July 8, 2005
COMPARISON OF PA 05-286 AND EXECUTIVE ORDER NO. 7
By: Christopher Reinhart, Senior Attorney
You asked for a comparison of PA 05-286 (sSB 94) and Executive Order No. 7.
On June 30, 2005, Governor Rell vetoed PA 05-286 and issued Executive Order No. 7. Both contain similar provisions creating a State Contracting Standards Board (SCSB). The order makes some changes to the SCSB provisions included in PA 05-286, contains a few provisions not part of PA 05-286, and does not include a number of other changes that were part of PA 05-286.
Both the order and act create a SCSB, but the order reduces the board membership from nine to five, with all members appointed by the governor and no legislative appointments. The order contains most of the act's provisions on staff, member qualifications, ethics, operations, pay, and duties.
The act made the SCSB the successor of the State Properties Review Board (SPRB) and gave it all the SPRB's powers and duties. The order instead requires the board to make recommendations to the General Assembly for the board to perform the SPRB's powers and duties.
Both the order and act require the SCSB to develop a procurement code but the act limits the types of state agencies that it applies to. The order requires the code to contain the same provisions required by the act, including standards to evaluate privatization contracts. But the order does not require the act's specific list of minimum privatization standards.
Both the order and act require the SCSB to conduct compliance audits.
The order does not include the act's provisions allowing the SCSB to restrict an agency's contracting or procurement authority. Instead of the act's procedures for the SCSB to review or terminate contracts, the order requires contracts beginning October 1, 2005 to include a provision that the board can review and recommend termination for cause. Instead of the act's procedures for disqualifying or suspending contractors, the order requires the board to recommend procedures for agencies to disqualify or suspend contractors.
The order contains a provision similar to the act's prohibition on state agencies' contracting for legal services unless there is a request for proposals and negotiation. The act applied to legal services contracts starting at $250,000 but the order applies to contracts starting at $50,000.
The order does not contain a number of the act's provisions, all of which are subject to the veto. They include:
1. prohibiting state agencies from entering certain privatization contracts between the act's passage and June 30, 2007 and, from that date to June 1, 2009, requiring a privatization contract, including one initiated by the Judicial Branch, to provide that it becomes effective after the contractor and the state agency have complied with the act and the uniform procurement code;
2. requiring the Judicial Branch to prepare its own procurement code;
3. establishing a procedure for the legislature to exempt construction contracts from the competitive bidding process;
4. establishing procedures for state agencies to use when entering purchase of service agreements; and
5. banning the state from contracting with corporations that receive a tax benefit as a result of reincorporating outside of the United States.
The order contains three provisions that were not part of the act. The order:
1. directs that all public meetings of state agencies be posted on the agency's website;
2. prohibits Executive Branch appointed officials and state employees from contracting for goods and services for personal use with anyone doing business with or seeking business with the person's agency unless it is for something readily available to the general public; and
3. requires all contracts entered into starting July 1, 2005 to contain a requirement that the contractor disclose to the agency head any items of value provided to employees where full payment has not been made.
The executive order took effect when the governor issued it on June 30, 2005. Most of PA 05-286 would have taken effect upon passage or on July 1, 2005. But, under the executive order, a few provisions took effect sooner than they would have under PA 05-286. Under the act, the list of the SCSB's duties, other than preparing the procurement code, did not take effect until July 1, 2007 and the provision requiring SCSB audits did not take effect until October 1, 2007. The act's procedures for reviewing and terminating contracts and disqualifying or suspending contracts would have taken effect October 1, 2007.
The sections below summarize the provisions of PA 05-286 and compare them to Executive Order No. 7. The final section briefly lists provisions in the public act that were not included in the executive order.
SCSB MEMBERS' APPOINTMENTS
PA 05-286 establishes the nine-member SCSB as a separate, independent, executive-branch agency.
The governor appoints five members of the board. The appointing authorities for the remaining four members vary depending on the party affiliation of the governor and the majority party in the House and Senate. When the governor is:
1. of a different political party than that which controls both houses of the General Assembly, the House speaker and the Senate president each appoints two members;
2. of the same political party as one chamber of the General Assembly, the highest ranking leader of the opposing party of the applicable chamber appoints four members;
3. of the same political party as both chambers of the General Assembly, the minority leader of the House and Senate each appoint two members; or
4. an independent, the House speaker and the Senate president each appoints two members.
