BILL ANALYSIS |
C.S.S.B. 543 |
By: Zaffirini |
Government Transparency & Operation |
Committee Report (Substituted) |
BACKGROUND AND PURPOSE
It is generally held that the manner in which state agencies engage and administer contracts with vendors is of vital concern for the state because it directly affects the use of state-appropriated financial resources. Interested parties assert that all stages of contract solicitation, negotiation, and management must be skillfully managed to mitigate risk, contain costs, and ensure high quality and that the state would benefit from greater uniformity in state contracting management processes to ensure the best value for each dollar spent. These parties assert that improving the training processes for employees involved in contracting, improving contract reporting and oversight mechanisms at state agencies, and addressing contract amendments, modifications, renewals, or extensions, among other things, would consequently improve the processes by which the state solicits, negotiates, enters, and manages contracts with vendors. C.S.S.B. 543 seeks to establish such improvements.
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CRIMINAL JUSTICE IMPACT
It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change 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 the State Office of Risk Management in SECTION 34 of this bill.
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ANALYSIS
C.S.S.B. 543 amends the Government Code, for purposes of state agency accounting procedures, to specify that purchasing, as included in the definition of "enterprise resource planning," includes solicitations and contracting, to require a state agency's annual financial report to include any claims made against the agency for the preceding fiscal year and the amount paid by the agency in relation to each claim, and to require state agencies, other than a university system or an institution of higher education, to report contract and purchasing information in the uniform manner required by the comptroller of public accounts. The bill requires the centralized accounting and payroll system, or any successor system used to implement the enterprise resource planning component of the uniform statewide accounting project, to provide alerts to the comptroller to notify the comptroller of a state contract, other than a contract of a university system or an institution of higher education, that has a high risk of loss to the state based on parameters identified by comptroller rule, including a change order of more than 20 percent of the original contract's value and a contract entered into in an amount that exceeds a predetermined threshold amount. The bill establishes that if, through the uniform statewide accounting system or a component of that system, the comptroller or an officer or employee of the comptroller's office releases or publishes information that is confidential or excepted from required disclosure in reliance on a determination made by a state agency about the status of the information as confidential or excepted from disclosure, the comptroller, officer, or employee, as appropriate, is immune from any civil or criminal liability for releasing or publishing the information and is not required to comply with the notification requirements of statutory provisions relating to security breach notification by a state agency and of Business & Commerce Code provisions relating to the unauthorized use of identifying information in relation to the release or publication of the information. The bill authorizes a state agency in the legislative branch of state government to elect to participate in the centralized accounting and payroll system or any successor system used to implement the enterprise resource planning component of the uniform statewide accounting project.
C.S.S.B. 543 includes among the periodic audits of a state agency's major systems and controls that must be conducted under a state agency's program of internal auditing the periodic audits of contract management processes and controls and includes in a state agency's program of internal auditing the periodic audits of one or more of the agency's contracts with high-risk factors.
C.S.S.B. 543 revises the statutory prohibition on a state agency using appropriated money to contract with a person to audit the agency to remove the specification that the prohibition applies only to an audit of the financial records or accounts of the agency, to add among the exceptions to the prohibition an audit of the state agency in accordance with a statutory provision regarding the coordination of certain audits under statutory provisions generally relating to the state auditor, and to remove from among the other exceptions to the prohibition the exceptions provided by statutory provisions pertaining to the state lottery, to the Texas Department of Housing and Community Affairs, and to the Texas Turnpike Authority division of the Texas Department of Transportation (TxDOT).
C.S.S.B. 543 requires a state agency purchasing goods or services that exceed $50,000 under a contract listed on the multiple award contract schedule developed by the comptroller to submit a request for pricing to at least three vendors included on the schedule in the category to which the purchase relates or to all vendors included on the schedule in the category to which the purchase relates if fewer than three vendors are included in the category. The bill clarifies, for purposes of the use of the schedule by a state agency, that the price listed for a good or service under a multiple award contract is a maximum price and that a state agency may negotiate a lower price for goods or services under a contract listed on a schedule.
