ASSEMBLY LABOR COMMITTEE
ASSEMBLY, No. 2873
with committee amendments
STATE OF NEW JERSEY
DATED: MAY 15, 2014
The Assembly Labor Committee reports favorably and with committee amendments Assembly Bill No. 2873.
The purpose of this bill, as amended, is to ensure that no public services are privatized unless there are cost savings which are not based on increased charges or reduced services to the public, or lowered workforce standards. Each prospective private contractor would be required to demonstrate cost reductions based on improvements such as management efficiencies or technical innovation, not based on added burdens imposed on the members of the public using the services or the employees producing them. The bill requires that a contract for the privatization of public services not be entered into without cost analyses demonstrating that there will be actual cost savings for the public agency and the taxpayers without increased fees, fares, or other charges to the public, reduced quantity or quality of services, or lowered workforce standards, including reduced staff qualifications and remuneration. The bill further requires sustained oversight and public disclosure regarding those contracts to provide accountability to taxpayers, public users of the services, and employees producing the services, that the cost savings actually occur without increased charges, or reduced services or workforce standards, and provides penalties and sanctions for any noncompliance involving agency or contractor misrepresentation, fraud or other malfeasance, misfeasance or nonfeasance.
The bill prohibits any agency of the State or political subdivision from entering into a contract of $250,000 or more to purchase from private entities services previously performed by agency employees, other than legal, management consulting, planning, engineering or design services, prevailing wage construction work, or certain services provided by disabled individuals employed by rehabilitation facilities, unless:
1. The agency solicits competitive sealed bids for the contracts based on a comprehensive statement of requirements by the agency;
2. The contract requires that the public not be charged fares, fees or other charges greater than those currently charged, that the quantity and quality of the services provided equal or exceed the quantity and quality of services currently provided, that the contractor is qualified, and that contractor employees have qualifications and wage and benefit rates at least equal to the agency employees currently performing the services. Contractors are required to submit payroll records to the agency and, upon any failure to pay the agreed upon wage and benefit rates, are subject to the remedies and penalties provided by the “New Jersey Prevailing Wage Act,” P.L.1963, c.150 (C.34:11-56.25 et seq.) for failure to pay the prevailing wage;
3. The agency permits the union of the affected agency employees to review the agency’s estimate of current costs and submit an alternative cost estimate and propose cost saving measures compliant with requirements of the bill and the agency reviews the union estimate and proposal and makes a determination whether to reduce the agency’s estimate of current costs;
4. The contract requires compliance with antidiscrimination standards, requires available positions to be offered to qualified displaced agency employees, and requires the agency to prepare a plan of training and assistance for displaced employees;
5. The contractor and specified associates have no adjudicated record of substantial or repeated noncompliance with any federal or State law pertaining to the operation of a business, including laws regarding contracting and conflict of interest;
6. After receiving bids, the agency publicly designates the bidder to which it proposes to award the contract and issues a comprehensive written analysis of the total contract cost of the designated bid; and
7. The agency provides written certification that the agency and the proposed contract are in compliance with all provisions of the bill and the total estimated contract cost is less than the cost of agency employees performing the services, with a statement of the amount of the savings.
The Office of the State Comptroller would be required to review the certification and prohibit the agency from entering into the privatization contract if the office provides a written determination that the bid does not provide cost savings or that the agency has otherwise failed to comply with any requirement of the bill.
The State Auditor would be required to conduct post-audits of contracts subject to the bill, evaluating whether the projected cost savings were obtained without raising charges, cutting services, or lowering workforce standards. If the noncompliance was related to agency or contractor misrepresentation, fraud or other malfeasance, misfeasance or nonfeasance, the agency or contractor would be subject to penalties and sanctions including, where appropriate, debarment or rescission of contracts, or reimbursement of excess charges to the public and underpayments of employees.
The requirements of the bill do not apply to any privatization contract first entered into before the effective date of the bill or to the renewal or extension of any privatization contract first entered into prior to that effective date.
The committee amended the bill to provide that the exemption from the bill’s provision for contracts for services provided by certain disabled individuals employed by rehabilitation facilities applies to:
1. Contracts in which services are provided principally, not solely, by such individuals; and
2. Individuals employed by, not just at, the rehabilitation facilities.
These amendments make this bill identical to Senate Bill No. 770 (1R).
By Assemblymen Jay Webber and Parker Space
While the sponsors of the bill should be commended for their attempt to bring transparency and accountability to the process of privatizing public services, this bill as currently drafted is clearly designed as an impediment to the potential efficiencies that can be gained through privatization. This bill raises a fundamental question for the members of this body: whom are we serving, the taxpayers, or the people who work for the taxpayers?
The taxpayers of this State pay their hard-earned money to various levels of government in various ways — through property taxes, income taxes, sales taxes, etc. Our elected officials are the stewards of that money and have a fiduciary responsibility to take from the people only what is necessary, and to use the money they take wisely. When government spends taxpayer money, it should provide the best services it can for the lowest cost it can find. It owes nothing less to the taxpayers who fund the State's operations. The option of privatizing some functions is just one avenue government can explore to make sure that it serves its constituents in that way, and it should be an option that every level of government can explore seriously, even if it is not the appropriate tool for every circumstance.
When privatization is appropriate, the public employees affected should be treated fairly, and some suggest that treating those employees fairly demands the kinds of restrictions put in place by this bill. But there is a difference between fair treatment for affected individuals and sabotaging the process of privatization altogether. This bill represents the latter. Moreover, public employees are taxpayers too, and our obligation to use their tax dollars wisely is no different from our obligation to every other taxpayer in the State. A roadblock such as this bill ensures that there will be no cost savings from privatization, and therefore no savings for taxpayers, including the taxpayers who work for public entities. That is why we oppose it.