HB 1707 2003
1	A bill to be entitled
2	An act relating to procurement of personal property and
3	services; creating s. 287.019, F.S.; defining
4	"privatization"; requiring the head of a state agency,
5	prior to the purchase, lease, or acquisition of
6	commodities or contractual services by privatization, to
7	conduct an evaluation of the proposed privatization;
8	requiring the head of a state agency, subsequent to the
9	purchase, lease, or acquisition of commodities or
10	contractual services by privatization, to conduct an
11	evaluation of the privatization; providing evaluation
12	criteria; requiring the State Council for Competitive
13	Government to conduct a quarterly review of completed
14	agency privatization evaluations; providing that a vendor
15	must be a domiciled state corporation or have a
16	significant business presence in the state; providing an
17	effective date.
18
19	WHEREAS, a continuing issue in government reform is the
20	option of privatizing public services, and
21	WHEREAS, privatization is often proposed as a way to
22	improve public services, with proponents claiming that
23	privatization can cut government waste, increase employee
24	productivity, and save tax dollars, and
25	WHEREAS, however, concerns have been raised that
26	privatization can cost more than it saves, can lead to the loss
27	of public control over government services, and may reduce
28	service quality, and
29	WHEREAS, experience has shown that privatization can work
30	well in some cases, produces mixed results in others, and can
31	raise a variety of problems if the process is not well managed,
32	and
33	WHEREAS, privatization in Florida is occurring in a host of
34	public services, ranging from delivery of social services to
35	building roads, and
36	WHEREAS, Florida is also outsourcing government programs
37	and services through public-private partnerships, and
38	WHEREAS, in these partnerships, which are an alternative to
39	full privatization, the private sector and government assume
40	joint responsibility for the design and delivery of public
41	programs and services, and
42	WHEREAS, when assessing privatization potential, the best
43	candidates are programs where there are clearly defined tasks to
44	be performed, good unit cost data can be developed for
45	comparison, good quality and quantity measures are available so
46	that service delivery can be monitored, and private sector
47	service providers already exist, and
48	WHEREAS, it must also be recognized that it may be
49	difficult to privatize many state functions, and
50	WHEREAS, for example, programs that involve the state's
51	police power in which issues of fairness and equity are critical
52	are not good candidates for privatization, and
53	WHEREAS, it should be recognized that market competition,
54	rather than privatization itself, produces cost savings, and
55	WHEREAS, private companies have incentives to reduce their
56	costs to increase profits and market share, whereas government
57	agencies commonly do not face such competition, and
58	WHEREAS, however, when agencies have been placed in a
59	competitive situation, they have frequently improved their
60	performance and were able to under-bid private vendors, and
61	WHEREAS, it is in the public interest of the citizens of
62	the State of Florida that a diligent, comprehensive, ongoing
63	effort at providing realistic assessments and evaluations of
64	privatization efforts be undertaken, NOW, THEREFORE,
65
66	Be It Enacted by the Legislature of the State of Florida:
67
68	Section 1. Section 287.019, Florida Statutes, is created
69	to read:
70	287.019 Privatization evaluation and assessment.--
71	(1) For the purposes of this section, "privatization"
72	means entering into a contract with one or more private entities
73	for the purchase, lease, or acquisition of any commodity or
74	contractual service required by an agency of the state under
75	this chapter when:
76	(a) It is maintained by the department that such commodity
77	or contractual service can be provided in a more efficient
78	manner by a private entity; and
79	(b) The expenditure by the contracting agency for the
80	purchase, lease, or acquisition of commodities or contractual
81	services meets or exceeds the threshold amount provided in s.
82	287.017 for CATEGORY FIVE:
83	1. Twice in any 1-year period; or
84	2. Four or more times during any 3-year period.
85	(2) Prior to the purchase, lease, or acquisition of any
86	commodity or contractual service required by an agency of the
87	state under this chapter which meets the definition provided in
88	subsection (1), the head of the state agency shall conduct an
89	evaluation of the proposed privatization which shall
90	specifically address the potential for the privatization to
91	result in a verifiable cost savings. If it is determined that
92	the proposed privatization will result in a verifiable cost
93	savings, the evaluation must ascertain whether the cost savings
94	be will directly attributable to any of the following:
95	(a) Lower labor costs than that of the state agency.
96	(b) Reduced regulatory requirements.
97	(c) Reduced overhead.
98	(d) Increased flexibility with respect to the motivation,
99	reward, and termination of employees.
100	(e) Access to better equipment than that available to the
101	state agency.
102	(f) The ability to react more quickly to changing
103	conditions than the state agency. If so was this ability
104	attributable to:
105	1. An ability to shift funds to pay unexpected expenses
106	without the encumbrance of budget transfer authority under which
107	the state agency must operate.