C.S.S.B. 543 adds the following to the information the State Council on Competitive Government is required to consider in comparing the cost of providing a service: the installation costs and any other initial costs associated with a contract with a private contractor, other costs associated with the transition to using a private contractor's services, and cost savings to the state if a private contractor were awarded the contract.
C.S.S.B. 543 increases from $14,000 to $50,000 the minimum threshold amount of contracts, including an amendment, modification, renewal, or extension of the contract, for certain construction projects, professional services, and consulting services that triggers the requirement that a certain written notification be provided to the Legislative Budget Board (LBB).
C.S.S.B. 543 expands the limited applicability of provisions governing state contracting standards and oversight by removing a condition that limited such applicability, with respect to procurements by state agencies other than an institution of higher education and the M.D. Anderson Cancer Center and other than procurements less than a certain monetary amount, to each procurement of goods or services made by a state agency that is made outside the purchasing authority delegated to the agency by the comptroller.
C.S.S.B. 543 expands the definition of "contract," for purposes of statutory provisions generally governing state contracting standards and oversight and for purposes of the applicable bill provisions, to include an agreement or other written expression of terms of agreement, including an amendment, a modification, a renewal, or an extension, for the purchase of goods or services that is entered into or paid for, wholly or partly, by a state agency during a fiscal year. The bill requires each state agency to maintain in a central location all contracts for that agency and to maintain a comprehensive list of all contracts for that agency. The bill requires each state agency to maintain accurate records of all essential information relating to agency contracts, including information on a contract delay or changes to a contract in which total expenditures under the contract increase by more than 20 percent from the original contract amount and including information on cost overruns, including a written explanation of why expenditures have increased under a contract, and specifies that the term "contract," for purposes of this bill provision requiring each state agency to maintain accurate records of all essential information, includes a sole source contract. The bill requires contracts and other related information that must be maintained by a state agency to be retained for the duration of the contract, notwithstanding record retention schedules required to be prepared and submitted under statutory provisions governing the preservation and management of state records and other historical resources.
C.S.S.B. 543 specifies, for the purpose of the bill's contract reporting provision as that provision relates to statutory provisions generally governing state contracting standards and oversight, the Government Code provisions that prescribe the reporting requirements for certain contracts and specifies that the term "contract" includes construction contracts for purposes of this bill provision regarding contract reporting. The bill requires a state agency to procure professional services in accordance with the Professional Services Procurement Act and requires each state agency to establish formal guidelines and procedures for all employees involved in the contracting process regarding who may approve a contract for the agency, for contract planning and solicitation, for contract negotiations, for contract management, and for contract oversight. The bill establishes that a state agency's interagency agreement or contract is governed by the Interagency Cooperation Act and an interlocal contract to which a state agency is a party is governed by the Interlocal Cooperation Act. The bill specifies that the most important considerations in determining the best value for the state in contracting for goods and services are purchase price and whether the goods or services meet specifications, authorizes a state agency to consider, subject to other specified statutory requirements, other relevant factors, and sets out a list of other factors relevant to determining the best value for the state in the context of a particular purchase.
C.S.S.B. 543 authorizes a state agency to use any forms developed by the comptroller as templates, guides, or samples for contracts entered into by the agency. The bill sets out essential contract provisions required in each contract to which the provisions are applicable, other than a grant, and requires a state agency, if the agency determines that the circumstances of a proposed contract require more protection for the state than the essential contract provisions provide, to include a provision in the contract providing for that protection. The bill specifies that, in any contract for the acquisition of goods or services to which a state agency is a party, a provision required by other applicable law to be included in the contract is considered to be a part of the executed contract without regard to whether the provision appears on the face of the contract or the contract includes any provision to the contrary, and the bill requires a state agency, if the agency determines that the circumstances of a proposed contract require more protection for the state than the contract provisions required by state law provide, to include a provision in the contract providing for that protection. The bill requires a state agency to establish a standardized process for renewing all contracts of the agency. The bill requires a state agency to establish a reasonable term for a contract before solicitation of the contract and to make an effort to keep the maximum length of a contract to four years without reissuing a competitive solicitation, including any contract renewals or extensions. The bill requires a contract term so established to be included in a solicitation document and prohibits a state agency from entering into a contract that has an indefinite term.
