THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY GROVE, BOYD, CLYMER, DENLINGER, GRELL, KAUFFMAN, PYLE AND SWANGER, JANUARY 26, 2011

REFERRED TO COMMITTEE ON STATE GOVERNMENT, JANUARY 26, 2011  

AN ACT

Establishing the Council on Efficient Government; and providing

for its powers and duties and for business cases to

outsource.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Short title.

This act shall be known and may be cited as the Council on

Efficient Government Act.

Section 2.  Definitions.

The following words and phrases when used in this act shall

have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Council."  The Council on Efficient Government established

by this act.

"State agency."  Any of the following:

(1)  Any department, agency, board or commission under

the jurisdiction of the Governor.

(2)  The Office of Attorney General.

(3)  The Department of the Auditor General.

(4)  The Treasury Department.

(5)  An independent administrative department, agency,

board or commission of the Executive branch of State

government.

Section 3.  Council on Efficient Government.

(a)  Establishment.--The Council on Efficient Government is

established and shall consist of the following members:

(1)  The chief executive or administrative officer of a

State agency who is appointed by the Governor.

(2)  Two members who are engaged in private enterprise

and who are appointed by the Governor.

(3)  Two members who are engaged in private enterprise

and who are appointed by the President pro tempore of the

Senate.

(4)  Two members who are engaged in private enterprise

and who are appointed by the Speaker of the House of

Representatives.

(b)  Terms.--The terms of appointment for members to the

council are for two years, unless the chief executive or

administrative officer of a State agency ceases to hold office.

The Governor shall appoint a replacement member for the

remainder of the unexpired term.

(c)  Reimbursement of reasonable expenses.--A member of the

council who is engaged in private enterprise is not eligible to

receive compensation but is eligible for reimbursement of

reasonable expenses, pursuant to State law.

(d)  Disqualification on council reviews.--A member of the

council may not participate in a council review of a business

case to outsource if the State agency is conducting the proposed

outsourcing or, in the case of a member engaged in private

enterprise, if the member has a business relationship with an

entity that is involved or potentially could be involved in the

proposed outsourcing.

(e)  Delegation prohibited.--A member of the council who is

engaged in private enterprise may not delegate the membership to

a designee.

(f)  Quorum.--A quorum shall consist of at least three

members of the council.

(g)  Vacancies.--A vacancy on the council shall be filled in

the same manner as the original appointment, and any member

appointed to fill a vacancy occurring for a reason other than

the expiration of a term shall serve only for the unexpired term

of the member's predecessor.

(h)  Chairperson.--The council shall select a chairperson

from among its members.

Section 4.  Powers and duties.

(a)  General rule.--The council shall:

(1)  Review whether or not a good or service provided by

a State agency may be privatized to provide the same type and

quality of good or service that would result in cost savings

or best value. The council may hold public hearings as part

of its evaluation process and shall report its

recommendations to the Governor, the President pro tempore of

the Senate and the Speaker of the House of Representatives.

(2)  Review privatization of a good or service at the

request of a State agency or a private enterprise.

(3)  Review issues concerning agency competition with one

or more private enterprises to determine ways to eliminate

any unfair competition with a private enterprise.

(4)  Recommend privatization to a State agency if a

proposed privatization is demonstrated to provide a more

cost-efficient or more effective manner of providing a good

or service.

(5)  Employ a standard process for reviewing business

cases to outsource.

(6)  Review and evaluate business cases to outsource as

requested by the Governor or the State agency head whose

State agency is proposing to outsource.

(7)  No later than 30 days before a State agency's

issuance of a solicitation of $10,000,000 or more, provide to

the State agency conducting the procurement, the Governor,

the President pro tempore of the Senate and the Speaker of

the House of Representatives an advisory report for each

business case reviewed and evaluated by the council. The

report shall contain all versions of the business case, an

evaluation of the business case, any relevant recommendations

and sufficient information to assist the State agency in

determining whether the business case to outsource should be

included with the legislative budget request.

