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Senate Bill 2356

Senate Bill sb2356

CODING: Words stricken are deletions; words underlined are additions.
    Florida Senate - 2005                                  SB 2356

    By Senator Lawson





    6-1227-05                                               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 state

16         agencies to establish a system for monitoring

17         the performance of a privatization contractor

18         and for monitoring the contractor's compliance

19         with the terms and conditions of the

20         privatization contract; requiring state

21         agencies to conduct annual evaluations of the

22         performance of privatization contractors and

23         report their findings to the Legislature, the

24         Office of Program Policy Analysis and

25         Government Accountability, and the Auditor

26         General; requiring the Office of Program Policy

27         Analysis and Government Accountability and the

28         Auditor General to periodically examine any

29         privatization in order to assist the

30         Legislature in evaluating whether expected

31         savings and outcomes have been achieved through

                                  1

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    Florida Senate - 2005                                  SB 2356
    6-1227-05                                               See HB




 1         privatization; creating s. 14.204, F.S.;

 2         creating the Center for Efficient Government;

 3         providing purposes of the center; providing for

 4         an oversight advisory board to oversee the

 5         activities of the center; providing for

 6         membership of the board; creating s. 110.1095,

 7         F.S.; requiring executive agencies to address

 8         the transition of employees affected by

 9         outsourcing initiatives; requiring agencies to

10         develop job placement policies for such

11         employees; requiring agencies to develop a

12         reemployment and retraining assistance plan for

13         employees; authorizing agencies to provide job

14         skills retraining to any impacted employee who

15         is not offered comparable employment within 1

16         year of separating from state employment;

17         requiring agencies to coordinate the impact and

18         transition of affected employees with the

19         Agency for Workforce Innovation; requiring the

20         coordination of services for state employees

21         with Workforce Florida, Inc., and regional

22         workforce boards throughout the state;

23         requiring agencies to offer critical employee

24         retention salary increases; authorizing

25         agencies to use a percentage of the savings

26         realized from an implemented outsourcing

27         initiative as an employee recognition

28         allocation to reward the employee or group of

29         employees who proposed the initiative;

30         requiring agencies to consider incorporating

31         severance compensation provisions into

                                  2

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    Florida Senate - 2005                                  SB 2356
    6-1227-05                                               See HB




 1         outsourcing contracts; providing an effective

 2         date.

 3  

 4  Be It Enacted by the Legislature of the State of Florida:

 5  

 6         Section 1.  Section 287.019, Florida Statutes, is

 7  created to read:

 8         287.019  Privatization evaluation and assessment.--

 9         (1)  For the purposes of this section, "privatization"

10  means entering into a contract with one or more private

11  entities for the purchase, lease, or acquisition of any

12  commodity or contractual service required by an agency of the

13  state under this chapter when:

14         (a)  It is maintained by the department that such

15  commodity or contractual service can be provided in a more

16  efficient manner by a private entity; and

17         (b)  The expenditure by the contracting agency for the

18  purchase, lease, or acquisition of commodities or contractual

19  services exceeds $10 million annually.

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:

31  

                                  3

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    Florida Senate - 2005                                  SB 2356
    6-1227-05                                               See HB




 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

31  

                                  4

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    Florida Senate - 2005                                  SB 2356
    6-1227-05                                               See HB




 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

                                  5

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    Florida Senate - 2005                                  SB 2356
    6-1227-05                                               See HB




 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.

31  

                                  6

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    Florida Senate - 2005                                  SB 2356
    6-1227-05                                               See HB




 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

11  subsection (1), the Center for Efficient Government shall

12  conduct an evaluation of the results of the privatization to

13  determine whether the privatization yielded or failed to yield

14  the projected cost savings based on the evaluation conducted

15  pursuant to subsections (2) and (3) prior to entering into the

16  contract and an evaluation of the results of the privatization

17  during its first year which shall specifically address whether

18  the privatization resulted in a verifiable cost increase. If

19  it is determined that the privatization resulted in a

20  verifiable cost increase, the evaluation must ascertain

21  whether the cost increase was directly attributable to any of

22  the following:

23         (a)  Reduced public accountability. If so, did the lack

24  of public accountability or reduced public accountability

25  manifest itself in increased costs resulting from:

26         1.  Lack of public access to service and financial

27  records maintained by the provider.

28         2.  Variations in the quality of services being

29  provided to citizens.

30  

31  

                                  7

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    Florida Senate - 2005                                  SB 2356
    6-1227-05                                               See HB




 1         3.  Entering into a contract the term of which was too

 2  lengthy, thus precluding the ability to adjust to a changing

 3  condition or circumstance.

