New Jersey-2010-A1720-Introduced

An Act establishing procedures and standards with respect to certain privatization contracts.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. The Legislature finds and declares that:

a. Using private contractors to provide public services formerly provided by State employees does not always promote the public interest;

b. Decisions to use private contractors to provide public services must be based on factors which promote the public interest;

c. To ensure that citizens of the State receive high quality public services at low cost, with due regard for the taxpayers of the State and the needs of public and private workers, it is necessary to regulate privatization contracts for public services and to require a thorough review and analysis of potential cost impacts prior to entering into any such privatization contract; and

d. It is appropriate to require that cost savings of the contract to the State be substantial and significant because of the hazard that the use of private contractors to provide services may prove, in the long term, to be less efficient or more expensive than expected when the contracting commences, and the ability of an agency to resume the public provision of services under those circumstances may be hindered by factors such as the divestment of equipment and capital and the loss of experienced, highly qualified personnel in connection with the contract.

2. As used in this act:

"Agency" includes, but is not limited to, a department, division, board, commission or other office or officer in the Executive Branch of the State government, or any authority or other instrumentality of the State, but does not include any political subdivision of the State.

"Dependent" means any spouse or child of an employee who qualifies for dependent status under the Internal Revenue Code of 1986.

"Employee benefits" means all benefits provided to employees, including, but not limited to, pensions, paid time off and health insurance plans, including coverage provided under those plans to the employee, the employee's spouse and dependent children.

"Privatization contract" or "contract" means an agreement or combination or series of agreements valued at a total of $250,000 or more by which a non-governmental person or entity agrees with an agency to provide services which are substantially similar to and in lieu of, services previously provided, in whole or in part, by regular employees of the agency, except that any agreement solely to
provide legal, management consulting, planning, engineering or design services shall not be considered a "privatization contract."

3. No agency shall enter into a privatization contract, and no privatization contract with the agency shall be valid, unless all of the following requirements are met:

a. The agency shall prepare a written statement of the services proposed to be the subject of the privatization contract, including the specific quantity and standard of quality of the subject services, and solicit competitive sealed bids for the privatization contracts based upon that statement. The day designated by the agency upon which it will accept these sealed bids shall be the same for any and all parties. That statement shall be a public record, and shall be transmitted to the State Auditor for review. The term of a privatization contract shall not exceed five years. No amendment to a privatization contract shall be valid if it has the purpose or effect of avoiding any requirement of this section.

b. For each position in which a bidder will employ any person pursuant to the privatization contract, the statement made by the agency pursuant to subsection a. of this section shall include the rate of wages and employee benefits paid by the agency to the regular agency employee or employees most comparable to the position under the privatization contract. Every bid for a privatization contract and every privatization contract shall include provisions specifically stating the rate of wages and employee benefits for each position, which shall not be less than the rate of wages and employee benefits stated by the agency for comparable agency employees. Each contractor shall submit quarterly payroll records to the agency, listing the name, hours worked, the hourly wage and employee benefit rates paid to each employee, and the agency shall make the records available upon request to any labor organization representing employees of the contractor or employees or displaced employees of the agency. Any contractor who fails to pay the rates of wages and employee benefits required by the contract pursuant to this subsection shall be subject to the remedies which apply in connection with a failure to pay the prevailing wage pursuant to the "New Jersey Prevailing Wage Act," P.L.1963, c.150 (C.34:11-56.25 et seq.), including, but not limited to, the withholding of payments from the agency to the contractor pursuant to section 9 of P.L.1963, c.150 (C.34:11-56.33), the imposition of fines and penalties by the Commissioner of Labor and Workforce Development pursuant to sections 11 and 15 of P.L.1963, c.150 (C.34:11-56.35 and 34:11-56.39), debarment from contracting pursuant to sections 13 and 14 of P.L.1963, c.150 (C.34:11-56.37 and 34:11-56.38), and the actions by workers to recover unpaid amounts in civil actions pursuant to section 16 of P.L.1963, c.150 (C.34:11-56.40). The commissioner shall have the same authority to conduct investigations, inspections and other activities to enforce wage and benefit payments due under contracts pursuant to this section as he has to conduct investigations, inspections and other activities to enforce payments of prevailing wages pursuant to the "New Jersey Prevailing Wage Act," P.L.1963, c.150 (C.34:11-56.25 et seq.).

c. Each bid for a privatization contract and each privatization contract shall require that the staff used by the contractor have certification, licensing and levels of job proficiency equal to or exceeding those of the agency employees currently providing the services, 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 by agency employees, and that the contractor has the demonstrated ability and experience to provide services of that quantity and quality.

d. The contract shall require the contractor to comply with a policy of nondiscrimination and equal opportunity, take affirmative steps to provide that equal opportunity, and offer available employee positions to qualified regular employees of the agency who are displaced or dismissed from agency employment, in whole or in part, because of the privatization contract, and the agency shall prepare a plan of assistance for each employee displaced as a result of the contract, including any training needed to place the employee in a position with the contractor or the agency.

e. The contractor making the bid, and its subsidiaries, affiliates, principals and managerial or supervisory employees are not, when the bid is made or the contract is awarded, or during the ten-year period before the award were not, subject to debarment, suspension, adjudication or conviction, or any criminal conviction at any time, which debarment, suspension, adjudication or conviction is due to substantial or repeated noncompliance with any federal or State law pertaining to the operation of a business, including, but not limited to, laws regarding labor relations, workplace standards, occupational safety and health, public safety and health, environmental protection, nondiscrimination and affirmative action, tax payment and conflicts of interest.

f. The agency shall prepare a comprehensive estimate of the costs of regular agency employees providing the services subject to the contract, including the cost of employee benefits.

g. After soliciting and receiving bids, the agency shall publicly designate the bidder to which it proposes to award the contract and prepare a comprehensive written analysis of the total contract cost of the designated bid, including the costs of transition from public to private operation and any additional unemployment and retirement benefits of agency employees, and the costs of monitoring and administering contract performance. If the designated bidder is headquartered outside the State, or proposes to perform any or all of the work done under contract outside the boundaries 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 corresponding elimination of agency employees.

h. The agency shall provide the State Auditor with a copy of the proposed privatization contract and a written certification that:

(1) The agency has complied with all provisions of this section;

(2) The proposed privatization contract is in the public interest and meets all requirements of this section; and

(3) The total contract cost estimated pursuant to subsection g. of this section is at least 10 percent less than the cost of agency employees providing the services estimated pursuant to subsection f. of this section.