(8)  Recommend and implement standard processes for State

agency and council review and evaluate State agency business

cases to outsource, including templates for use by State

agencies in submitting business cases to the council.

(9)  Recommend standards, processes and guidelines for

use by State agencies in developing business cases to

outsource.

(10)  Incorporate any lesson learned from outsourcing

services and activities into council standards, procedures

and guidelines, as appropriate, and identify and disseminate

to State agencies information regarding best practices in

outsourcing efforts.

(11)  Develop guidelines for assisting State employees

whose jobs are eliminated as a result of outsourcing.

(12)  Receive complaints of violations of this act.

(13)  Transmit complaints received under this section to

the State agency alleged to be in violation.

(14)  Hold public hearings on complaints and determine

whether a State agency is in violation of this act.

(15)  Issue a written report of its findings to the

complainant within 90 days after receiving the State agency's

response.

(16)  Transmit to the Governor, the President pro tempore

of the Senate and the Speaker of the House of Representatives

a complete report of each meeting, including recommendations

to correct violations of prohibitions on competition with

private enterprise and findings on necessary exceptions to

the prohibitions.

(17)  (i)  Solicit petitions of interest from private

sector service providers as the council considers

appropriate. The council may evaluate and review the

petitions and may hold public hearings as part of the

evaluation process. The council may recommend some or all

of the petitions to the Governor's Office for further

review pursuant to State law.

(ii)  A person does not have a cause of action based

on the failure of the council to consider a petition of

interest or make a recommendation.

(b)  Evaluation and review of exemptions.--The council may

evaluate and review all State agency exemptions and exemptions

to the restrictions on competition with private enterprise in

this act and may determine that any function or functions of a

State agency are in violation of this act. The council shall

report its findings and recommendations to the Governor, the

President pro tempore of the Senate and the Speaker of the House

of Representatives.

(c)  Annual report.--The council shall prepare an annual

report on:

(1)  Recommendations on innovative methods of delivering

government services that would improve the efficiency,

effectiveness or competition in the delivery of government

services, including enterprise-wide proposals.

(2)  Outsourcing efforts of each State agency, including

the number of outsourcing business cases and solicitations,

the number and dollar value of outsourcing contracts,

descriptions of performance results as applicable, any

contract violations or project slippages and the status of

extensions, renewals and amendments of outsourcing contracts.

(3)  Information about the council's activities.

(4)  The status of the inventory of commercial activities

created under section 5.

(d)  Submission of annual report.--The council shall submit

the annual report prescribed by subsection (c) to the Governor,

the President pro tempore of the Senate and the Speaker of the

House of Representatives no later than January 15 immediately

following the calendar year for which the report is made. The

council shall provide an oral report to the Joint Legislative

Budget Committee and the Governor's Budget Office when the

legislature is not in session.

(e)  Staff.--The Auditor General of the Commonwealth shall

employ an adequate number of staff who collectively possess

significant expertise and experience as required to carry out

the duties specified in this act.

(f)  Cooperation by State agencies.--Each State agency shall

submit to the council all information, documents and other

materials required by the council pursuant to this act.

(g)  Release of performance audits.--At the request of the

council, the Auditor General shall provide performance audit and

other required information relating to State agency budgets and

functions. The Auditor General may assist in the development and

review of the agency inventory of commercial activities

prescribed in section 5.

(h)  Filing of recommendations for privatization.--In

addition to filing a copy of recommendations for privatization

with a State agency head, the council shall file a copy of its

recommendations for privatization with the Governor's Office,

the Joint Legislative Budget Committee and the Governor's Budget

Office for submission to the relevant legislative appropriation

subcommittee.

(i)  Advisory groups.--The council may appoint advisory

groups to conduct studies, research or analyses and make reports

and recommendations with respect to a matter within the

jurisdiction of the council. At least one member of the council

shall serve on each advisory group.

(j)  Independent privatizations.--Subject to the provisions

of section 6, nothing in this act shall be construed to preclude

a State agency from privatizing the provision of a good or

service independently of any recommendation of the council,

provided there is legal authority to do so.

