Senate Bill sb2756
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Florida Senate - 2004 SB 2756
By Senator Lawson
6-1793-04 See HB
1 A bill to be entitled
2 An act relating to procurement of personal
3 property and services; creating s. 287.019,
4 F.S.; defining "privatization"; requiring the
5 head of a state agency, prior to the purchase,
6 lease, or acquisition of commodities or
7 contractual services by privatization, to
8 conduct a business case evaluation of the
9 proposed privatization; providing elements and
10 components of the evaluation; requiring the
11 head of a state agency, subsequent to the
12 purchase, lease, or acquisition of commodities
13 or contractual services by privatization, to
14 conduct an evaluation of the privatization;
15 providing evaluation criteria; requiring the
16 State Council on Competitive Government to
17 conduct a quarterly review of completed agency
18 privatization evaluations; requiring state
19 agencies to establish a system for monitoring
20 the performance of a privatization contractor
21 and for monitoring the contractor's compliance
22 with the terms and conditions of the
23 privatization contract; requiring state
24 agencies to conduct annual evaluations of the
25 performance of privatization contractors and
26 report their findings to the Legislature, the
27 Office of Program Policy Analysis and
28 Government Accountability, and the Auditor
29 General; requiring the Office of Program Policy
30 Analysis and Government Accountability and the
31 Auditor General to periodically examine any
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Florida Senate - 2004 SB 2756
6-1793-04 See HB
1 privatization in order to assist the
2 Legislature in evaluating whether expected
3 savings and outcomes have been achieved through
4 privatization; providing that a vendor must be
5 a domiciled state corporation or have a
6 significant business presence in the state;
7 providing an effective date.
8
9 WHEREAS, a continuing issue in government reform is the
10 option of privatizing public services, and
11 WHEREAS, privatization is often proposed as a way to
12 improve public services, with proponents claiming that
13 privatization can cut government waste, increase employee
14 productivity, and save tax dollars, and
15 WHEREAS, however, concerns have been raised that
16 privatization can cost more than it saves, can lead to the
17 loss of public control over government services, and may
18 reduce service quality, and
19 WHEREAS, experience has shown that privatization can
20 work well in some cases, produces mixed results in others, and
21 can raise a variety of problems if the process is not well
22 managed, and
23 WHEREAS, privatization in Florida is occurring in a
24 host of public services, ranging from delivery of social
25 services to building roads, and
26 WHEREAS, Florida is also outsourcing government
27 programs and services through public-private partnerships, and
28 WHEREAS, in these partnerships, which are an
29 alternative to full privatization, the private sector and
30 government assume joint responsibility for the design and
31 delivery of public programs and services, and
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Florida Senate - 2004 SB 2756
6-1793-04 See HB
1 WHEREAS, when assessing privatization potential, the
2 best candidates are programs where there are clearly defined
3 tasks to be performed, good unit cost data can be developed
4 for comparison, good quality and quantity measures are
5 available so that service delivery can be monitored, and
6 private sector service providers already exist, and
7 WHEREAS, it must also be recognized that it may be
8 difficult to privatize many state functions, and
9 WHEREAS, for example, programs that involve the state's
10 police power in which issues of fairness and equity are
11 critical are not good candidates for privatization, and
12 WHEREAS, it should be recognized that market
13 competition, rather than privatization itself, produces cost
14 savings, and
15 WHEREAS, private companies have incentives to reduce
16 their costs to increase profits and market share, whereas
17 government agencies commonly do not face such competition, and
18 WHEREAS, however, when agencies have been placed in a
19 competitive situation, they have frequently improved their
20 performance and were able to under-bid private vendors, and
21 WHEREAS, studies have shown that agencies need to
22 systematically plan privatization initiatives and evaluate the
23 expected costs and benefits before carrying out these efforts
24 in order to maximize the potential that privatization will be
25 successful, and
26 WHEREAS, it is in the public interest of the citizens
27 of the State of Florida that a diligent, comprehensive,
28 ongoing effort at providing realistic assessments and
29 evaluations of privatization efforts be undertaken, NOW,
30 THEREFORE,
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Florida Senate - 2004 SB 2756
6-1793-04 See HB
1 Be It Enacted by the Legislature of the State of Florida:
2
3 Section 1. Section 287.019, Florida Statutes, is
4 created to read:
5 287.019 Privatization evaluation and assessment.--
6 (1) For the purposes of this section, "privatization"
7 means entering into a contract with one or more private
8 entities for the purchase, lease, or acquisition of any
9 commodity or contractual service required by an agency of the
10 state under this chapter when:
11 (a) It is maintained by the department that such
12 commodity or contractual service can be provided in a more
13 efficient manner by a private entity; and
14 (b) The expenditure by the contracting agency for the
15 purchase, lease, or acquisition of commodities or contractual
16 services meets or exceeds the threshold amount provided in s.
17 287.017 for CATEGORY FIVE:
18 1. Twice in any 1-year period; or
19 2. Four or more times during any 3-year period.