108	2. An ability to expand operations more quickly than the
109	state agency.
110	(g) Staffing flexibility, including the ability to obtain
111	specialized expertise by contract or through the hiring of a
112	consultant for one-time occasional projects.
113	(h) The avoidance of political factors, which may include
114	the use of private-sector experts not aligned or associated with
115	partisan political groups.
116	(i) The avoidance of prohibitive or excessive start-up
117	costs needed to provide appropriate up-front funding for service
118	infrastructure.
119	(3) One year after entering into a contract for the
120	purchase, lease, or acquisition of any commodity or contractual
121	service required by an agency of the state under this chapter
122	which meets the definition provided in subsection (1), the head
123	of the state agency shall conduct an evaluation of the results
124	of the privatization to determine whether the privatization
125	yielded or failed to yield the projected cost savings based on
126	the evaluation conducted pursuant to subsection (2) prior to
127	entering into the contract, and an evaluation of the results of
128	the privatization during its first year which shall specifically
129	address whether the privatization resulted in a verifiable cost
130	increase. If it is determined that the privatization resulted in
131	a verifiable cost increase, the evaluation must ascertain
132	whether the cost increase was directly attributable to any of
133	the following:
134	(a) Reduced public accountability. If so, did the lack of
135	public accountability or reduced public accountability manifest
136	itself in increased costs resulting from:
137	1. Lack of public access to service and financial records
138	maintained by the provider.
139	2. Variations in the quality of services being provided to
140	citizens.
141	3. Entering into a contract the term of which was too
142	lengthy, thus precluding the ability to adjust to a changing
143	condition or circumstance.
144	4. A resultant inability to gauge or monitor poor
145	performance. In an instance where such an inability and poor
146	performance resulted in termination of a contract, was increased
147	cost and or hardship incurred because:
148	a. The contractor was a sole-source provider of a service;
149	or
150	b. The contractor was providing a service in which no
151	service disruptions could be tolerated.
152	(b) Service quality problems which include, but are not
153	limited to:
154	1. Providing service to only those who do not have many
155	needs, commonly known as "creaming."
156	2. Identifiable cost-cutting measures that result in cost
157	increases including, but not limited to, frequent replacement of
158	poorly maintained equipment.
159	3. Service quality problems that arise from contract
160	deficiencies which include, but are not limited to:
161	a. Poorly defined responsibilities of the contractor;
162	b. Lack of service quality performance measures;
163	c. The absence of penalties for nonperformance;
164	d. The absence of contingency plans.
165	(c) Higher long-term costs. If so, did the higher long-
166	term costs result from:
167	1. The submission by the contractor of a low initial bid
168	in order to obtain the contract followed by substantially
169	increasing costs in subsequent years when the agency previously
170	providing the service no longer has the staff or authority to
171	perform the service.
172	2. The acceptance of a contract bid that appears low but
173	is in actuality higher than the in-house costs of the agency due
174	to the agency's inability to determine the actual cost of
175	providing services in-house because of agency accounting systems
176	which do not allocate all direct and indirect costs to services.
177	3. Failure in the request for proposals that solicited the
178	bid for the service to mandate that the contractor achieve a
179	specified level of savings.
180	4. Failure of the contract to limit future price
181	increases.
182	(d) Workforce issues including, but not limited to:
183	1. Employee layoffs resulting in morale problems.
184	2. Union challenges to privatization.
185	3. Disruptions resulting from bumping rights when affected
186	employees assume jobs in other areas.
187	4. Failure of an agency's ability to meet Equal Employment
188	Opportunity goals and subsequent discrimination challenges
189	resulting from inordinate numbers of minority groups being
190	removed from state payrolls.
191	5. Failure in a contract to require the contractor to
192	guarantee jobs and wages for a limited time period.
193	(6) The State Council for Competitive Government must
194	conduct a quarterly review of each completed agency
195	privatization evaluation required pursuant to subsection (3).
196	The council may authorize the Office of Program Policy Analysis
197	and Governmental Accountability to conduct the quarterly reviews
198	required under this subsection.
199	Section 2. Any other provision of law to the contrary
200	notwithstanding, a contract for services, request for proposals,
201	or invitation to bid between an agency of the state and a
202	contract vendor succeeding to the operation of a program or
203	function of a state agency shall not be executed unless the
204	vendor is a domiciled corporation in this state or has a
205	significant business presence in the state for the duration of
206	the contract. For purposes of this section, the term
207	"significant business presence" means a retention of
208	substantially all of the filed positions previously assigned to
209	the state agency at substantially the same total cash equivalent
210	of salaries and benefits.
211	Section 3. This act shall take effect upon becoming a law.