; and the request for proposals related to a competitively bid contract included on the website until the contract expires or is completed. The bill authorizes a state agency to monthly post the previously described contracts that are valued at less than $15,000. The bill requires each state agency by rule to establish a procedure to identify each contract that requires enhanced contract or performance monitoring and to submit information on the contract to the agency's governing body or, if the agency is not governed by a multimember governing body, the officer who governs the agency. The bill requires an agency's contract management office or procurement director to immediately notify the agency's governing body or governing official, as appropriate, of any serious issue or risk that is identified with respect to a contract monitored under this provision. The bill establishes that these requirements relating to required posting of certain contracts and enhanced contract and performance monitoring do not apply to a memoranda of understanding, interagency contract, interlocal agreement, or contract for which there is not a cost.
C.S.H.B. 3241 requires a state agency to develop and implement, for each contract for the purchase of goods or services that has a value exceeding $1 million, contract reporting requirements that provide information on compliance with financial provisions and delivery schedules under the contract, corrective action plans required under the contract and the status of any active corrective action plan, and any liquidated damages assessed or collected under the contract. The bill requires each state agency to verify the accuracy of any reported information that is based on information provided by a contractor and the delivery time of goods or services scheduled for delivery under the contract. The bill authorizes a state agency to enter into a contract for the purchase of goods or services that has a value exceeding $1 million only if the governing body of the state agency approves the contract and the approved contract is signed by the presiding officer of the governing body or if, for a state agency that is not governed by a multimember governing body, the officer who governs the agency approves and signs the contract. The bill authorizes the governing body or governing official of a state agency, as appropriate, to delegate to the executive director of the agency the approval and signature authority. The bill establishes that a highway construction or maintenance contract that is awarded by the Texas Department of Transportation (TxDOT) by competitive bid is not required to be signed by a member of the Texas Transportation Commission or the executive director of TxDOT but specifies that this exception does not apply to an expedited highway improvement contract, a comprehensive development agreement, a design-build contract, or any other contract entered into by TxDOT.
C.S.H.B. 3241 requires the contract management office or procurement director of a state agency, for each state agency contract for the purchase of goods or services that has a value exceeding $5 million, to verify in writing that the solicitation and purchasing methods and contractor selection process comply with state law and agency policy and to submit to the governing body of the agency, or governing official of the agency if the agency is not governed by a multimember governing body, information on any potential issue that may arise in the solicitation, purchasing, or contractor selection process.
C.S.H.B. 3241 requires each state agency to develop and comply with a risk analysis procedure that must provide for assessing the risk of fraud, abuse, or waste in the contractor selection process, contract provisions, and payment and reimbursement rates and methods for the different types of goods and services for which the agency contracts and for identifying contracts that require enhanced contract monitoring. The bill requires each state agency to publish a contract management handbook that establishes consistent contracting policies and practices to be followed by the agency and that is consistent with the comptroller's contract management guide. The bill specifies that the agency handbook may include standard contract provisions and formats for the agency to incorporate in contracts.
C.S.H.B. 3241 requires each state agency that becomes a participant in the centralized accounting and payroll systems to use the system to identify and record each contract entered into by the agency as specified by the rules, policies, or procedures developed by the comptroller. The bill requires the comptroller to provide as necessary information and state agency contract data contained in the systems to other state agencies with oversight duties, including the Legislative Budget Board (LBB), the state auditor's office, and DIR.
C.S.H.B. 3241 excepts the bill's provisions establishing ethics, reporting, and approval requirements for certain contracts from the specification that statutory provisions relating to state contracting standards and oversight apply only to each procurement of goods or services made by a state agency that is neither made by the comptroller nor made under certain purchasing authority delegated to the agency. The bill establishes that those bill provisions apply to TxDOT and to an institution of higher education acquiring goods or services under specified Education Code provisions.
C.S.H.B. 3241 provides for the Contract Advisory Team, after being notified by a state agency of a change order, contract amendment, contract renewal or extension, or other proposed action that would result in a change to the monetary value of a contract reviewed by the team that has a value of at least $10 million by more than 20 percent, to review the justification for the change order, contract amendment, contract renewal or extension, or other proposed action, as applicable, to determine whether the justification is reasonable considering the circumstances. The bill also provides for the team, if the team determines the justification is not reasonable, to contact the agency for additional justification, and if not satisfactory, forward the contract to the comptroller. The bill requires a state agency that notifies the team of a change order, contract amendment, contract renewal or extension, or other proposed action to include with the notification a justification for the proposed action in the form and containing the information specified by the team. The bill requires the comptroller, for each contract forwarded by the team, to notify the governing body of the agency or the single state officer who governs the agency, the LBB, and each member of the senate and house of representatives.
