SENATE, No. 390
STATE OF NEW JERSEY
211th LEGISLATURE
PRE-FILED FOR INTRODUCTION IN THE 2004 SESSION
Sponsored by:
Senator NICHOLAS ASSELTA
District 1 (Cape May, Atlantic and Cumberland)
SYNOPSIS
Requires review of certain privatization contracts.
CURRENT VERSION OF TEXT
Introduced Pending Technical Review by Legislative Counsel.
An Act concerning certain privatization contracts of State agencies and supplementing chapter 24 of Title 52 of the Revised Statutes.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. It is the policy of this State that State employees shall perform the public services of the State in preference to contracting out those services to the private sector. The Legislature finds and declares that using private contractors to provide public services formerly provided by State employees, or which are substantially similar to and in lieu of services heretofore provided, or that could be provided, in whole or in part, by State employees, does not always promote the public interest. To ensure that citizens of the State receive high quality public service at a fair cost, and to ensure fair treatment of those State employees who have been providing the public services, the Legislature finds it necessary to regulate the circumstances which may result in the awarding of public service contracts to private business entities, and to require that no decision regarding the privatization of any service provided by the State should be made without a careful evaluation of the long term impact of the privatization on the State, its citizens and its employees. Therefore, no agency of the State shall enter into a privatization contract and no such contract shall be valid unless it complies with the conditions set forth in this act.
2. As used in this act:
"Agency" includes, but is not limited to, an executive officer, department, division, board, commission or other office or officer in the executive branch of the State government.
"Aggregate cost savings" with respect to a privatization contract means the amount by which the net reduction of in-house costs exceeds the entire cost of the privatization contract.
"Entire cost of the privatization contract” means a detailed accounting of all costs under a privatization contract, or pro-rata share of the costs, and all costs resulting from the contract, including:
(1) Costs of labor;
(2) Costs of employer-provided fringe benefits;
(3) Costs of equipment or materials, whether supplied by the State or a private contractor;
(4) All other costs directly or indirectly attributable to transferring the work being performed by State employees to a private business entity under the contract, including, but not limited to, the costs of preparing and bidding the contract, the costs of training the new workforce, bonding costs, insurance liability costs, costs to the public of delayed or reduced services, and recovery costs of returning the work to the agency if required by future decision makers;
(5) Costs borne by the State in the maintenance of any publicly supplied property, equipment or materials;
(6) Costs of administering, inspecting or monitoring the subcontracted service, including, but not limited to, the use of consultant services for this purpose;
(7) Cost of any anticipated unemployment compensation or other benefits, including retraining expenses, for State employees who are displaced as a result of the contracted service;
(8) Cost of lost income tax revenue and other tax revenue to the State through the elimination of agency employees if the contractor performs functions outside of the State.
"Fringe benefits" means all employer-provided fringe benefits including health, dental, vision care, prescription, holidays, vacations, sick and administrative leave, pensions and other retirement benefits.
"Net reduction of in-house costs" means the net reduction of cost to an agency caused by the agency not providing or performing a service which is instead performed or provided by a private business entity under a privatization contract.
"Private business entity" means a non-governmental person or entity.
"Privatization contract" means an agreement, modification of a prior agreement, or combination or series of agreements between a private business entity and an agency under which the entity performs or provides services substantially similar to, and in lieu of, services heretofore provided, or that could be provided, in whole or in part, by employees of the agency.
3. a. In any case of a privatization contract entered into, renewed or extended by an agency after the effective date of this act, the agency shall, prior to soliciting bids or proposals from any prospective or current contractor for the contract or its renewal or extension, prepare a written statement which describes: the requirements of the contract; the procedures for awarding the contract, which shall be in compliance with this act and all other applicable laws; the quantity and standard of quality of the specific services proposed to be the subject of the contract; the rate and total amounts of wages and benefits needed for the employees of the agency to do the work related to the contract; and the net reduction of in-house costs anticipated by the agency in connection with the contract.