The act requires the legislature to confirm each appointment. The members' terms are coterminous with that of their appointing authority. Each appointing authority fills any vacancy in his appointment.
The act specifies that its provisions do not prohibit a member of the general public with a demonstrated interest in government ethics and integrity from serving as an appointee.
Six members of the board constitute a quorum, which is required for the board to transact business.
Executive Order No. 7 makes the SCSB a five-member board with all members appointed by the governor. It does not require legislative approval for appointments. Members serve at the pleasure of the governor and their terms are coterminous with the governor's. The order does not include the provision specifying that members of the general public with an interest in ethics and integrity are not prohibited from serving as appointees.
It makes three members a quorum.
SCSB EXECUTIVE DIRECTOR AND STAFF
PA 05-286 requires the board to appoint its chairperson and the governor to appoint an executive director who serves as an ex-officio, nonvoting board member. The legislature must confirm both appointments. All board employees are members of classified state service. The board must annually evaluate the executive director's performance. The executive director may be removed for cause.
The act authorizes the board to employ any other staff it considers necessary, including property and procurement specialists, real estate examiners, and contract specialists.
Executive Order No. 7 contains these provisions but does not require legislative approval of the executive director.
The order adds that the Department of Administrative Services (DAS) sets the executive director's salary and places him in the management pay plan with benefits such as vacation, sick leave, pension, and insurance set according to that designation. For other purposes, the order makes the executive director an appointed official.
The order states that since the board is not a state agency, the employees are considered employees of DAS for administrative purposes.
It assigns the board to DAS for administrative purposes only.
BOARD MEMBER QUALIFICATIONS
PA 05-286 requires each member to have (1) a demonstrated interest in government ethics and integrity or (2) education, training, or experience received in five consecutive years of the 10 years immediately preceding his appointment, in several of the following areas:
2. contract negotiation, selection, and drafting;
3. contract risk assessment;
4. requests for proposals and real estate transactions;
5. business insurance and bonding;
6. the State Code of Ethics;
7. federal and state statutes, policies, and regulations;
8. outsourcing and privatization proposal analysis;
9. small and minority business enterprise development; or
10. personnel and union management.
“Contract risk assessment” means (1) the identification and evaluation of loss exposures and risks, including business and legal risks associated with contracting and (2) the identification, evaluation, and implementation of measures available to minimize potential loss exposures and risks.
Executive Order No. 7 contains the same provisions but eliminates personnel and union management as one of the possible qualifications.
BOARD ETHICS AND OPERATIONS
PA 05-286 prohibits anyone from serving on or working for the board if (1) he holds another position in state or municipal government or (2) his spouse, child, stepchild, parent, or sibling is directly or indirectly involved in any enterprise that does business with the state. The act requires the State Ethics Commission to adopt regulations clarifying the meaning of “directly or indirectly involved in any enterprise.”
It requires board members and employees to file with the board and the State Ethics Commission (subsequently designated the Citizen's Ethics Advisory Board by PA 05-183) annual financial statements, by April 15, that disclose the sources of any income over $1,000 for the preceding calendar year and the name of any business with which they are associated. The requirement appears to apply to members and employees beginning with their second year of service or employment, respectively. By law, an associated business is one owned by an official, employee, or member of his immediate family, or where any one of them (1) serves as an officer or a director or compensated agent or (2) owns at least 5% of the stock in any class. The financial statement is a public record and subject to disclosure under the Freedom of Information Act.
Any board employee or member, who violates the employment prohibition and any member or employee who fails to file the statement violates the State Ethics Code and may be subject to the code's penalties, including a fine of up to $10,000.
The act requires the board to adopt any rules it deems necessary to conduct its internal affairs, including appellate rules of procedure and procedural rules to carry out the duties and responsibilities of the SPRB.
Executive Order No. 7 contains these provisions but does not require the ethics board to adopt regulations clarifying the meaning of “directly or indirectly involved in any enterprise.”
The order does not have provisions on board employee or member violations and does not require rules for the board's internal affairs.