20 (2) Prior to the purchase, lease, or acquisition of
21 any commodity or contractual service required by an agency of
22 the state under this chapter which meets the definition
23 provided in subsection (1), the head of the state agency shall
24 conduct a business case evaluation of the proposed
25 privatization which shall specifically address the potential
26 for the privatization to result in a verifiable cost savings.
27 A business case evaluation for a privatization proposal shall
28 contain the following elements:
29 (a) Description and rationale.--The description and
30 rationale element shall contain the following components:
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Florida Senate - 2004 SB 2756
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1 1. A description of the program or service to be
2 privatized.
3 2. An analysis of the agency's current performance and
4 associated needs or problems with respect to the program or
5 service that is the subject of the privatization proposal, and
6 proposed solutions.
7 3. The benefits, such as cost savings or program
8 improvements, that are expected to result from privatization.
9 (b) Cost-benefit analysis.--The cost-benefit analysis
10 element shall contain the following components:
11 1. An accounting of the current direct and indirect
12 expenditures for the program or services for which
13 privatization is proposed. Indirect costs, as determined by
14 the agency, include, but are not limited to, providing
15 executive direction, legal services, and administrative
16 support services such as personnel, finance, and budgeting;
17 program direction, monitoring, and other activities that are
18 essential to operating a program but are not directly
19 associated with providing a service; and the salaries,
20 benefits, and expenses of the individuals overseeing the
21 contractor for the privatization. Direct costs, as determined
22 by the agency, include, but are not limited to, salaries and
23 benefits of employees formerly providing the program or
24 service.
25 2. An analysis demonstrating the potential savings or
26 increased costs that are expected to occur as a result of
27 privatization. The analysis shall include the identification
28 of crucial factors that could affect the potential savings
29 realized, the effect of changes in these factors on costs and
30 benefits of the proposal, and a list of state assets that
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Florida Senate - 2004 SB 2756
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1 would be transferred to the contractor if the privatization
2 plan is implemented.
3 3. If the proposed privatization will occur under a
4 share-in-savings contract, a description of the methodology
5 that will be used to calculate savings and payments to a
6 contractor under such contract. For purposes of this section,
7 a "share-in-savings contract" is an agreement in which an
8 agency pays a contractor based on the financial benefits
9 derived from the contractor's performance and which contains
10 quantifiable baseline data that will be used to establish the
11 basis upon which the percentage of savings paid to a
12 contractor will be determined.
13 (c) Contract monitoring and contingency plans.--The
14 contract monitoring and contingency plans element shall
15 contain the following components:
16 1. The process the agency plans to use to monitor the
17 performance of the privatization contractor and the estimated
18 monitoring costs the agency will incur for this oversight
19 function.
20 2. A contingency plan specifying actions that will be
21 taken to address potential problems such as vendor prices
22 exceeding anticipated levels, unexpected delays by the
23 contractor in performing services by required deadlines,
24 failure to meet performance expectations, or inability to meet
25 obligations or abandonment of the contract.
26 (d) Public records access.--The public records access
27 element shall contain the following components:
28 1. A list of public records issues pertinent to the
29 proposed privatization, including whether any confidential or
30 exempt records would be maintained by the contractor and the
31 procedures that would be used to ensure that the contractor
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Florida Senate - 2004 SB 2756
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1 maintains security and privacy of confidential or exempt
2 records.
3 2. Agency plans to require the contractor to make
4 available for inspection and review any program-related
5 records that it produces or collects to the same extent and in
6 the same manner as such records would be available from a
7 state agency.
8 (3) If the business case evaluation conducted pursuant
9 to subsection (2) indicates that the proposed privatization
10 will result in a verifiable cost savings, the evaluation must
11 ascertain whether the cost savings will be directly
12 attributable to any of the following:
13 (a) Lower labor costs than that of the state agency.
14 (b) Reduced regulatory requirements.
15 (c) Reduced overhead.
16 (d) Increased flexibility with respect to the
17 motivation, reward, and termination of employees.
18 (e) Access to better equipment than that available to
19 the state agency.
20 (f) The ability to react more quickly to changing
21 conditions than the state agency. If so was this ability
22 attributable to:
23 1. An ability to shift funds to pay unexpected
24 expenses without the encumbrance of budget transfer authority
25 under which the state agency must operate.
26 2. An ability to expand operations more quickly than
27 the state agency.
28 (g) Staffing flexibility, including the ability to
29 obtain specialized expertise by contract or through the hiring
30 of a consultant for one-time occasional projects.
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Florida Senate - 2004 SB 2756
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1 (h) The avoidance of political factors, which may
2 include the use of private-sector experts not aligned or
3 associated with partisan political groups.
4 (i) The avoidance of prohibitive or excessive start-up
5 costs needed to provide appropriate up-front funding for
6 service infrastructure.