b. The agency shall, not less than 90 days prior to any solicitation of bids or proposals, make the statement required by subsection a. of this section available to the public and transmit the statement to the State Auditor and the representatives of all employee organizations whose members may be affected by the privatization contract. Any member of the State Legislature, representative of an employee organization representing affected employees, or affected member of the public may, during the 30 days after the statement is made available to the public, submit to the agency and the State Auditor comments regarding the statement and the proposed privatization contract. If the State Auditor finds that there are inaccuracies in the statement or that any changes are needed in the proposed privatization contract to make it conform with the requirements of law, the State Auditor shall, between 30 and 60 days following the issuing of the statement, report its findings in writing to the agency. The agency shall review the comments and the report prior to soliciting bids or proposals for the privatization contract from prospective contractors.
4. a. In any case of a privatization contract with a total value of more than $100,000 entered into, renewed or extended by an agency after the effective date of this act, the agency, upon selecting a contractor but prior to making a final award of the contract, shall prepare a certification that the contract complies with the provisions of section 5 of this act and shall prepare a cost analysis of the work to be performed under the contract, which shall be used to assess whether it is more effective to use employees of the private business entity or to use existing or additional agency employees to perform the work required. The cost analysis shall be based on the quantity and quality of service described in the statement prepared by the agency pursuant to section 3 of this act and on the agency's calculations of the net reduction of in-house costs attributable to the privatization contract, of the entire cost of the contract, and of the aggregate cost savings due to the contract.
b. The agency shall, not less than 90 days prior to making the final award of the contract, make copies of the certification and cost analysis available to the public and transmit copies to the State Auditor and representatives of all employee organizations whose members perform services which may be subject to the privatization contract. Any member of the State Legislature, representative of an employee organization representing affected employees, or affected member of the public may, during the 30 days after the certification and cost analysis are made available to the public, submit to the agency and the State Auditor written comments regarding the certification, the cost analysis and the proposed privatization contract, and may request the State Auditor to hold a public hearing on the proposed contract. If the State Auditor determines that the nature of the privatization contract warrants a hearing, or if the hearing is requested by a member of the State Legislature, any union representing affected employees, or any affected member of the public, a public hearing shall be held following the 30th day after the receipt of the cost analysis. The purpose of the public hearing will be to gather testimony regarding all aspects of the agency's plan to privatize the service which is the subject of the cost analysis.
c. The State Auditor, after considering any written comments and testimony submitted pursuant to subsection b. of this section, shall review the certification and perform an independent audit of the agency's calculations, make such adjustments to those calculations as it deems appropriate, and issue its determination of the aggregate cost savings, if any, with respect to the privatization contract. The State Auditor shall, between 30 and 60 days following the issuing of the certification and cost analysis pursuant to subsection a. of this section, submit to the agency a written report of its determination of the aggregate cost savings of the contract and of any analysis, concerns, or recommended changes the State Auditor may have regarding the proposed contract. The agency shall review the report before making a final award of the contract. When deciding whether to make a final award of the privatization contract, the agency shall consider not only the projected aggregate cost savings but also the long-term impact of the contract on the ability of the State to resume the service as a State employee-provided service in the event that the contracting of the service proves to be not in the public interest, including the impact of any divestment of capital and equipment by the State in connection with the contract.
d. If the agency decides not to make a final award of the contract to a contractor after making the review of the proposed contract required pursuant to this section and selects another contractor, the agency shall comply with requirements of subsections a., b. and c. of this section when considering the other contractor.