BUDGET AND COMPENSATION
PA 05-286 requires the board's budget, upon approval of its members, to pay its reasonable expenses. It requires the board chairperson to be paid a $200 per diem up to a maximum of $30,000 annually. Other members must receive the same per diem up to a maximum of $25,000 annually.
Executive Order No. 7 includes these provisions but eliminates the maximum limits on annual compensation.
PA 05-286 requires the board to:
1. recommend the repeal of repetitive, conflicting, or obsolete state procurement statutes;
2. prepare a uniform procurement code;
3. develop, publish, and maintain the code for all state contracting agencies;
4. help them with code compliance by providing their staffs with guidance, models, advice, and practical assistance on buying the best service at the best price, properly selecting contractors, and drafting contracts that achieve state goals and protect taxpayers' interest;
5. review and certify that a state contracting agency's procurement processes comply with the code;
6. triennially recertify state contracting agencies' procurement processes and give them notice of any certification deficiency and tell them how they can rectify it;
7. define the training requirements for state contracting agency procurement professionals;
8. monitor implementation of the state contracting website and make recommendations for improvements to DAS;
9. define the requirements for state agencies to retain information on (a) the number and type of current state contracts, (b) their dollar value, (c) a list of client agencies and contractor names, (d) a description of contracted services, and (e) an evaluation of contractor performance, and make sure that it is available on the state contracting portal;
10. recommend the procurement code changes to the governor and the Government Administration and Elections (GAE) Committee;
11. approve an ethics training course for state employees involved in procurement and for prequalified state contractors and subcontractors; and
12. conduct compliance audits.
The ethics training course may be developed and provided by the Citizen's Ethics Advisory Board or any other person or firm as long as the SCSB approves it.
Executive Order No. 7 requires the board to perform the same duties but its approved ethics training must be for state contractors rather than prequalified contractors and subcontractors.
The order does not require the board to recommend procurement code changes to the GAE Committee.
It adds a requirement that the board make recommendations to the General Assembly for the board to perform the powers, duties, and obligations of the State Properties Review Board.
UNIFORM PROCUREMENT CODE
By January 1, 2007, PA 05-286 requires the SCSB to prepare a uniform code for use by state contracting agencies when contracting for, buying, renting, leasing, or otherwise acquiring or disposing of supplies or services, including construction services, materials, or supplies.
“State contracting agencies” are (1) state agencies other than the SCSB, Judicial Branch, and Legislative Management; (2) municipal and quasi-public agencies; and (3) any other agency that receives state funds. The uniform code does not apply to the expenditure of federal assistance or contract funds if federal law provides procurement procedures.
The act requires the board to conduct a comprehensive review of existing state contracting and procurement laws, regulations, and practices and use any appropriate, existing procedures and guidelines when preparing the code. It requires each state contracting agency to provide its procurement information if the board asks. The act gives the board access to all such agencies' information, files, and records necessary to complete the code. It protects documents exempt from disclosure under the Freedom of Information Act from disclosure by the board.
The act requires the board to submit the code to the legislature for approval by filing it with the Senate and House clerks by January 15, 2007. Within the next five days, the Senate president and House speaker must submit the code to the GAE Committee. The committee must hold a hearing on the code and report its recommendations, including any changes, for approval or rejection to the House and Senate. The General Assembly must vote on the code by the end of the 2007 regular session.
Executive Order No. 7 requires the board to prepare a procurement code but it limits the definition of “state contracting agencies” so that it applies to any state agency and all higher education agencies and institutions, but not municipal or quasi-public agencies.
The order requires the board to submit the code to the legislature by the same date required by the act but the order does not require specific legislative procedures. Instead, the order requires the board to submit the code for legislative “consideration and adoption.”
