1997 Regular Session
To: Fees and Salaries of Public Officers; Appropriations
By: Representatives Janus, Barnett (116th), Bowles, Cameron, Chaney, Davis (102nd), Denny, Ellington, Flaggs, Formby, Foster, Frierson, Gibbs, Howell, Johnson, Ketchings, King, Maples, Montgomery, Read, Robinson (84th), Stribling, Warren, Wells-Smith
House Bill 1482
AN ACT TO CREATE THE MISSISSIPPI COMMISSION ON PRIVATIZATION; TO PROVIDE FOR THE MEMBERSHIP AND DUTIES OF THE COMMISSION; TO ESTABLISH A SEQUENCE OF ACTIONS THAT THE COMMISSION MUST FOLLOW IN ORDER TO STUDY THE POTENTIAL FOR PRIVATIZING AN ACTIVITY; TO ESTABLISH A PROCEDURE FOR RECOMMENDING PRIVATIZATION UNDER CERTAIN CONDITIONS; TO REQUIRE CERTAIN ACTIONS BY THE COMMISSION AFTER THE CONDUCT OF COST BENEFIT ANALYSES OF AGENCIES BEING CONSIDERED FOR PRIVATIZATION; TO PROVIDE A PROCEDURE TO CONTRACT FOR SERVICES NECESSARY AS A RESULT OF PRIVATIZATION; AND FOR RELATED PURPOSES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:
SECTION 1. The Legislature hereby finds and declares:
(a) The function of government is to determine and fulfill the public interest, not necessarily to operate or administer the goods and services that accomplish the objectives of the public interest.
(b) Government entities should seek to provide their public goods and services at a cost no more than necessary, consistent with public objectives.
(c) Mississippi government employees generally are competent, hard-working and dedicated. However, the monopolistic structure of the public sector contains perverse incentives that often preclude government employees from properly executing their responsibilities. This results in increased costs and reduced efficiency for the taxpayer.
(d) Due to inherent competition, the private sector can operate and deliver many public programs and services with greater efficiency and reduced cost.
(e) Decisions as to whether a public good or service should be produced by either a state entity or a private company should be made on economic considerations, instead of institutional or ideological reasons.
(f) Like many governments around the world have successfully proven, Mississippi government should privatize, that is, delegate its public responsibilities to the private sector whenever the private sector can deliver public goods and services at comparatively lower cost and enhanced efficiency while maintaining public equity and the public interest.
SECTION 2. For purposes of this act, the following terms shall be defined as follows:
(a) "Commission" means the Mississippi Commission on Privatization created under Section 3 of this act.
(b) "State entity" means any board, commission, authority, department, agency or institution which employs state service or nonstate service personnel as defined by Section 25-9-107.
(c) "Privatization" means a method of providing a portion or all of a formerly government-provided and government-produced program and/or its services through the private sector using one or more or a combination of the three (3) following categories of activity:
(ii) Delegation; or
(d) "Divestment" means that the state through a competitive process turns over the ownership, control, financial responsibility and delivery of a public service to the private sector. Divestment may be effectuated through sale of the assets necessary to produce the service to a provider of services, or through liquidation of assets where the purchaser of the assets will not provide the service.
(e) "Delegation" means that the state assigns the provision of all or part of a function or service to the private sector through a make or buy analysis while retaining the responsibility of overseeing its production and/or delivery to its citizens and/or governmental entities.
(f) "Deregulation" means the passive process by which the government is gradually displaced by the private sector through elimination of regulation.
(g) "Attributable fully allocated cost" means the operating and capital cost of a public service including direct, indirect and allocated cost minus the cost of any function not to be competitively contracted.
(h) "Make or buy analysis" means a periodic analysis in which the costs of internal production of a good or service are compared to the costs of production by outside vendors. This process requires the comparison of the true costs of public and private production methods that result in comparable public goods or services.