5. Except as provided by section 6 of this act, no privatization contract with a total value of more than $100,000 shall be entered into, renewed or extended by an agency after the effective date of this act unless all the following conditions are met:
a. The aggregate cost savings for the privatization contract are substantial;
b. It is contrary to the public interest to have the function performed directly by the State;
c. The contract provides that State employees directly or indirectly displaced by the terms of the privatization contract after the effective date of this act have the right of first refusal for the jobs under the contract;
d. The agency prepares a plan of assistance for each employee displaced after the effective date of this act who chooses not to work under the terms of the contract, including any training needed to place the employee in a comparable position in that agency, or if that is not possible, with another agency;
e. The contract requires the contractor to provide fringe benefit coverage and a rate of pay and pay progression to its employees performing work under the contract not less than what is provided to State employees performing the work and requires the contractor to submit quarterly payroll reports to the agency, which shall be available for public inspection, listing the name, address, hours worked and the hourly wage paid for each employee who performed work under the contract. The Attorney General may bring a civil action for equitable relief in the Superior Court to enforce this subsection or to prevent or remedy any noncompliance with the provisions of this subsection;
f. The contract prohibits the contractor from increasing fees or other direct or indirect charges to the public for the provision of services and requires the contractor to maintain staffing levels sufficient to ensure no deterioration in the quality and quantity of services provided to the public;
g. The contractor, and its subsidiaries, affiliates, principals and managerial or supervisory employees have no record of noncompliance with any federal or state law regarding the operation of a business, including, but not limited to, laws regarding labor relations, occupational health and safety, environmental protection, nondiscrimination and affirmative action, tax payment and conflicts of interest;
h. The contractor certifies that its hiring practices meet applicable nondiscrimination and affirmative action standards and the contract requires the contractor to comply with a policy of nondiscrimination and equal opportunity for all persons in accordance with applicable nondiscrimination laws, regulations and standards;
i. The awarding of the contract does not have a significant adverse effect on any affirmative action effort of the State;
j. The contractor has disclosed to the State Treasurer and to the State Auditor every suit to which it, or its subsidiaries or affiliates are, or has been a party, whether for alleged violations of law, or arising out of the terms of a contract;
k. The agency and the contractor have disclosed to the State Treasurer and to the State Auditor every report generated by the agency, the contractor or any entity retained by the agency or contractor, analyzing the ability of the contractor to comply with the specifications of the contract;
l. The contractor has disclosed to the State Treasurer and to the State Auditor all political contributions made by the contractor, any of its subsidiaries or affiliates or any principal or managerial employee of the contractor or its subsidiaries or affiliates, to any elected officer of the State or member of the State Legislature, during the four years immediately preceding the date of the bid;
m. The contract clearly states the legal and financial responsibility for damages which arise out of contractor noncompliance, theft, damage, negligence or inability to perform to the quantity and quality standards specified in the contract;
n. The term of the contract is three years or less and the contract provides that it will be voided if it is amended in a manner which has the purpose or effect of avoiding any requirement this act;
o. No principal or management employee of the contractor has worked in the preceding four years for the State in any capacity which relates to work to be performed under the contract;
p. The contractor has complied with requests of the agency, the State Auditor and affected employee organizations, to provide copies of any union contract, personnel manual and documents describing fringe benefits, that cover its employees; and
q. The contracted service is exactly the same as that which is or would be performed by State employees if there was no privatization contract.
Failure of a contractor to meet the conditions of subsection g., j., k., l., o., or p. of this section shall result in revocation of the contract, if the failure becomes known after the award of the contract.
6. If it is impossible for the agency to perform the work with existing or additional employees of the agency because no training is available to provide the employees with the required level of expertise or skill and no workers with the required level of expertise or skill are available to hire, or because the work would be of such an intermittent nature as to be likely to cause regular periods of unemployment for the employees, the agency may enter into a contract with a private business entity for the performance of the work, even if the contract does not provide substantial cost savings. This section shall not be construed or applied as authorizing the privatization of work that has been regularly performed by State employees, including permanent intermittent employees, or the privatization of work for which State employees may be trained or hired.