Procurement Code Contents
PA 05-286 requires the code to:
1. establish uniform state contracting standards and practices;
2. ensure the fair and equitable treatment of all businesses and people involved in the state's procurement system;
3. include a process for maximizing the use of small contractors and minority business enterprises;
4. provide increased economy in state procurement activities and maximize purchasing value to the fullest extent possible;
5. ensure that state contracting agencies procure supplies, materials, equipment, services, real property, and construction in a cost-effective and responsive manner;
6. preserve and maintain state agencies' contracting or procurement procedures that represent best practices, including their discretion and authority to disqualify contractors and terminate contracts;
7. include a process to improve contractor and state contracting agency accountability;
8. include standards for state contracting agencies to evaluate proposals to privatize state or quasi-public agency services and privatization contract bid proposals;
9. establish standards for leases and lease-purchase agreements and for the purchase and sale of real estate;
10. simplify and clarify the state's contracting standards and procurement policies and practices, including procedures for competitive sealed bids or proposals, small purchases, and sole source, special, and emergency procurements (procurements necessary because of a sudden, unexpected occurrence that poses a clear and imminent danger to public safety or that requires immediate action to prevent or reduce loss or impairment of life, health, property, or essential public services); and
11. provide a process for competitive sealed bids and proposals, small purchases, sole source, emergency, and special procurements, best-value selection, and qualification-based selection, and the conditions for their use.
“Best-value selection” means a process to award contracts based on quality and costs. “Qualification-based selection” means a process to award contracts based primarily on contractor qualifications and a fair and reasonable price.
“Privatization contracts” means those between a state agency and a private person, at a cost to the state of $500,000 or more, to provide services substantially similar to those provided by state employees and that result in state employee layoffs, transfers, or reassignments. The term does not include renewal, modification, extension, or rebidding of (1) a privatization agreement in effect on July 1, 2005; (2) an agreement to only provide legal services, litigation support, or management or financial consulting; or (3) a consultant-services agreement to provide professional architectural or design services on a project-by-project basis for only a period of time. (The OPM implementer, HB 7502 from the June 2005 Special Session, would have changed this definition. Under the act, but not the order, this definition also applied to a ban on state agencies entering privatization contracts for a certain period and requirements for those contracts for a period after the ban ends.)
The act requires privatization standards to, at a minimum, require state and quasi-public agencies to:
1. complete an analysis before deciding to privatize services that examines all direct and indirect state costs and an examination of privatization contract's effect on the public health and safety of the state residents who may use the services;
2. give their affected employees and, where applicable, employee unions, adequate notice;
3. prepare an employee impact statement, including measures a bidder must take to retain the agency's qualified employees;
4. set fair wages based on objective standards, such as those required under the act for privatization contracts; and
5. provide their employees with adequate information and resources that would encourage and help them to organize and submit a bid to provide the services that are the subject of the privatization contract.
The standards must also require bidders to disclose all relevant information pertaining to their past performance and pending or concluded legal or regulatory proceedings or complaints, including compliance with fair employment practices standards and federal fair employment and non-discrimination standards.
Executive Order No. 7 requires the code to contain the same provisions, including standards to evaluate privatization contracts. But it does not include the specific list of minimum privatization standards that are included in the act.
The order also changes the definition of “privatization contract.” Under the act, certain contracts were excluded from the definition. The order also contains these exclusions except for legal services and litigation support.
PA 05-286 requires the board to audit state contracting agencies every three years and report on their compliance with the uniform procurement code. During the audit, the act gives the board access to all of the agencies' contracting and procurement records, and authority to interview people responsible for awarding and negotiating contracts or procurement. The board can make an agreement with the state auditors to conduct the audit.
The board must identify in the compliance report any process or procedure that is inconsistent with the uniform procurement code and corrective measures to achieve code compliance. The board must deliver the report, which is a public record, to the contracting agency within 30 days after the audit is completed.
Executive Order No. 7 contains these same provisions.
ACTIONS AGAINST STATE AGENCIES
PA 05-286 allows the board to restrict an agency's contracting or procurement authority upon a two-thirds vote, after notice and a hearing, because it finds the agency failed to comply with statutory and procurement requirements and showed a reckless disregard for applicable policies and procedures. The restriction stays in effect until the agency implements corrective measures and complies with the code. Any restriction must be in the state's best interest.
Executive Order No. 7 does not include this provision.
CONTRACTS AND PROCUREMENT AGREEMENTS
PA 05-286 allows the board to review or terminate a contract or procurement agreement for cause after consulting with the attorney general and giving the agency and contractor 15 days notice. “For cause” means (1) engaging in activities prohibited under the State Ethics Code; (2) wanton or reckless disregard of any state contracting and procurement process by any person substantially involved in the contract or with the state contracting agency; or (3) notification from the attorney general to the state contracting agency that a whistleblower investigation indicates that the contract process was compromised by fraud, collusion, or other serious ethical improprieties.