C.S.S.B. 543 requires a state agency to require, for each contract for goods or services that is subject to statutory provisions relating to state contracting standards and oversight and to the bill's provisions relating to state contracting standards and oversight, that payment under the contract be linked to clear and measurable achievements, such as length of time of work, contract deliverables, or performance measures, and prohibits an agency from making a final payment on such a contract for goods or services unless the agency verifies that all contract deliverables have been received. The bill defines a "contract deliverable," for purposes of statutory provisions generally governing state contracting standards and oversight and for purposes of the applicable bill provisions, as a unit or increment of work required by a contract, including goods, services, reports, or documents.
C.S.S.B. 543 requires a state agency's policy that is established and adopted as one of its contract management policies for the purpose of defining applicable contract monitoring roles and responsibilities of certain staff to establish clear lines of accountability, staff roles and responsibilities, and decision-making authority for program staff, contract management staff, and executive management staff. The bill clarifies, in the existing requirement that the policy clearly define those monitoring roles and responsibilities of internal audit staff and other inspection, investigative, or audit staff, that the roles and responsibilities are those of agency staff, including internal audit staff and other inspection, investigative, or audit staff.
C.S.S.B. 543 requires each state agency to review a contractor's performance under a contract with a value of $25,000 or more after the contract is completed or otherwise terminated and requires an agency to report to the comptroller on the results of the review, using forms made available to the agency. The bill requires each state agency that enters into contracts other than interagency contracts to establish a career ladder program for contract management in the agency. The bill authorizes an employee hired as a contract manager to participate in procurement planning, contract solicitation, contract formation, price establishment, and other contract activities. The bill requires each state agency to determine, in consultation with the state auditor, the amount and significance of contract management duties sufficient for an employee to be considered a contract manager, program staff, or a contract specialist. The bill defines "contract manager," for purposes of statutory provisions generally governing state contracting standards and oversight and for purposes of the applicable bill provisions, as a person who is employed by a state agency and who has significant contract management duties for the state agency.
C.S.S.B. 543 requires each state agency to adopt a policy to establish a monetary threshold above which agency contracts and amendments to or extensions of agency contracts require written authorization by the agency executive director. The bill requires each state agency to annually report to the comptroller a list of persons authorized to approve contracts at the agency and requires the list to include each person's name, position, and supervisory responsibility, if any. The bill prohibits a state agency from negotiating a major contract with only one employee engaging in the negotiation. The bill defines "major contract," for purposes of statutory provisions generally governing state contracting standards and oversight and for purposes of the applicable bill provisions, to mean a contract, including a service contract and the renewal of a contract, that has a value of at least $1 million.
C.S.S.B. 543 requires a contractor's performance to be periodically reviewed throughout a contract's term. The bill requires a state agency to ensure ongoing communication between executive management staff, contract management staff, and program staff of the results of the reviews with specific attention to contracts that are anticipated to be completed later than originally estimated or expected to cost more than the amount that was originally budgeted. The bill requires a state agency, in order to implement these contract review and reporting provisions, to create a system for agency-wide reporting on the status of, activity on, and contractor performance for each contract.
C.S.S.B. 543 requires a state agency that has a contract with a value of $5 million or more to create a contract administration team to ensure and verify the performance of agency contracts with a value of $5 million or more and to maintain within the agency contract oversight expertise to effectively manage contractors.