7. The State Auditor shall, as part of his responsibility under R.S.52:24-4, conduct a post audit of each privatization contract with a total value of more than $100,000 and issue an annual report to the Governor and the Legislature regarding the contract, the first of which shall be issued not more than 90 days after the end of the first year that the contract is in effect, or, in the case of a contract entered into prior to the effective date of this act, not more than six months after the effective date of this act or more than 90 days after the end of the first year that the contract is in effect, whichever is later. The report shall include an evaluation of the actual net reduction of in-house costs, the actual entire cost of the privatization contract, and the actual aggregate cost savings of the contract, and shall include, in the case of a contract entered into, renewed or extended after the effective date of this act, a review of the compliance of the agency and the contractor with the provisions of this act in connection with the contract. For the purposes of paragraph 6 of section 1 of Article 7 of the State Constitution, the duties assigned to the State Auditor by sections 3 and 4 of this act are duties related to post-audits required pursuant to this section and make an essential contribution to the conduct of those post-audits. Any malfeasance, misfeasance or nonfeasance of an agency or any officer of the agency in connection with a privatization contract which is disclosed by any audit or investigation conducted pursuant to this act shall be subject to the provisions of R.S.52:24-7.
8. This act shall take effect immediately.
STATEMENT
This bill establishes procedures for any State agency regarding a privatization contract, which is defined as an agreement between the agency and a private business entity in which the entity provides services which are substantially similar to, and in lieu of, services previously provided, or that could be provided by agency employees.
The bill requires the agency, before soliciting bids or proposals for a privatization contract or its renewal or extension, to prepare a statement describing contract requirements, procedures for awarding, renewing or extending the contract, services subject of the contract, the wages and benefits of the agency employees performing the work, and the anticipated net reduction of in-house costs. The agency is required, at least 90 days before soliciting bids or proposals, to make the statement available to the public, the State Auditor and any employee organization with members performing services subject to the contract. Any State Legislator, employee organization representative or affected member of the public may submit comments to the agency and the State Auditor. The agency is required, before soliciting bids or proposals, to review the comments and any report of the State Auditor regarding the statement or the proposed contract.
The bill requires the agency, upon selecting a contractor for any privatization contract with a total value of more than $100,000, but before making a final award of the contract, to prepare a cost analysis of the contract and certification that the contract complies with the requirements of the bill. Not less than 90 days before the final award of the contract, the agency is required to make the cost analysis and certification available to the public, the State Auditor and affected employee organizations. Any member of the State Legislature or affected employee organization representative or member of the public may, within 30 days after the certification and cost analysis are made available, submit comments to the agency and the State Auditor and request a public hearing. The State Auditor is required to review the certification and perform an audit of the agency's calculations and report its own determination of the aggregate cost savings, if any, with respect to the contract.
The bill requires that for any privatization contract with a total value of more than $100,000:
1. The contract results in substantial aggregate cost savings and it is contrary to the public interest to have the function performed directly by the State;
2. Displaced State workers are given a right of first refusal for the jobs under the contract, or training and other assistance if they choose not to work under the contract;
3. The contractor provides workers under the contract with benefits and a rate of pay and pay progression not less than that provided to State employees performing the work;
4. The contracted service is the same as that performed by State employees in lieu of the privatization contract, there is no increase in charges to the public, and staffing levels are maintained at the level needed to sustain the quality of the service;
5. The contractor's practices meet all applicable nondiscrimination and affirmative action standards and the contract has no significant adverse effect on State affirmative action efforts.
6. The contractor, its subsidiaries and affiliates, and its managerial and supervisory employees have no record of noncompliance with any law regarding the operation of a business, and have not worked in the preceding four years for the State in any capacity related to work to be performed under the contract;
7. The contractor discloses all political contributions it made in connection with State elections during the preceding four years, every suit involving it or its subsidiaries or affiliates, and every report regarding the contractor's ability to comply with the contract, and provides copies of all requested union contracts, personnel manuals, and documents describing fringe benefits, that cover its employees;
8. The contract has a term of not more than three years and states the contractor's liability for damages arising out of contractor noncompliance, theft, damage, negligence or inability of the contractor to perform; and
The bill requires the State Auditor to conduct annual post audits of each privatization contract with a total value of more than $100,000 and issue a report which includes evaluations of the actual net reduction of in-house costs, the actual entire cost of the contract, and the actual aggregate cost savings of the contract, and a review of the compliance of the agency and the contractor with the provisions of this act in connection with the contract.