The decision to terminate a contract must be preceded by notice to the state agency and any other affected party that the board is meeting for that purpose. The board's decision to terminate must be approved by a two-thirds vote of its members.
Executive Order No. 7 does not include a review and termination procedure. Instead it requires contracts entered into starting October 1, 2005 to include a provision that the board, for cause, can review and recommend termination of a contract or procurement agreement undertaken by a state contracting agency after giving 15 days notice to the agency and contractor.
The order uses the same definition of “for cause” except for the provision on the attorney general's notification of whistleblower investigations.
CONTRACTOR DISQUALIFICATION OR SUSPENSION
PA 05-286 allows the board to disqualify, and a state contracting agency to suspend, contractors from bidding on, applying for, or participating as a subcontractor in, state or agency contracts, respectively. The disqualification can last for up to five years and the suspension for up to six months. The board and the agency must provide reasonable notice and a hearing before taking this action. Additionally, the board must consult with the relevant state contracting agency and get a two-thirds vote of board members before acting.
The board can reduce the disqualification period or limit its application upon the contractor's written request and supporting documentation showing (1) newly discovered material evidence, (2) a reversal of the conviction that formed the basis for the disqualification, (3) a bona fide change in ownership or management, or (4) the elimination of other causes that formed the basis for the disqualification.
A contracting agency can allow a suspended contractor to work on a particular contract upon its commissioner's written determination that good cause exists for the exception and that it is in the state's best interest.
When making its decision, the board or agency, as the case maybe, must consider the seriousness of the contractor's acts or omissions, any mitigating factors, and whether at least one of the act's grounds for disqualification or suspension, respectively, is met.
The board or agency must make its decision within 90 days after the hearing; include its reasoning and the disqualification period; and mail it to the contractor by certified mail, return receipt requested. An aggrieved party may appeal the board's or agency's decision to Superior Court.
Executive Order No. 7 does not include a disqualification and suspension procedure. Instead it requires the board to establish recommendations on the procedure that agencies should use to disqualify or suspend a contractor from bidding on state contracts. It includes the same provision on reducing the period of disqualification and exceptions to allow suspended contractors to participate in a contract.
Grounds for Disqualification by the Board
PA 05-286 allows the board to disqualify a contractor for:
1. conviction of, or guilty or no contest plea to, a crime (a) related to getting or attempting to get a contract or subcontract or (b) related to performing the contract or subcontract;
2. conviction of, or guilty or no contest plea to, embezzlement, forgery, bribery, document falsification or destruction, receiving stolen property, or any other offense that indicates a lack of business integrity or honesty related to a contractor's responsibility;
3. conviction of, or guilty or no contest plea to, violating state or federal antitrust, collusion, or conspiracy laws while submitting a public or private contract or subcontract bid or proposal;
4. at least two suspensions in 24 months by a contracting agency;
5. a willful failure to perform the terms of at least one contract;
6. a willful violation of a statute or regulation applicable to a contract;
7. a willful or egregious violation of ethical standards specific to contractors or contractor prequalification and evaluation laws; or
8. any reason that casts serious and compelling doubt on the contractor's responsibility, including (a) for-cause disqualification by another state; (b) fraudulent, criminal, or seriously improper conduct committed by a shareholder or member, including an employee of the contractor's firm in the performance of his duties on behalf of the contractor, if the contractor knew or had reason to know of the conduct; or (c) an informal or formal business relationship with a contractor disqualified from bidding on state contracts.
Under Executive Order No. 7, the board's recommendations to agencies must include reasons to disqualify a contractor, which can include the same list of grounds for disqualification included in the act.
The order adds willful or egregious violations of the ethical standards set in the order as a possible reason for disqualification.
Grounds for Suspension by a Contracting Agency
PA 05-286 allows an agency to suspend a contractor for:
1. failure, without good cause, to adhere to contract specifications or timeframes;
2. a record of failure to perform or of at least one unsatisfactory performance, other than one caused by acts beyond the contractor's control;
3. any reason, including suspension for cause by another agency, that the contracting agency deems to cast serious and compelling doubt on the contractor's responsibility; or
4. a violation of ethical standards specific to contractors or contractor prequalification and evaluation laws.