C.S.H.B. 3241 increases the membership of the Contract Advisory Team from six to nine members by adding to the team one member from TxDOT, one member from the Texas Education Agency, and one member from the Texas Commission on Environmental Quality and requires the respective executive directors of those agencies to each appoint a member of the team, as appropriate, as soon as is practicable after the bill's effective date. The bill requires the team to submit a quarterly report to the LBB on the number of solicitation documents and contracts reviewed by the team in the preceding quarter and whether state agencies accepted or rejected the team's recommendations and any reasons provided by the state agencies for rejecting the recommendations.
C.S.H.B. 3241 amends the Education Code to require the board of regents of an institution of higher education by rule to establish for each institution under the management and control of the board a code of ethics for the institution's officers and employees, including provisions governing officers and employees authorized to execute contracts for the institution or to exercise discretion in awarding contracts; policies for the internal investigation of suspected defalcation, misappropriation, and other fiscal irregularities and an institutional or systemwide compliance program designed to promote ethical behavior and ensure compliance with all applicable policies, laws, and rules governing higher education, including research and health care to the extent applicable; a contract management handbook that provides consistent contracting policies and practices and contract review procedures, including a risk analysis procedure; contracting delegation guidelines; training for officers and employees authorized to execute contracts for the institution or to exercise discretion in awarding contracts, including training in ethics, selection of appropriate procurement methods, and information resources purchasing technologies; and internal audit protocols. The bill sets out required contents of the code of ethics governing an institution of higher education. The bill requires an institution of higher education to establish contract review procedures and a contract review checklist that must be reviewed and approved by the institution's legal counsel before implementation and sets out required contents of the review procedures and checklist.
C.S.H.B. 3241 requires an institution of higher education's policies governing contracting authority to clearly specify the types and values of contracts that must be approved by the board of regents and the types and values of contracts for which contracting authority is delegated by the board to the chief executive officer and by the chief executive officer to other officers and employees of the institution. The bill prohibits an officer or employee from executing a document for the board unless the officer or employee has authority to act for the board and the authority is exercised in compliance with applicable conditions and restrictions. The bill prohibits an institution of higher education from entering into a contract with a value of more than $1 million, including any amendment, extension, or renewal of the contract that increases the value of the original contract to more than $1 million, unless the institution's board of regents approves the contract, expressly delegates authority to exceed that amount, or expressly adopts an exception for that contract. The bill requires the board to approve any amendment, extension, or renewal of a contract with a value that exceeds 25 percent of the value of the original contract approved by the board unless the authority to exceed the approved amount is expressly delegated by the board or an exception is expressly adopted by the board for that contract.
C.S.H.B. 3241 requires the board of regents of an institution of higher education to adopt standards for internal audits conducted by the institution to provide a systematic, disciplined approach to evaluate and improve the effectiveness of the institution's risk management, control, and governance processes related to contracts and to require risk-based testing of contract administration. The bill requires the internal auditor to have full and unrestricted access to all institutional property, personnel, and records and requires an internal auditor to report directly to the board of regents in accordance with the Texas Internal Auditing Act. The bill requires the chief auditor of an institution of higher education to annually assess whether the institution has adopted the rules and policies required by the bill's provisions and to submit a report of findings to the state auditor. The bill requires the state auditor, in auditing the purchase of goods and services by the institution, to determine whether an institution has adopted the required rules and policies.
C.S.H.B. 3241 requires the state auditor, if the auditor determines that an institution of higher education has failed to adopt the required rules and policies, to report that failure to the legislature and to the institution's board of regents and, in consultation with the institution, to adopt a remediation plan to bring the institution into compliance. The bill requires the auditor, if the institution fails to comply within the time established by the state auditor, to find the institution to be in noncompliance and report that finding to the legislature and comptroller. The bill establishes that, in accordance with a schedule adopted by the state auditor in consultation with the comptroller, the authority of an institution of higher education to acquire goods and services under certain Education Code provisions is suspended if the institution fails to comply with the remediation plan within the time established by the state auditor. The bill establishes that, as a result of the suspension, the laws governing acquisition of goods and services by state agencies from which the institution is otherwise exempt shall apply to the institution's acquisition of goods and services.
C.S.H.B. 3241 prohibits an institution of higher education from exercising the acquisition authority granted by certain Education Code provisions unless the institution complies with the bill's provisions establishing required standards for purchasing by institutions of higher education and establishes that an institution that is determined to not be in compliance is subject to the laws governing acquisition of goods and services by state agencies.
C.S.H.B. 3241 requires the comptroller and each affected state agency as necessary, as soon as is practicable after the bill's effective date, to adopt the rules and procedures and take the actions necessary to implement the bill's provisions.
C.S.H.B. 3241 repeals Section 2155.502(d), Government Code, providing for the definition of "telecommunications" for purposes of statutory provisions governing the development of the multiple award contract schedule.
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EFFECTIVE DATE
September 1, 2015.
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COMPARISON OF ORIGINAL AND SUBSTITUTE
While C.S.H.B. 3241 may differ from the original in minor or nonsubstantive ways, the following comparison is organized and formatted in a manner that indicates the substantial differences between the introduced and committee substitute versions of the bill.
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