SECTION 3. (1) There is created the Mississippi Commission on Privatization, which shall consist of thirteen (13) members, seven (7) to be appointed by the Governor and six (6) to be appointed by the Lieutenant Governor. The Governor shall appoint one (1) member from each congressional district and two (2) members from the state at large, and the Lieutenant Governor shall appoint one (1) member from each congressional district and one (1) member from the state at the large. No member shall be an elected or appointed public official. All appointments shall be made with the advice and consent of the Senate.
(2) The initial appointments to the commission shall be made as follows: The Governor shall appoint one (1) member for a term that expires on June 30, 1998, two (2) members for terms that expire on June 30, 1999, one (1) member for a term that expires on June 30, 2000, two (2) members for terms that expire on June 30, 2001, and one (1) member for a term that expires on June 30, 2002. The Lieutenant Governor shall appoint one (1) member for a term that expires on June 30, 1998, one (1) member for a term that expires on June 30, 1999, one (1) member for a term that expires on June 30, 2000, one (1) member for a term that expires on June 30, 2001, and two (2) members for terms that expire on June 30, 2002. After the expiration of the initial terms, all subsequent appointments shall be made by the original appointing authorities for terms of five (5) years from the expiration date of the previous term.
(3) Upon the expiration of his or her term of office, a commission member shall continue to serve until his or her successor has been appointed and has qualified. No person may be appointed more than once to fill an unexpired term or more than two (2) consecutive full terms. Any vacancy on the commission before the expiration of a term shall be filled by appointment of the original appointing authority for the remainder of the unexpired term.
(4) The Governor shall designate one (1) of his initial appointments as chairman of the commission, who shall serve as chairman for two (2) years. Once every two (2) years the commission shall select one (1) of its members to serve as chairman. No person may serve as chairman for more than four (4) years.
(5) The commission may remove any of its members, or remove the chairman from his or her position as chairman, for (a) malfeasance in office, or (b) conviction of a felony or a crime of moral turpitude while in office, or (c) failure to attend five (5) consecutive commission meetings. However, no member may be removed until after a public hearing of the charges against him or her, and at least thirty (30) days' prior written notice to the accused member of the charges against him or her and of the date fixed for such hearing. No member shall participate in any matter before the commission in which he or she has a pecuniary interest, personal bias or other similar conflict of interest.
(6) Commission members shall receive no compensation for their services, but shall be reimbursed for their actual and necessary expenses incurred in the performance of official commission business as provided in Section 25-3-41.
(7) Seven (7) members of the commission shall constitute a quorum of the commission for all meetings.
(8) The Director of the Legislative Budget Office and the Director of the Joint Legislative Committee on Performance Evaluation and Expenditure Review (PEER) each shall designate a staff member from their respective staffs to attend meetings of the commission and to act in an advisory capacity to the commission.
(9) The Department of Finance and Administration shall provide staff support to the commission.
SECTION 4. (1) The commission shall have the following duties and responsibilities:
(a) To advocate, develop and accelerate a privatization program for state entities that ensures private sector competition for provision and/or production of state government services. This authority shall extend to issuing requests for information and proposals from both public and private sector entities.
(b) To develop an overall state privatization policy including necessary goals and objectives for privatizing the programs and services of state government.
(c) To establish all analytical, approving, planning and reporting processes required to carry out the functions of the commission, and to promulgate all rules essential to carry out the commission's mission, including deadlines for state entity reports, timetables for commission action, standards and criteria governing reports made to the commission, standards for requests for proposals, and rules of order.
(d) To determine, in conjunction with other state entities, the pool of potential program or service candidates for privatization; however, the commission shall not issue any privatization recommendation regarding any program that:
(i) Directly and significantly consists of planning and proposing public policy, making public policy, or consists in whole or in part of activities that regulate the business, occupation, or profession, of any person, firm, partnership, corporation, or association that is doing business in Mississippi or is domiciled in this state;
(ii) Directly and significantly affects the investigation or prosecution of criminal acts, the operations of the courts of law, the preservation of peace and order, or the prevention of epidemics; or
(iii) Makes judgments or recommendations relative to the fiscal policy of the state, or judgments pertaining to the making of rules and regulations by which entitlements are granted.