C.S.S.B. 543 requires a state agency to establish and implement a monitoring process for agency contracts that includes certain specified actions, to establish and implement a process for evaluating potential risk to the state that includes certain specified processes, and to establish and implement a procedure for corrective action to be used when contract implementation or performance problems occur. The bill sets out certain specified information the state agency is required to consider in creating the process for evaluating potential risk. The bill requires a state agency, for each agency contract and based on the assessed risk of the contract, to determine the appropriate frequency and method of contract monitoring, to allocate contract monitoring resources, and to develop a contract auditing plan.
C.S.S.B. 543 requires a state agency to maintain effective communication procedures regarding contract performance. The bill requires the chief financial officer of a state agency, or an individual designated by the agency executive director with similar contract administration duties and responsibilities, to report at least monthly to the executive director on the status of agency contracts. The bill requires such a report to include a clear indication of any contract cost overruns or contracts that are performing poorly and contracts that may cause the state to delay or default on service delivery.
C.S.S.B. 543 requires the comptroller to publish, not later than December 1 of each year, a report on the number and dollar value of sole source and emergency purchases made in the previous fiscal year. The bill requires each state agency to timely provide to the comptroller the information the comptroller requires for the purpose of creating the report in the manner and form specified by the comptroller. The bill requires the comptroller to establish requirements for the provision of such information in consultation with the Contract Management and Oversight Team established under the bill's provisions, the Health and Human Services Commission, and TxDOT. The bill prohibits the comptroller from requiring a state agency to provide information on a contract related to health and human services if the value of the contract cannot be determined at the time of execution of the contract and if any qualified vendor is eligible for the contract.
C.S.S.B. 543 requires each state agency that becomes a participant in the centralized accounting and payroll system, or any successor system used to implement the enterprise resource planning component of the uniform statewide accounting project, 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, after consultation with the Department of Information Resources (DIR). The bill requires the comptroller to provide, as necessary, information and state agency contract data contained in the centralized accounting and payroll system to other state agencies with oversight duties, including the LBB, the state auditor's office, and DIR.
C.S.S.B. 543 subjects an extension of or amendment to a state agency contract, including a change order, to the same agency approval processes as the original contract. The bill prohibits a state agency from extending or amending a contract unless the agency complies with the same agency approval processes for the extension or amendment as required for the original contract and the agency states in writing why the extension or amendment is necessary or advantageous to the state. The bill requires an agency executive director to authorize a contract amendment in writing for state agency contracts valued in excess of $1 million. The bill specifies that these provisions do not apply to a contract amendment, extension, or change order that does not change the cost or terms of the contract and do not affect whether a state agency is required to undertake a new solicitation process in the manner required for a new contract in order to extend or amend a contract.
C.S.S.B. 543 requires a state agency, if a proposed contract amendment or extension changes the monetary value of a major contract by at least 20 percent or $1 million, to submit the amendment or extension for review to the agency's executive director before the agency amends or extends the contract and specifies that such a requirement does not apply to a proposed contract amendment required by a state or federal statute. The bill requires the agency's executive director to be timely notified of any unanticipated contract cost overrun. The bill specifies that its provisions governing changes to contracts do not apply to contract extensions or renewals that are specifically established as a component of the original procurement.
C.S.S.B. 543 requires a state agency to require a contract manager to complete the contract manager training program developed and administered by the comptroller, requires a state agency to maintain a list of contract managers who have completed the contract manager training program, and authorizes a state agency to develop qualified contract manager training to supplement the required training. The bill requires all members of the governing body of a state agency, excluding a state agency that does not enter into any contracts, to complete at least one abbreviated course of the contract manager training program developed and administered by the comptroller.