Under Executive Order No. 7, the board's recommendations to agencies must include reasons to suspend a contractor, which can include the same list of grounds for disqualification included in the act.
CONTRACTS FOR LEGAL SERVICES
Beginning January 1, 2006, PA 05-286 requires state agency contracts for legal services that will, or could reasonably be expected to, result in attorney's fees, including contingency fees, of at least $250,000 to be awarded pursuant to request for proposal or for qualification and negotiation procedures. By October 1, 2005, the attorney general must establish the procedures. He must also approve all legal services contracts for form and substance.
Executive Order No. 7 similarly prohibits a state agency from expending funds for a legal services contract between the attorney general and a person, firm, or corporation. Both the act and order require a request for qualification but the order requires a competitive selection process instead of negotiation. The order applies to contracts starting at $50,000 instead of $250,000.
The order does not require the attorney general to establish procedures.
PROVISIONS NOT INCLUDED IN THE EXECUTIVE ORDER
Executive Order No. 7 does not include a number of provisions of PA 05-286. These include:
1. a process for bidders on state contracts to contest the way the contracts were solicited or awarded or to contest an unauthorized or unwarranted, noncompetitive selection process (§ 9);
2. appeals from an agency decision on state contract solicitation and awarding processes to the SCSB to determine whether the process complied with the uniform procurement code or involved an unauthorized or unwarranted, noncompetitive selection process (§ 10);
3. establishing a Contracting Standards Advisory Council to discuss problems with procurement processes and recommend improvements (§ 11);
4. making the SCSB the successor department to the SPRB; transferring the SPRB's powers, duties, obligations, and other government functions; requiring the SCSB to establish a subcommittee, called the State Properties Review Subcommittee, to perform the SPRB's duties in accordance with SCSB's rules and procedures (§§ 12, 34);
5. establishing a more specific procedure for the legislature to exempt construction projects from the competitive bidding process (§ 13);
6. prohibiting state agencies from entering certain privatization contracts between the act's passage and June 30, 2007 and, from that date to June 1, 2009, requiring privatization contracts, including one initiated by the Judicial Branch, to provide that it becomes effective after the contractor and the state agency have complied with the act and the uniform procurement code (§ 14);
7. requiring the Office of Policy and Management to establish procedures for state agencies to use when entering certain purchase of service agreements based on an agreed-upon price for such services, a set cost for such services, or a flat grant for an agreed upon level of services (§ 15);
8. requiring subcontractors to prequalify with DAS before performing work valued in excess of $500,000 on a state or municipal construction contract; prohibiting a public agency from receiving state funds for construction if it accepts a bid without the bidder's prequalification certificate or update statement; adding an additional ground for the DAS commissioner to revoke a contractor's or subcontractor's prequalification; eliminating certain requirements from the contractor prequalification process; and generally banning state and municipal agencies from receiving state funds for construction if they accept bids from a contractor without proof of his prequalification (§§ 17-19, 29);
9. changing the number, tenure, and mission of the panels that assist the Department of Public Works (DPW) commissioner to award state construction projects outside of the competitive bidding process (§§ 20-21);
10. conforming the DPW contractor selection law to practice and increasing the number of days it and constituent units of higher education have to award contracts (§ 22);
11. prohibiting the state from contracting with corporations that receive a tax benefit as a result of reincorporating outside of the United States (§ 23);
12. banning, with some exceptions, the use of state bond revenues or appropriated or allocated state funds for outdoor lighting that is not energy efficient or that exceeds the brilliance required to achieve its purpose and establishing a schedule for floodlight violators to comply with the law (§§ 24-25);
13. requiring the Judicial Branch to prepare its own procurement code (§ 27);
14. permitting documents public agencies receive in response, and related, to a procurement request for proposal to be exempt from disclosure under the Freedom of Information Act for a limited time (§ 28);
15. changing the set-aside program, including changing the definition of small contractor (§§ 30-32);
16. making a change to PA 05-287 to require state agencies to obtain from certain contractors an affidavit identifying consultants who work with them on that contract (§ 33); and
17. making a change to PA 05-287 to limit those whom state agencies can deem to be nonresponsible bidders to those whom the State Ethics Commission finds in violation (§ 34).