(k)  Aggrieved persons.--Except as provided by statute, any

aggrieved person may elect to directly seek judicial relief from

action of the council.

Section 5.  Commercial activities inventory and review.

(a)  General rule.--On or before a date selected by

concurrent resolution or act of the General Assembly, the

council shall create an inventory of activities of State

agencies to classify whether each activity or elements of the

activity are:

(1)  A commercial activity that may be obtained in whole

or in part from a private enterprise.

(2)  An inherently governmental activity.

(b)  Biennial update of inventory.--The council shall update

the inventory created under this section at least every two

years.

(c)  Public access to inventory.--The council shall make the

inventory available to the public through electronic means.

(d)  Cooperation from State agencies.--State agencies shall

cooperate with inventory requests made by the council.

Section 6.  Business cases to outsource.

(a)  Project cost of more than $10,000,000.--A proposal to

outsource having a projected cost of more than $10,000,000 in

any fiscal year shall require:

(1)  An initial business case analysis conducted by the

State agency and submitted to the council, the Governor, the

President pro tempore of the Senate and the Speaker of the

House of Representatives at least 60 days before a

solicitation is issued. The council shall evaluate the

business case analysis and submit an advisory report to the

State agency, the Governor, the President pro tempore of the

Senate and the Speaker of the House of Representatives when

the advisory report is completed, but at least 30 days before

the State agency issues the solicitation.

(2)  A final business case analysis conducted by the

State agency and submitted after the conclusion of any

negotiations, at least 30 days before execution of a

contract, to the council, the Governor, the President pro

tempore of the Senate and the Speaker of the House of

Representatives.

(b)  Project cost of $1,000,000 to $10,000,000.--A proposal

to outsource having a projected cost of at least $1,000,000 but

not more than $10,000,000 in any fiscal year shall require:

(1)  An initial business case analysis conducted by the

State agency and submission of the business case, at least 30

days before issuing a solicitation, to the council, the

Governor, the President pro tempore of the Senate and the

Speaker of the House of Representatives.

(2)  A final business case analysis conducted by the

State agency and submitted after the conclusion of any

negotiations, at least 30 days before execution of a

contract, to the council, the Governor, the President pro

tempore of the Senate and the Speaker of the House of

Representatives.

(c)  Project cost of less than $1,000,000.--A business case

to outsource having a projected cost of less than $1,000,000 in

any fiscal year shall require a final business case analysis

conducted by the State agency after the conclusion of any

negotiations and provided to the council at least 30 days before

execution of a contract. The council shall provide the business

case in its annual report to the President pro tempore of the

Senate and the Speaker of the House of Representatives.

(d)  Contents of business case.--For any proposed

outsourcing, the State agency shall develop a business case that

justifies the proposal to outsource. The business case is not

subject to challenge or protest. The business case shall

include:

(1)  A detailed description of the service or activity

for which the outsourcing is proposed.

(2)  A description and analysis of the State agency's

current performance based on existing performance measures if

the State agency is currently performing the service or

activity.

(3)  The goals to be achieved through the proposed

outsourcing and the rationale for the goals.

(4)  A citation to the existing or proposed legal

authority for outsourcing the service or activity.

(5)  A description of available options for achieving the

goals. If State employees are currently performing the

service or activity, at least one option involving

maintaining State provision of the service or activity shall

be included.

(6)  An analysis of the advantages and disadvantages of

each option, including, at a minimum, potential performance

improvements and risks.

(7)  A description of the current market for the

contractual services that are under consideration for

outsourcing.

(8)  (i)  A cost-benefit analysis documenting the direct

and indirect specific baseline costs, savings and

qualitative and quantitative benefits involved in or

resulting from the implementation of the recommended

option or options. The analysis shall specify the

schedule that, at a minimum, must be adhered to in order

to achieve the estimated savings. All elements of cost

shall be clearly identified in the cost-benefit analysis,

described in the business case and supported by

applicable records and reports. The head of the State

agency shall attest that based on the data and

information underlying the business case and to the best

of his knowledge, all projected costs, savings and

benefits are valid and achievable.

