Amends the law regarding privatization to include restrictions on the privatization of public services and enhance government accountability. (SD1)

A BILL FOR AN ACT

PART I

SECTION 1. The legislature finds that it is necessary to ensure that access to public information guaranteed by state law is not hindered if public services are provided by private contractors. The purpose of this Act is to amend the law regarding privatization to include restrictions on the privatization of public services and enhance government accountability. Nothing in this Act is intended to extend the sunset date of part II of Act 90, Session Laws of Hawaii 2001, beyond June 30, 2007.

SECTION 2. Act 90, Session Laws of Hawaii 2001, is amended by amending section 2 to read as follows:

"CHAPTER

§   -1 Scope and application. This chapter preempts and supersedes all other state law with regard to determining whether services, including services obtained in conjunction with the procurement of goods and construction, funded by the State or any of its counties, should be provided exclusively by government or obtained through government contracts from the private sector. Procurement laws shall be applied, as appropriate, if a determination is made pursuant to this chapter that a service should be obtained by contract from the private sector.

§   -2 Determination; standards. (a) Notwithstanding any law to the contrary, including but not limited to chapters 46, 76, 77, 78, 89, and 89A, any other applicable civil service law, customary or historical past practices, or the fact that the services hereinafter described may have been performed by persons or positions in civil service, any state or county official in whom procurement authority is vested by law may enter into a contract financed by public funds, with a private entity to obtain services, including services provided in conjunction with the procurement of goods or construction, from a private entity, when there is reasonable basis to believe that the service of equivalent or better quality than that which could be provided by a government agency can be provided at lower cost.

(b) For purposes of this chapter, a "private entity" is any individual, company, or organization that is not an employee or agency within the federal, state, or county government.

(c) In the determination made pursuant to this chapter, the state or county official shall consider whether contracting with the private entity will:

(d) Any employee displacements shall be subject to section 46-36 or 89A-1(e) as appropriate.

§   -3 Legislative review. (a) Before any agency, department, or other unit of the State or a county proposes a privatization contract with a value of $500,000 or more over the life of the contract, the contract shall not be valid unless approved by the legislature or the respective county council. The agency, department, or other unit shall give written notice of the proposed privatization to the president of the senate and the speaker of the house of representatives, or county council, as appropriate. If the privatization is to be accomplished pursuant to a request for proposal or invitation to bid, the notice shall be given at least sixty days prior to the issuance of the request for proposal or invitation to bid. If the privatization is to be accomplished without a request for proposal or invitation to bid, the notice shall be given at least sixty days prior to entering into negotiations with any contractor or provider. In no instance shall the bid or request for proposal be divided into units for the purpose of evading legislative oversight.

(b) The notice required by this section shall include a description of the program proposed for privatization, a statement of the reasons for the proposed action, including a financial analysis of the anticipated fiscal impact of the action, and an explanation of the action with respect to any affected employee.

(c) No privatization contract under this section is valid and binding until the legislature or the respective county council has approved it. If disapproved, the contract or negotiations shall not be implemented.

§   -4 Contract criteria. (a) To be considered for an award of a contract, the proposer shall demonstrate that it has:

(b) The proposer of a privatization contract shall agree that the State or county may cancel the contract at any time after the first year of operation, without penalty to the State or county, on giving ninety days written notice.

(c) A contract may provide for annual contract price or cost adjustments, except that any adjustment may be made only once each year, effective on the anniversary of the effective date of the contract. If any adjustment is made pursuant to the terms of the contract, it shall not exceed the per cent of change in the average consumer price index as published by the United States Department of Labor, Bureau of Labor Statistics between that figure for the latest calendar year and the next previous calendar year.

(d) Any price or cost adjustments to a contract in excess of $500,000 that are different than those authorized in subsection (c) shall be made only if the legislature specifically authorizes the adjustments and appropriates the moneys for that purpose.

(e) An award of a contract shall not be made unless an acceptable proposal is received pursuant to any request for proposals. For purposes of this subsection, "acceptable proposal" means a proposal which substantially meets all of the requirements or conditions set forth in this section and which meets all of the requirements in the request for proposal.

(f) A proposal shall not be accepted unless the proposal offers cost savings to the State or a county. Cost savings shall be based upon all relevant costs. As used in this subsection, "relevant costs" means the total costs of the contract, including the costs of transition from public to private operation, monitoring and administering contract performance, and additional unemployment and retirement benefits paid to displaced workers, if any.

(g) A proposal shall not be accepted unless the proposal offers a level and quality of services that are at least functionally equal to those that would be provided by the State or a county.

§   -5 Review of contract costs. (a) Any State or county agency considering whether to enter into a privatization contract shall prepare a public-private cost analysis to evaluate which public costs will be reduced by contracting out the function. Cost comparisons shall be based upon the total costs of the contract, including the costs of transition from public to private operation, monitoring and administering contract performance, and additional unemployment and retirement benefits paid to displaced workers, if any.

