84(R) SB 20 - Enrolled version

Fiscal Year	Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2016	($2,395,606)
2017	($1,945,606)
2018	($650,000)
2019	($650,000)
2020	($650,000)

Fiscal Year	Probable Savings/(Cost) from General Revenue Fund 1	Change in Number of State Employees from FY 2015
2016	($2,395,606)	7.0
2017	($1,945,606)	7.0
2018	($650,000)	7.0
2019	($650,000)	7.0
2020	($650,000)	7.0

The bill would amend the Government Code to require the State Auditor's Office to consider auditing contracts entered by the Health and Human Services Commission that exceed $100 million in annual value.

The bill would require the Comptroller of Public Accounts (CPA), in cooperation with the Governor's budget and policy staff, to conduct a study examining the feasibility and practicality of consolidating state purchasing functions and reducing the number of vendors authorized to contract with the state.

The bill would amend the Government Code to require agencies to retain records related to contracts for at least seven years after the expiration of the contract.

The bill would prohibit the employment of former state employees and officers within the first two years after state employment if those employees participated in a procurement related to the hiring entity.

The bill would amend the Government Code to specify that purchasing information reported by state agencies in the statewide uniform accounting system should include solicitation and contracting information, as defined by CPA.

The bill would require institutions of higher education to participate in the training and certification process offered by CPA to state agencies.

The bill would amend the Government Code to allow CPA to contract with entities that administer cooperative purchasing programs and agreements.

The bill would require agencies to submit a certain number of requests for pricing on purchases made through multiple award contract schedules at the Department of Information Resources (DIR) depending on the value of the goods, services, and contracts. Agencies would be prohibited from making purchases for commodities in a single fiscal year in excess of $1 million under a single contract in a multiple award schedule. Agencies would also be required to receive approval for statements of work on DIR information technology commodity contracts worth more than $50,000.

The bill would require agencies and institutions of higher education to comply with certain reporting requirements for each contract with a value exceeding $1 million, and to comply with certain additional requirements for each contract with a value exceeding $5 million. Agencies would be required to develop a risk analysis procedure and identify certain types of contracts for enhanced contract or performance monitoring. The bill would also require agencies, including the Texas Department of Transportation (TxDOT), to post online a list of the contracts the entities have entered along with the statutory authorities and request for proposals associated with the procurements.

The bill would amend the Government Code to require agencies to use the vender performance tracking system to determine whether to award a contract to a vendor reviewed in the system. CPA would be required to develop an evaluation process to rate vendors on an "A" through "F" scale. CPA would be required to establish in rule how these ratings affect a vendor's eligibility for state contracts and the grades on the scale that disqualify a vendor from state contracting. The tracking system would be accessible to the public on CPA's website. The bill would also require agencies to consider prior vendor performance when renewing a contract or considering a rebid for a contract.

Additionally, CPA could bar vendors from participating in state contracts if more than two contracts between the vendor and the state have been terminated by the state within the last three years.

The bill would amend the Education Code to make the procurement authority of institution of higher education contingent on implementation of policies and procedures described in the bill. If the state auditor determines that an institution of higher education has failed to adopt the required rules and policies, the auditor will adopt a remediation plan in consultation with the institution. If the auditor finds that the institution fails to comply with the remediation plan, the purchasing authority of the institution would subject to standard agency procurement oversight and procedures.

The bill would amend the Education Code to require the disclosure of research sponsors in certain public communications.

The new debarment and vendor rating requirements will likely lead to significant protests and litigation. The costs associated with these protests and litigation will depend on agency performance evaluations of vendors and the evaluation criteria developed by CPA. Therefore, the potential cost impact of vendor protests and litigation cannot be determined at this time. Given the large number of vendors that hold contracts with the state, the costs could be significant. Likewise, the potential fiscal impacts on state agencies from prohibiting certain vendors from participating in contracts cannot be determined at this time but could be significant, depending on rules adopted by CPA.

This estimate assumes CPA would incur additional administrative costs of $1.3 million in General Revenue to hire 7.0 FTEs in the 2016-17 biennium for legal support for new procurements, ensuring compliance with procurement requirements, and rating vendors in the vendor performance tracking system. Additionally, the CPA would also incur costs of $0.45 million in General Revenue in 2016-17 to contract for assistance to study state procurement.

DIR estimates there would be a cost associated with implementing provisions of the bill including reviewing statements of work for information technology commodity purchases over $50,000. It is anticipated that these cost could be absorbed within existing resources. The agency also anticipates a loss of revenue out of appropriated receipts generated from administrative fees charged to customers of DIR's cooperative contracts program due to the $1 million cap on contracts offered through the program. The agency anticipates that administrative fees would be increased to offset the loss of revenue from purchases through the program. To the extent administrative fees are not increased, there would likely be a reduction in FTEs at DIR.

TxDOT estimates a $2.6 million cost in the 2016-17 biennium to develop a system for identifying and hosting 50,000 contracts on its website annually. This analysis assumes that on-going business costs to maintain this system in fiscal year 2018 and beyond could be absorbed by the agency using existing resources.

In addition to the costs described above, institutions of higher education and state agencies reported some costs associated with implementation of the provisions of the bill, including the verification of contract monitoring information provided by contractors, developing and implementing a risk analysis procedure to identify contracts that require enhanced contract and performance monitoring, and the additional reporting requirements. For purposes of this fiscal note, it assumed that any costs not described above would not be significant and could be absorbed by the institutions and agencies.

LEGISLATIVE BUDGET BOARD
Austin, Texas

FISCAL NOTE, 84TH LEGISLATIVE REGULAR SESSION


May 29, 2015

TO:	Honorable Dan Patrick, Lieutenant Governor, Senate Honorable Joe Straus, Speaker of the House, House of Representatives

FROM:	Ursula Parks, Director, Legislative Budget Board

IN RE:	SB20 by Nelson (Relating to state agency contracting.), Conference Committee Report