Report Title:

Privatization; New Programs; Criteria

 

Description:

Amends the budget law with respect to new government programs by establishing criteria for contracts entered into with private vendors to perform functions that the public sector cannot implement as cost-effectively as the private sector while meeting various objectives and standards of the State.

HOUSE OF REPRESENTATIVES

H.B. NO.

306

TWENTY-FIRST LEGISLATURE, 2001

  

STATE OF HAWAII

  

 

A BILL FOR AN ACT

 

relating to privatization.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. Section 37-68, Hawaii Revised Statutes, is amended to read as follows:

"§37-68 Responsibilities of agencies. (a) Under such rules as may be prescribed by the director of finance with the approval of the governor:

(1) Every agency assigned the task of developing programs and preparing program and financial plans, budgetary requests, and program performance reports shall develop such programs and prepare such plans, requests, and reports and submit the same to the director of finance at such times, on such forms, and in such manner as the director may prescribe. For informational purposes, the University of Hawaii shall submit its program and financial plans, budgetary requests, and program performance reports to the legislature at the same time the university submits them to the director of finance. Where new programs are being proposed, every agency shall demonstrate that the program:

(A) Is an appropriate function of state government; and [, as applicable]

(B) [Can] As applicable, can be implemented by the public sector as cost-effectively as the private sector while meeting the same plans, goals, objectives, standards, measures of effectiveness, wage, salary, conditions of employment, and employee benefit programs of the State; provided that if the new program cannot be implemented by the public sector as cost-effectively as the private sector while meeting the objectives and standards set forth in this paragraph, any contract that an agency enters into with a private vendor to perform those functions shall comply with the criteria established in subsections (b) to (h).

(2) Every agency administering state programs and every agency responsible for the formulation of programs and the preparation of program and financial plans, budgetary requests, and program performance reports, shall furnish the department of budget and finance all such documents and information as the department may from time to time require. Each agency shall make available to the legislature and any member or committee of either house of the legislature, all documents and information as may be requested; and

(3) The director of finance or any employee of the department of budget and finance, when duly authorized, for the purpose of securing information, shall have access to and may examine any books, documents, papers, or records of any agency.

(b) Contracts entered into with private vendors pursuant to subsection (a) are permissible under this section to achieve increased efficiency in the delivery of government services when the director of human resources development determines that all of the following conditions are met:

(1) The contracting agency clearly demonstrates that the proposed contract will result in overall cost savings to the State and that the estimated savings will not be eliminated by contractor rate increases during the term of the contract, subject to the following:

(A) In comparing costs, there shall be included the State's cost of providing the same service as proposed by a contractor. The State's costs shall include the salaries and benefits of staff that would be needed and the cost of space, equipment, and material needed to perform the function;

(B) In comparing costs, there shall not be included the State's indirect overhead costs unless the costs can be attributed solely to the function in question and would not exist if that function were not performed in state service. For this purpose, "indirect overhead costs" means the pro rata share of existing administrative salaries and benefits, rent, equipment costs, utilities, and materials;

(C) In comparing costs, there shall be included in the cost of a contractor providing a service any continuing state costs that would be directly associated with the contracted function. These continuing state costs shall include, but need not be limited to, those for inspection, supervision, and monitoring; and

(D) In comparing costs, there shall not be included any savings to the State attributable to lower health insurance benefits provided by the contractor;

(2) The contracting agency clearly demonstrates that the proposed contract will provide at least the same quality of services as that offered by the contracting agency;

(3) The contract includes specific provisions pertaining to the qualifications of the staff that will perform the work under the contract;

(4) The contract contains nondiscrimination provisions required by law to be included in state contracts;

(5) The contract contains provisions for termination by the State for breach of the contract by the contractor; and

(6) The potential economic advantage of contracting is not outweighed by the public's interest in having a particular function performed directly by state government. In assessing the public's interest, the director shall take into account:

(A) The consequences and potential mitigation of improper or failed performance by the contractor;

(B) Whether performance of the contract involves the improper delegation of a policy-making function; and

(C) The extent to which the contracting preserves the principles of competence in government and the avoidance of political patronage. For this purpose, there shall be considered the applicability of other laws, including those as enumerated in subsection (e), that aid in safeguarding the fundamental principles underlying the civil service system.

(c) The director shall not approve a contract entered into with private vendors pursuant to subsection (a) if the contract would result directly or indirectly in the separation of certified employees from state service. However, nothing contained in this section shall be construed to prevent the separation of certified employees from state service pursuant to any other provision of law for reasons other than privatization.

(d) The contractor shall assume all liability arising from its own acts or omissions under all contracts entered into pursuant to subsection (a). The sovereign immunity and governmental immunity of the contracting agency shall not extend to the contractor, except as otherwise provided by law. Neither the contractor nor the insurer of the contractor may plead the defense of sovereign immunity or governmental immunity in any action arising out of the performance of the contract.

(e) Contracts entered into pursuant to subsection (a) are subject to all other applicable laws, which may include but are not necessarily limited to the following:

(1) State procurement laws, including the Hawaii public procurement code;

(2) Laws governing fiscal administration by the state controller;

(3) Laws governing the management of state moneys by the state director of finance; and

(4) Laws establishing standards of conduct for public officers and employees, including chapter 84, part II.

(f) Using forms supplied by the director of human resources development, every state agency shall submit to the state director a report no later than September 30 of each year setting forth the types and dollar values of contracts entered into with private vendors pursuant to subsection (a) during the preceding fiscal year. The report shall include information on any changes to the types or number of classified positions in the state agency as a direct result of contracts entered into by the agency.

(g) Contracts entered into pursuant to subsection (a) for a term of six months or less that are not expected to recur on a regular basis are not subject to this section.

(h) The director of human resources development shall adopt rules pursuant to chapter 91 to implement this section."

SECTION 2. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 3. This Act shall take effect upon its approval.

INTRODUCED BY:

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