(ii)  For the purposes of this paragraph:

(A)  "Cost" means the reasonable, relevant and

verifiable cost, which may include elements such as

personnel, materials and supplies, services,

equipment, capital depreciation, rent, maintenance

and repairs, utilities, insurance, personnel travel,

overhead and interim and final payments. The

appropriate elements shall depend on the nature of

the specific initiative.

(B)  "Savings" means the difference between the

direct and indirect actual annual baseline costs

compared to the projected annual cost for the

contracted functions or responsibilities in any

succeeding State fiscal year during the term of the

contract.

(9)  A description of differences among current State

agency policies and processes and, as appropriate, a

discussion of options for or a plan to standardize,

consolidate or revise current policies and processes, if any,

to reduce the customization of any proposed solution that

would otherwise be required.

(10)  A description of the specific performance standards

that must, at a minimum, be met to ensure adequate

performance.

(11)  The projected time frame for key events from the

beginning of the procurement process through the expiration

of the contract.

(12)  A plan to ensure compliance with applicable record

retention laws and the act of February 14, 2008 (P.L.6,

No.3), known as the Right-to-Know Law.

(13)  A specific and feasible contingency plan addressing

contractor nonperformance and a description of the tasks

involved in and costs required for its implementation.

(14)  A State agency's transition plan for addressing

changes in the number of agency personnel, affected business

processes, employee transition issues and communication with

affected stakeholders, such as State agency clients and the

public. The transition plan must contain a reemployment and

retraining assistance plan for employees who are not retained

by the State agency or employed by the contractor.

(15)  A plan for ensuring access by persons with

disabilities in compliance with applicable Federal and State

laws.

(16)  A description of legislative and budgetary actions

necessary to accomplish the proposed outsourcing.

(e)  Required contents of contracts.--Each contract for a

proposed outsourcing under this section shall include the

following:

(1)  A scope-of-work provision that clearly specifies

each service or deliverable to be provided, including a

description of each service or deliverable or activity that

is quantifiable, measureable and verifiable. This contractual

provisions shall include a clause stating that if a

particular service or deliverable is inadvertently omitted or

not clearly specified, but determined to be operationally

necessary and verified to have been performed by the agency

within the 12 months before the execution of the contract,

the service or deliverable will be provided by the contractor

through the identified contract amendment process.

(2)  A service-level agreement provision describing all

services to be provided under the terms of the agreement, the

State agency's service requirements and performance

objectives, specific responsibilities of the State agency and

the contractor and the process for amending any portion of

the service-level agreement. Each service-level agreement

shall contain an exclusivity clause that allows the State

agency to retain the right to perform the service or

activity, directly or with another contractor, if service

levels are not being achieved.

(3)  A provision that identifies all associated costs,

specific payment terms and payment schedules, including

provisions governing incentives and financial disincentives

and criteria governing payment.

(4)  A provision that identifies a clear and specific

transition plan that will be implemented in order to complete

all required activities needed to transfer the service or

activity from the State agency to the contractor and operate

the service or activity successfully.

(5)  A performance standards provision that identifies

all required performance standards, which shall include at a

minimum:

(i)  Detailed and measurable acceptance criteria for

each service or deliverable to be provided to the State

agency under the terms of the contract that document the

required performance level.

(ii)  A method for monitoring and reporting progress

in achieving specified performance standards and levels.

(iii)  The sanctions or disincentives that will be

imposed for nonperformance by the contractor or State

agency.

(6)  A provision that requires the contractor and its

subcontractors to maintain adequate accounting records that

comply with all applicable Federal and State laws and

generally accepted accounting principles.

(7)  A provision that authorizes the State agency to have

access to and audit all records related to the contract and

subcontracts, or any responsibilities or functions under the

contract and subcontracts, for purposes of legislative

oversight and a requirement for audits by a service

organization pursuant to professional auditing standards, if

appropriate.

(8)  A provision that requires the contractor to

interview and consider for employment with the contractor

each displaced State employee who is interested in such

employment.