C.S.S.B. 543 requires a state agency, before the agency solicits a contract, to identify, justify, and document the need for the good or service; to identify general contracting objectives, assumptions, and constraints; to consider alternatives to soliciting the contract; and to determine the preferred method of delivery for the good or service. The bill prescribes the matters required to be included in a solicitation for a contract and the information a state agency, in preparing a contract solicitation, is required to include in the requirements for contract deliverables. The bill requires a state agency to create and follow a procedure for contract closing that includes procedures for verification that all required goods or services have been delivered or performed, inspected, and accepted and that all existing options have been exercised or have expired; for issuance of a contract completion notice by one of the parties; for acquisition of all required forms, reports, and clearances; for verification that other applicable terms have been met; for verification that there are no outstanding claims or disputes; and for final payment.
C.S.S.B. 543 requires the contract management guide for use by state agencies to provide required and recommended contracting processes and procedures and replaces the requirement that the guide provide information regarding the primary duties of a contract manager with a requirement that the guide provide information regarding the primary duties of contract management. The bill expands the list of duties for which the guide is required to provide instruction; specifies, in the requirement that the guide provide information regarding how to select a contractor, that such information provide information regarding how to fairly and objectively select a contractor; and specifies, in the requirement that the guide provide information regarding how to monitor contractor and subcontractor performance, that the information include how to ensure compliance with provisions in a contract that hold the contractor accountable for performance results. The bill removes the requirement that the guide provide sufficient flexibility to accommodate the unique contracting needs of an individual state agency or program, consistent with protecting the interests of the state, and instead requires the guide to provide procedures for documenting agency decisions that do not follow required contracting processes and procedures but are consistent with protecting those interests.
C.S.S.B. 543 authorizes the comptroller to assess a fee for the contracting training provided for contract managers and state agency governing bodies in an amount sufficient to recover the comptroller's costs.
C.S.S.B. 543 requires the LBB to establish a Contract Management and Oversight Team to develop criteria for identifying high-risk factors in contracts; to consult with state agencies on and review high-risk contracts; to provide recommendations and assistance to state agency personnel throughout the contract management process; to coordinate and consult with the quality assurance team created by the state auditor, the LBB, and DIR on all high-risk contracts relating to a major information resources project, as such a project is defined under the Information Resources Management Act; and to coordinate and consult with the comptroller to develop certain criteria for high-risk contracts, identify strategies to mitigate contract risks, and monitor contract activity using information from the centralized accounting and payroll system or any successor system used to implement the enterprise resource planning component of the uniform statewide accounting project. The bill defines "high-risk contract" to mean a state agency contract or purchase order that has a value of at least $10 million; that has a value of less than $10 million but has high-risk factors as identified by the management and oversight team; that is entered into with an entity that is incorporated outside of the United States; that is entered into with an entity that, during the five-year period preceding the date of the purchase or award of the contract, has had a contract with a state agency or federal governmental entity terminated or canceled for certain reasons as specified by the bill; or that meets other criteria that may be established by the management and oversight team, including that the contract or purchase order meet certain criteria specified by the bill.
C.S.S.B. 543 requires each state agency to provide written notice to the management and oversight team not later than the 30th day before the date the agency publicly releases solicitation documents for a high-risk contract. The bill requires a state agency to submit to the management and oversight team information and documentation requested by the management and oversight team that relate to a high-risk contract, including information on contract development, vendor selection, and ongoing contract oversight. The bill requires the management and oversight team to review the submitted information and documentation and make recommendations to ensure that potential risks related to the high-risk contract have been identified and mitigated. The bill requires a state agency to implement the management and oversight team's recommendations and provide any additional documentation required by the management and oversight team to demonstrate that risks related to the high-risk contract have been mitigated and requires the agency, if a recommendation made by the management and oversight team is not implemented, to provide written notice to the management and oversight team before the 31st day after the date the agency received the recommendation. The bill requires the management and oversight team, if, after receiving notice, the management and oversight team determines that significant risks related to the high-risk contract remain, to provide written notice of that fact to the LBB, the governor, and the comptroller with a description of the risk and recommendations to mitigate the risk, including cancellation of the high-risk contract. The bill authorizes the management and oversight team to adopt criteria for waiving these consultation and review requirements.