4. a. The agency shall not enter into a privatization contract, and no privatization contract with the agency shall be valid, if the State Auditor notifies the agency, within 30 business days after receiving the certificate required by section 3 of this act, that he objects to the contract. The objection shall be in writing and shall state specifically the State Auditor's finding that the agency or the contract has failed to comply with one or more requirements of section 3 of this act, including findings of the agency that the State Auditor deems to be incorrect, based on independent review by the State Auditor, and any of the findings required by section 3 of this act. The State Auditor may extend the time for an objection for an additional period of 30 business days beyond the original 30 business days by written notice to the agency, stating the reason for that extension.

b. For the purpose of reviewing the agency's compliance and certification pursuant to section 3 of this act, the State Auditor may require by summons the attendance and testimony under oath of witnesses and the production of books, papers and other records relating to that review.

c. The objection of the State Auditor pursuant to subsection a. of this section shall be final and binding on the agency, unless the State Auditor subsequently provides a written withdrawal of the objection, stating the specific reasons, based upon a revised certification by the agency, and upon the State Auditor's review of the revised certification.

5. The State Auditor shall, as part of his responsibility under R.S.52:24-4, conduct a post audit of each privatization contract entered into after the effective date of this act and shall issue, and make available to the public and representatives of employee organizations representing affected employees, an annual report to the Governor and the Legislature regarding the contract, the first of which shall be issued not more than 90 days after the end of the first year that the contract is in effect. The report shall include an evaluation of any actual net reduction of costs for the agency and the State, the actual entire cost of the privatization contract, and any actual cost savings of the contract, and shall include a review of the compliance of the agency and the contractor with the provisions of this act in connection with the contract. The State Auditor shall, upon the conclusion of the contract, prepare and make available to the public a final comprehensive audit report on the effectiveness of the contractor in meeting the goals and requirements of the contract. For the purposes of paragraph 6 of Section 1 of Article 7 of the State Constitution, the duties assigned to the State Auditor by section 4 of this act are duties related to post-audits required pursuant to this act and make an essential contribution to the conduct of those post-audits. Any malfeasance, misfeasance or nonfeasance of an agency or any officer of the agency in connection with a privatization contract which is disclosed by any audit or investigation conducted pursuant to this act shall be subject to the provisions of R.S.52:24-7. Any finding by the State Auditor that a contractor has failed to make the wage or benefit payments required under a privatization contract shall be referred to the Commissioner of Labor and Workforce Development for appropriate enforcement actions.

6. This act shall take effect on the 90th day after enactment but shall not apply to any privatization contract first entered into prior to the effective date.

STATEMENT

This bill is designed to ensure that all relevant factors are taken into consideration when a State agency considers the privatization of public services, creating a procedure which would allow the agency to make choices based on accurate information in a timely manner. The bill sets standards to prevent any decrease in the quality and quantity of services or increase in their cost under a privatization contract by requiring, if the contact has a total value of more than $250,000, that:

1. The agency prepares a statement of the services subject to the contract and solicits competitive sealed bids for the contract to be transmitted to the State Auditor for review. Each bid and contract is required to provide that services be of a quantity and quality not less than the services currently provided by agency employees, that staff used by the contractor have certification, licensing and job proficiency levels not less than agency employees currently providing the services, that the public not be charged fares, fees or other charges greater than those currently charged, and that the wage and benefit rate for each position not be less than the wage and benefit rate for comparable agency employees. 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.

2. 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.

3. The contractor, related firms and key personnel are not subject to debarment, suspension, adjudication or conviction due to substantial or repeated noncompliance with federal or State laws pertaining to business operations.

4. The agency prepares an estimate of the costs of regular agency employees providing the services subject to the contract.

5. After receiving bids, the agency designates the bidder to which it proposes to award the contract and prepares a comprehensive analysis of the total contract cost for the designated bid, including the costs of transition from public to private operation, any unemployment and retirement benefits of agency employees, and administering contract performance. If the designated bidder is headquartered outside the State, or proposes to perform any of the contracted work outside of the State, the contract cost shall be increased by the amount of any income tax revenue lost to the State by the loss of agency employees.

6. The agency certifies to the State Auditor that the agency has complied with all requirements of the bill, the proposed privatization contract is in the public interest and meets all requirements of the bill, and that the total contract cost will be at least 10 percent less than the estimated cost of having agency employees provide the services.

Within 30 days of receiving certification from the agency, the State Auditor may approve the contract, state that the information is incomplete, subpoena the agency for additional data, or object to the contract. If the State Auditor objects to the contract, that decision is final and binding on the agency, unless the State Auditor subsequently provides a written withdrawal of the objection. The State Auditor is also required to conduct annual post audits of each contract and a final audit of the contract to evaluate cost savings of the contract and whether the contractor and the agency have complied with the requirements of the bill.

The requirements of the bill do not apply to any privatization contract first entered into before the effective date of the bill.