 4         4.  A resultant inability to gauge or monitor poor

 5  performance. In an instance where such poor performance

 6  resulted in termination of a contract, was increased cost or

 7  hardship incurred because:

 8         a.  The contractor was a sole-source provider of a

 9  service; or

10         b.  The contractor was providing a service in which no

11  service disruptions could be tolerated.

12         (b)  Service quality problems which include, but are

13  not limited to:

14         1.  Providing service to only those who do not have

15  many needs, commonly known as "creaming."

16         2.  Identifiable cost-cutting measures that result in

17  cost increases including, but not limited to, frequent

18  replacement of poorly maintained equipment.

19         3.  Service quality problems that arise from contract

20  deficiencies which include, but are not limited to:

21         a.  Poorly defined responsibilities of the contractor.

22         b.  Lack of service quality performance measures.

23         c.  The absence of penalties for nonperformance.

24         d.  The absence of contingency plans.

25         (c)  Higher long-term costs. If so, did the higher

26  long-term costs result from:

27         1.  The submission by the contractor of a low initial

28  bid in order to obtain the contract followed by substantially

29  increasing costs in subsequent years when the agency

30  previously providing the service no longer has the staff or

31  authority to perform the service.

                                  8

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    Florida Senate - 2005                                  SB 2356
    6-1227-05                                               See HB




 1         2.  The acceptance of a contract bid that appears low

 2  but is in actuality higher than the in-house costs of the

 3  agency due to the agency's inability to determine the actual

 4  cost of providing services in-house because of agency

 5  accounting systems which do not allocate all direct and

 6  indirect costs to services.

 7         3.  Failure in the request for proposals that solicited

 8  the bid for the service to mandate that the contractor achieve

 9  a specified level of savings.

10         4.  Failure of the contract to limit future price

11  increases.

12         (d)  Workforce issues including, but not limited to:

13         1.  Employee layoffs resulting in morale problems.

14         2.  Union challenges to privatization.

15         3.  Disruptions resulting from bumping rights when

16  affected employees assume jobs in other areas.

17         4.  Failure of an agency's ability to meet Equal

18  Employment Opportunity goals and subsequent discrimination

19  challenges resulting from inordinate numbers of minority

20  groups being removed from state payrolls.

21         5.  Failure in a contract to require the contractor to

22  guarantee jobs and wages for a limited time period.

23         Section 2.  (1)  No later than January 1, 2006, each

24  state agency shall establish a system for monitoring the

25  performance of a contractor with whom the state has entered

26  into a contract for the purchase, lease, or acquisition of

27  commodities or contractual services by privatization as

28  defined in section 287.019(1), Florida Statutes, and for

29  monitoring the contractor's compliance with the terms and

30  conditions of the privatization contract.

31  

                                  9

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    Florida Senate - 2005                                  SB 2356
    6-1227-05                                               See HB




 1         (2)  Beginning January 1, 2006, each state agency, in

 2  coordination with the Center for Efficient Government, shall

 3  conduct an annual evaluation of the performance of any

 4  contractor with whom the state has entered into a contract for

 5  the purchase, lease, or acquisition of commodities or

 6  contractual services by privatization exceeding $10 million

 7  and report its findings to the Legislature, the Office of

 8  Program Policy Analysis and Government Accountability, and the

 9  Auditor General.

10         (3)  Beginning January 1, 2006, the Office of Program

11  Policy Analysis and Government Accountability and the Auditor

12  General shall be required to periodically examine any

13  privatization exceeding $10 million in order to assist the

14  Legislature in evaluating whether expected savings and

15  outcomes have been achieved through privatization.

16         Section 3.  Section 14.204, Florida Statutes, is

17  created to read:

18         14.204  Center For Efficient Government; creation;

19  purpose; oversight advisory board.--

20         (1)  The Center for Efficient Government is created and

21  administratively housed in the Department of Management

22  Services.

23         (2)  The purpose of the center is to improve the way

24  state agencies deliver services to Florida's citizens. In

25  furtherance of this purpose, the center shall:

26         (a)  Review past outsourcing projects for best business

27  practices.

28         (b)  Review existing outsourcing plans within the state

29  agencies to ensure compliance with center standards and

30  business case criteria, execution of effective contracts with

31  vendors, and implementation of successful change management.

                                  10

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    Florida Senate - 2005                                  SB 2356
    6-1227-05                                               See HB




 1         (c)  Provide to the President of the Senate, the

 2  Speaker of the House of Representatives, and the Governor, by

 3  July 1, annually, a written report containing a list of

 4  outsourcing projects and initiatives that can be developed

 5  over the next 3-year period.

 6         (d)  Maintain a database that contains information

 7  about initiatives which are being performed by contractors to

 8  include, but not be limited to, the lead agency name and

 9  description of program or service being outsourced, names of

10  contractors and subcontractors on contract, projected and

11  actual completion dates by project phase, a description of

12  performance measures contained in the contract, and actual

13  performance measures and projected costs and revenues

14  associated with the contract.