C.S.S.B. 543 authorizes the LBB, governor, or the comptroller, after review of the written notice provided by the management and oversight team, to recommend that a state agency cancel a solicitation or a high-risk contract if a proposed contract would place the state at an unacceptable risk if executed or if an executed contract is experiencing performance failure or payment irregularities. The bill defines "solicitation," for purposes of the bill's provisions regarding the management and oversight team, as a solicitation for bids, offers, qualifications, proposals, or similar expressions of interest for a high-risk contract. The bill specifies that, with regard to TxDOT contracts, the bill's provisions relating to the management and oversight team apply to contracts that do not relate to highway construction or highway engineering or contracts that are not subject to a Transportation Code provision relating to the informal resolution of certain contract claims and further specifies that such bill provisions do not apply to a contract of the Employees Retirement System of Texas or the Teacher Retirement System of Texas, except for a contract with a nongovernmental entity for claims administration of a group health benefit plan under statutory provisions governing health benefits and other coverages for governmental employees. The bill makes applicable conforming changes regarding this provision.
C.S.S.B. 543 abolishes the Contract Advisory Team established under statutory provisions regarding statewide contract management and created to assist state agencies in improving contract management practices and repeals those applicable statutory provisions. The bill establishes that the validity of an action taken by the advisory team before the abolishment is not affected by the abolition, provides for the transfer of all powers and duties of the advisory team to the management and oversight team, and specifies that a rule, form, policy, procedure, or decision of the advisory team continues in effect as a rule, form, policy, procedure, or decision of the management and oversight team until superseded by an act of the management and oversight team. The bill transfers without change in status any action or proceeding involving the advisory team to the management and oversight team and establishes that the management and oversight team assumes, without a change in status, the position of the advisory team in a negotiation or proceeding to which the advisory team is a party. The bill establishes that a reference in law to the advisory team means the management and oversight team, and the bill makes applicable conforming changes to reflect those changes in reference.
C.S.S.B. 543 requires each state agency to submit ongoing contracts of the agency, except for contracts for goods with a value of $50,000 or less, to the State Office of Risk Management (SORM) for verification of vendor compliance with contract terms and requirements and to correct compliance deficiencies as provided by rules adopted by the office under the bill's provisions. The bill authorizes SORM to contract with a third-party credentialing organization to provide this compliance verification and requires SORM, not later than December 31 of each even-numbered year, to provide a report to the legislature of SORM's findings and recommendations to ensure state contract compliance and mitigate risk to the state. The bill prohibits SORM from requiring a state agency to submit for compliance verification a contract related to health and human services if the value of the contract cannot be determined at the time of the contract's execution and any qualified vendor is eligible for the contract. The bill requires SORM to adopt rules to implement the vendor risk management program, establishes minimum requirements for such rules, including a requirement that the rules set a reasonable fee to be paid by a vendor who enters into a contract with a state agency in an amount that is sufficient to recover SORM's costs under the vendor risk management program and that is less than one percent of the contract, not to exceed $1,000, and requires each state agency to include in each of its contracts a clause that provides that the vendor agrees that the vendor may be charged the fee.
C.S.S.B. 543 specifies that, to the extent of any conflict, its provisions prevail over another act of the 84th Legislature, Regular Session, 2015, relating to state agency contracting and oversight.
C.S.S.B. 543 repeals Subchapter C, Chapter 2262, Government Code.
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EFFECTIVE DATE
September 1, 2015.
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COMPARISON OF SENATE ENGROSSED AND SUBSTITUTE
While C.S.S.B. 543 may differ from the engrossed in minor or nonsubstantive ways, the following comparison is organized and formatted in a manner that indicates the substantial differences between the engrossed and committee substitute versions of the bill.
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