(9)  A contingency plan provision that describes the

mechanism for continuing the operation of the service or

activity, including transferring the service or activity back

to the State agency or successor contractor, if the

contractor fails to perform and comply with the performance

standards and levels of the contract and the contract is

terminated.

(10)  A provision that requires the contractor and its

subcontractors to comply with applicable record retention

laws and the Right-to-Know Law specifically to:

(i)  Keep and maintain the public records that

ordinarily and necessarily would be required by the State

agency in order to perform the service or activity.

(ii)  Provide the public with access to the public

records on the same terms and conditions that the State

agency would provide the records.

(iii)  Ensure that records that are exempt or records

that are confidential and exempt are not disclosed except

as authorized by law.

(iv)  Meet all requirements for retaining records and

transfer to the State agency, at no cost, all public

records in possession of the contractor on termination of

the contract and destroy any duplicate public records

that are exempt or confidential. All records stored

electronically shall be provided to the State agency in a

format that is compatible with the information technology

systems of the State agency.

(11)  (i)  A provision that addresses ownership of

intellectual property.

(ii)  This paragraph shall not be construed to

provide the specific authority needed by a State agency

to obtain a copyright or trademark.

(12)  If applicable, a provision that allows the State

agency to purchase from the contractor, at its depreciated

value, assets used by the contractor in the performance of

the contract. If assets have not depreciated, the State

agency retains the right to negotiate to purchase at an

agreed-upon cost.

Section 7.  Council accounting method.

The council, by rule, shall establish an accounting method

that:

(1)  Is similar to generally accepted accounting

principles used by a private enterprise.

(2)  Allows a State agency to identify the total actual

cost of engaging in a commercial activity in a manner similar

to how a private enterprise identifies the total actual cost

to the private enterprise, including the following:

(i)  Labor expenses, such as compensation and

benefits, costs of training, costs of paying overtime,

costs of supervising labor or other personnel expenses.

(ii)  Operating costs, such as vehicle maintenance

and repair, marketing, advertising or other sales

expenses, office expenses, costs of an accounting

operation, such as billing, insurance expenses, real

estate or equipment costs, debt service costs or a

proportionate amount of other overhead or capital

expenses, such as vehicle depreciation and depreciation

of other fixed assets.

(iii)  Contract management costs.

(iv)  Other costs particular to a person supplying

the good or service.

(3)  Provides a process to estimate the taxes a State

agency would pay related to engaging in a commercial activity

if the State agency were required to pay Federal, State and

local taxes to the same extent as a private enterprise

engaging in the commercial activity.

Section 8.  Required review of commercial activities by

Governor.

Beginning with a fiscal year designated by concurrent

resolution or act of the General Assembly, the Governor, at

least once every two fiscal years, shall select at least three

commercial activities that are being performed by a State agency

to be examined by the Governor's Budget Office.

Section 9.  Duties of Governor's Budget Office.

(a)  General rule.--The Governor's Budget Office shall:

(1)  Determine the amount of an appropriation that is no

longer needed by a State agency because all or a portion of

the State agency's provision of a good or service is

privatized.

(2)  Adjust the Governor's budget recommendations to

reflect the amount that is determined under paragraph (1).

(3)  Report its findings to the President pro tempore of

the Senate and the Speaker of the House of Representatives.

(b)  Construction.--Nothing in this section shall be

construed to prevent the Governor from making a budget

recommendation regarding the restoration of a portion of the

appropriation to a State agency that is reduced under this

section.

Section 10.  Applicability.

This act does not apply to contracts in support of the

planning, development, implementation, operation or maintenance

of the road, bridge and public transportation construction

program of the Department of Transportation.

Section 11.  Initial terms of members of the Council on

Efficient Government.

Notwithstanding section 2, the initial members of the council

who are engaged in private enterprise shall assign themselves by

lot to terms of one or two years in office. The appointing

authority shall make all subsequent appointments as prescribed

by statute.

Section 12.  Effective date.

This act shall take effect in 60 days.