15         (e)  Develop and implement a program to transition

16  impacted employees. This program should recognize their

17  contributions to the state and the state's commitment to

18  minimize the personal impact on such employees while

19  implementing beneficial programs that reduce the cost of

20  government for all citizens of the state. The center shall

21  provide recommendations for this program to the Governor on an

22  ongoing basis.

23         (3)(a)  The Center for Efficient Government Oversight

24  Advisory Board is established for the purpose of reviewing and

25  evaluating the performance of the center in carrying out its

26  duties under this section and investigating and evaluating any

27  issues relevant to the center's review of past outsourcing

28  projects and existing outsourcing plans or any other

29  activities of the center the board deems appropriate. The

30  center shall make reports as it deems necessary to the

31  Governor, the President of the Senate, the Speaker of the

                                  11

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    Florida Senate - 2005                                  SB 2356
    6-1227-05                                               See HB




 1  House of Representatives, and the Legislative Budget

 2  Commission concerning its findings and recommendations. The

 3  board is composed of the following members:

 4         1.  The Chief Financial Officer, who shall serve as

 5  chair of the board.

 6         2.  A member of the Senate appointed by the President

 7  of the Senate, who shall be a member of the majority party.

 8         3.  A member of the Senate appointed by the President

 9  of the Senate, who shall be a member of the minority party.

10         4.  A member of the House of Representatives appointed

11  by the Speaker of the House of Representatives, who shall be a

12  member of the majority party.

13         5.  A member of the House of Representatives appointed

14  by the Speaker of the House of Representatives, who shall be a

15  member of the minority party.

16         6.  The Secretary of the Department of Management

17  Services.

18         7.  The Secretary of Health.

19         8.  The Executive Director of the Agency for Workforce

20  Innovation.

21         9.  The Executive Director of the Department of

22  Revenue.

23         (b)  Board members are entitled to receive per diem and

24  travel expenses as provided in s. 112.061 while carrying out

25  official business of the board and shall be reimbursed by

26  their respective agencies in accordance with chapter 112.

27         (4)  All agencies are directed to render assistance,

28  resources, and cooperation to the center.

29         Section 4.  Section 110.1095, Florida Statutes, is

30  created to read:

31  

                                  12

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    Florida Senate - 2005                                  SB 2356
    6-1227-05                                               See HB




 1         110.1095  Transition of employees affected by

 2  outsourcing initiatives.--

 3         (1)  Executive agencies shall address the transition of

 4  all affected employees in the business case for any

 5  outsourcing proposal submitted to the Center for Efficient

 6  Government under s. 14.204 and through the procurement of such

 7  outsourced services.

 8         (2)  Each agency shall develop job placement policies

 9  for employees affected by an outsourcing initiative. Policies

10  shall include, but not be limited to, requiring that each

11  impacted state employee be interviewed by the contractor and

12  considered for job placement within the company.

13         (3)  Each agency shall develop a reemployment and

14  retraining assistance plan for employees who are not retained

15  by the agency or employed by the contractor. Agencies may

16  provide job skills retraining to any impacted employee who is

17  not offered comparable employment within one year of

18  separating from state employment. Agencies shall coordinate

19  the impact and transition of affected employees with the

20  Agency for Workforce Innovation. The agency shall also

21  coordinate services for state employees with Workforce

22  Florida, Inc., and regional workforce boards throughout the

23  state.

24         (4)  In accordance with existing statutory authority,

25  agencies shall, within their approval budgets, offer critical

26  employee retention salary increases in order to retain those

27  individuals identified as critical to successful transition of

28  the outsourced service to the contractor.

29         (5)  In accordance with existing statutory authority,

30  agencies may use a percentage of the savings realized from an

31  implemented outsourcing initiative as an employee recognition

                                  13

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    Florida Senate - 2005                                  SB 2356
    6-1227-05                                               See HB




 1  allocation to reward the employee or group of employees who

 2  proposed the initiative.

 3         (6)  Agencies shall consider incorporating severance

 4  compensation provisions into outsourcing contracts requiring

 5  the vendor to create an employee severance pay pool as part of

 6  the contract. Employees who are not offered employment with

 7  the state, the vendor, or another entity would be provided

 8  severance pay.

 9         (7)  The Department of Management Services, Division of

10  Human Resource Management, and the Center for Efficient

11  Government shall provide technical assistance to the agencies,

12  as requested, to facilitate development of the measures set

13  forth herein.

14         (8)  Agencies are directed to implement the policies

15  and programs set forth in this section.

16         Section 5.  This act shall take effect upon becoming a

17  law.

18  

19  

20  

21  

22  

23  

24  

25  

26  

27  

28  

29  

30  

31  

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