(b) If a bidder proposes to perform any or all of the contract outside of the State, the contract cost shall be increased by the amount of income tax revenue, if any, which will be lost to the State by the elimination of state or county employees, as determined by the department of taxation or the county department of finance to the extent it is able to do so.

§   -6 Review of contractor. (a) Any state or county department considering whether to enter into a privatization contract shall require the bidders or negotiators to submit a certification that the contractor and its supervisory employees while in the employ of the contractor, shall have no adjudicated record of wilful noncompliance with any federal or state regulatory law within the past five years, including but not limited to laws concerning employee health and safety, labor relations, environmental protection, non-discrimination, affirmative action, and conflicts of interest.

(b) This information shall specify the date of the complaint, citation, court or administrative finding, the enforcement agency, rule, law, or regulation involved, and any additional information the contractor elects to submit.

§   -7 Managed competition. At least sixty days prior to publishing any notice soliciting bids for a privatization contract, a state or county agency shall notify each collective bargaining organization representing employees of the agency of the planned solicitation. After consulting with the potentially affected bargaining units, the agency shall allow its employees the opportunity to submit proposals for improving the operations, efficiency, or organization of the program being considered for privatization. The agency shall also provide adequate resources and training to encourage and assist agency employees to submit a bid to provide services that are the subject of the privatization contract. The agency shall consider any employee bid on the same basis as other bids. An employee bid may be made as a joint venture with other persons.

§   -8 Monitoring and enforcing privatization contracts. (a) Any private contractor awarded a privatization contract, and any subcontractor to a private contractor subject to these provisions, shall file with the state or county department copies of financial audits of the private contractor prepared at least annually during the term of the contract.

(b) All privatization contracts shall include a contract provision specifying that in order to determine compliance with these principles and the contract, the private contractor shall be required to provide the State and the counties reasonable access, except where prohibited by federal, state, or county laws, regulations, or rules, through representatives of the private contractor, to facilities, records, and employees that are used in conjunction with the provision of contract services.

(c) The private contractor shall submit a report not less than annually during the term of the privatization contract, detailing the extent to which the contractor has achieved the specific quantity and standard of quality of the subject services as specified by the state or county department, and its compliance with all federal, state, and county laws, including any complaints, citations, or findings issued by administrative agencies or courts.

(d) The State or county may seek contractual remedies for any violation of a privatization contract under chapter 103D.

§   -9 Public access to information. (a) Any public record which a state or county department provides to a contractor or subcontractor shall remain a public record for the purposes of chapter 92F, and the enforcement provisions of that chapter shall apply to any refusal to disclose records under this section.

(b) With regard to any public record, the state or county department and the contractor or subcontractor shall comply with the requirements of chapter 92F.

(c) No contractor, subcontractor, employee, or agent of a contractor shall sell, market, or otherwise profit from the disclosure or use of any public records which are in its possession pursuant to a contract, subcontract, or amendment to a contract, except as authorized in the contract, subcontract, or amendment.

§   -10 Prohibition against discrimination or retaliation for disclosure of information. (a) No person shall retaliate or discriminate in any manner against any public employee or employee of a private contractor because the employee in good faith:

(b) No person shall retaliate or discriminate in any manner against any public employee or employee of a private contractor because the employee has attempted or has an intention to engage in an action described in subsection (a) of this section.

(c) No person shall by contract, policy, or procedure prohibit or restrict any employee of a private contractor from engaging in any action for which a protection against discrimination or retaliation is provided under subsection (a). (d) This section does not protect disclosures that would violate federal or state law or diminish or impair the rights of any person to the continued protection of confidentiality of communications provided by state or federal law.

(e) With respect to the conduct described in subsection (a)(1), an employee of a private contractor shall be considered to be acting in good faith if the employee reasonably believes:

(f) The identity of an employee of a private contractor who complains in good faith to a government agency or department or any member or employee of the legislature or a county council about the quality of service provided by a private contractor shall remain confidential and shall not be disclosed without the knowing written consent of the employee of the private contractor and except in the case in which there is imminent danger to health or public safety or an imminent violation of criminal law.

(g) Any current or former public employee or employee of a private contractor who believes that the employee has been retaliated or discriminated against in violation of subsection (a), (b), or (c) may file a civil action in any state court of competent jurisdiction against the person believed to have violated subsection (a), (b), or (c).

[§ -3] §   -11 Annual reports. Each state and county department and agency that uses the contracting process set out in this chapter, shall submit a report to the legislature no later than twenty days prior to the convening of the regular session of each year beginning with 2002. The report shall include:

PART II

SECTION 3. Section 46-36, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) Subject to the approval of the governor and the respective mayor of the county, the agency designated by the mayor with the responsibility to oversee the managed process for public-private competition for government services shall:

SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 5. This Act shall take effect on July 1, 2005; provided that section 2 of this Act shall be repealed on June 30, 2007.