7 (4) One year after entering into a contract for the
8 purchase, lease, or acquisition of any commodity or
9 contractual service required by an agency of the state under
10 this chapter which meets the definition provided in subsection
11 (1), the head of the state agency shall conduct an evaluation
12 of the results of the privatization to determine whether the
13 privatization yielded or failed to yield the projected cost
14 savings based on the evaluation conducted pursuant to
15 subsections (2) and (3) prior to entering into the contract,
16 and an evaluation of the results of the privatization during
17 its first year which shall specifically address whether the
18 privatization resulted in a verifiable cost increase. If it is
19 determined that the privatization resulted in a verifiable
20 cost increase, the evaluation must ascertain whether the cost
21 increase was directly attributable to any of the following:
22 (a) Reduced public accountability. If so, did the lack
23 of public accountability or reduced public accountability
24 manifest itself in increased costs resulting from:
25 1. Lack of public access to service and financial
26 records maintained by the provider.
27 2. Variations in the quality of services being
28 provided to citizens.
29 3. Entering into a contract the term of which was too
30 lengthy, thus precluding the ability to adjust to a changing
31 condition or circumstance.
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Florida Senate - 2004 SB 2756
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1 4. A resultant inability to gauge or monitor poor
2 performance. In an instance where such an inability and poor
3 performance resulted in termination of a contract, was
4 increased cost and or hardship incurred because:
5 a. The contractor was a sole-source provider of a
6 service; or
7 b. The contractor was providing a service in which no
8 service disruptions could be tolerated.
9 (b) Service quality problems which include, but are
10 not limited to:
11 1. Providing service to only those who do not have
12 many needs, commonly known as "creaming."
13 2. Identifiable cost-cutting measures that result in
14 cost increases including, but not limited to, frequent
15 replacement of poorly maintained equipment.
16 3. Service quality problems that arise from contract
17 deficiencies which include, but are not limited to:
18 a. Poorly defined responsibilities of the contractor;
19 b. Lack of service quality performance measures;
20 c. The absence of penalties for nonperformance;
21 d. The absence of contingency plans.
22 (c) Higher long-term costs. If so, did the higher
23 long-term costs result from:
24 1. The submission by the contractor of a low initial
25 bid in order to obtain the contract followed by substantially
26 increasing costs in subsequent years when the agency
27 previously providing the service no longer has the staff or
28 authority to perform the service.
29 2. The acceptance of a contract bid that appears low
30 but is in actuality higher than the in-house costs of the
31 agency due to the agency's inability to determine the actual
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Florida Senate - 2004 SB 2756
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1 cost of providing services in-house because of agency
2 accounting systems which do not allocate all direct and
3 indirect costs to services.
4 3. Failure in the request for proposals that solicited
5 the bid for the service to mandate that the contractor achieve
6 a specified level of savings.
7 4. Failure of the contract to limit future price
8 increases.
9 (d) Workforce issues including, but not limited to:
10 1. Employee layoffs resulting in morale problems.
11 2. Union challenges to privatization.
12 3. Disruptions resulting from bumping rights when
13 affected employees assume jobs in other areas.
14 4. Failure of an agency's ability to meet Equal
15 Employment Opportunity goals and subsequent discrimination
16 challenges resulting from inordinate numbers of minority
17 groups being removed from state payrolls.
18 5. Failure in a contract to require the contractor to
19 guarantee jobs and wages for a limited time period.
20 Section 2. (1) No later than January 1, 2005, each
21 state agency shall establish a system for monitoring the
22 performance of a contractor with whom the state has entered
23 into a contract for the purchase, lease, or acquisition of
24 commodities or contractual services by privatization as
25 defined in section 287.019(1), Florida Statutes, and for
26 monitoring the contractor's compliance with the terms and
27 conditions of the privatization contract.
28 (2) Beginning January 1, 2005, each state agency, in
29 coordination with the State Council on Competitive Government,
30 shall conduct an annual evaluation of the performance of any
31 contractor with whom the state has entered into a contract for
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Florida Senate - 2004 SB 2756
6-1793-04 See HB
1 the purchase, lease, or acquisition of commodities or
2 contractual services by privatization as defined in section
3 287.019(1), Florida Statutes, and report its findings to the
4 Legislature, the Office of Program Policy Analysis and
5 Government Accountability, and the Auditor General.
6 (3) Beginning January 1, 2005, the Office of Program
7 Policy Analysis and Government Accountability and the Auditor
8 General shall be required to periodically examine any
9 privatization as defined in section 287.019(1), Florida
10 Statutes, in order to assist the Legislature in evaluating
11 whether expected savings and outcomes have been achieved
12 through privatization.
13 Section 3. Any other provision of law to the contrary
14 notwithstanding, a contract for services, request for
15 proposals, or invitation to bid between an agency of the state
16 and a contract vendor succeeding to the operation of a program
17 or function of a state agency shall not be executed unless the
18 vendor is a domiciled corporation in this state or has a
19 significant business presence in the state for the duration of
20 the contract. For purposes of this section, the term
21 "significant business presence" means a retention of
22 substantially all of the filed positions previously assigned
23 to the state agency at substantially the same total cash
24 equivalent of salaries and benefits.
25 Section 4. This act shall take effect upon becoming a
26 law.
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