(e) To require, and if necessary subpoena, information to insure that all state entities whose programs are included in the pool of candidates for privatization assist the commission in performing the managerial, operational, or administrative analysis relative to:
(i) Determining the privatization potential of a program or activity;
(ii) Performing cost/benefit analysis;
(iii) Performing make or buy analyses; and
(iv) Certifying the profits and savings from privatization projects.
(2) The commission, with the assistance of state entities, shall devise evaluation criteria to be used in conducting reviews of any program or activity that is the subject of a privatization recommendation.
(3) To the extent practicable and to the extent resources are available, the commission shall make available its services for a fair compensation to any local government entity. The Legislature encourages local government entities to utilize the services of the commission.
SECTION 5. In carrying out the duties described in Section 4 of this act, the commission shall follow the sequence of activities described in this section and in Sections 6 through 13 of this act. The commission, through the use of state entity input, shall prepare a pool of program or activity candidates for privatization before performing any other analytical function. The pool shall include not less than ten (10) state entity projects. After developing a pool of candidates, the commission shall conduct cost/benefit studies of all candidates in the pool. Recommendations of privatization may only be issued subsequent to the preparation and commission review of cost/benefit studies. Each year the commission shall complete cost/benefit studies with respect to expenditures comprising not less than Two Hundred Million Dollars ($200,000,000.00) of all state government expenditures.
SECTION 6. (1) In conducting a cost/benefit analysis of candidates from the pool, the commission shall consider the use of delegation, divestment, or deregulation as means of privatizing programs or activities. In developing a plan for conducting cost/benefit analysis, the commission shall consider the following:
(a) The potential annual recurring savings from privatization;
(b) Potential market for the programs or activities;
(c) Potential one-time savings from elimination of a program or activity;
(d) Relative strengths and weaknesses of governmental customer service mechanisms and private sector customer service mechanisms;
(e) The impact of reduced services on the citizens of the state;
(f) The private sector's capacity to engage in voluntary self-regulation; and
(g) Barriers to privatization created by laws, market structure, user expectations, and imperfections in the dissemination and assimilation of information.
(2) The commission shall set appropriate deadlines for reporting of costs and benefits, as well as any other matter germane to privatization. The commission shall also determine the criteria for judging successful privatization, and publish that criteria for evaluation purposes.
(3) The commission, upon privatizing a program or service, shall annually review such privatization project and certify the savings and profits generated by such project.
SECTION 7. (1) After the preparation of cost/benefit analysis, the commission shall review the analysis to determine the accuracy of the analysis provided. In performing this function, the commission may contract with consultants and other experts for assistance. The commission may refer questions or proposals to the state entities or the experts referred to in this subsection regarding the analysis of the program or activity or the delivery of services.
(2) If the commission finds that the cost/benefit analysis prepared by the state entity or expert fails to address the criteria or regulations promulgated by the commission with respect to cost/benefit analysis, the commission shall direct the state entity or expert to resubmit a revised cost/benefit analysis.
SECTION 8. After the cost/benefit analysis, the commission shall:
(a) In the case of divestment or deregulation deemed to be in the public interest, transmit its recommendation to the state entity, the Governor and the Legislature and shall make its recommendation available to the public.
(b) In the case of delegation anticipated to produce any one-time or annual savings of either the previous year's expenditures for a program or activity, or the proposed aggregate charge for rendering the same program or activity, require the state entity to perform a make or buy analysis at the earliest feasible date.
SECTION 9. (1) In addition to make or buy analyses required by the commission, the commission shall perform or require the state entity or expert to perform a make or buy analysis covering any good or service for which the commission has received a qualifying petition of interest from a private company (consistent with the process below). No more than one (1) make or buy analysis shall be required for a particular good or service within a one-year period.
(2) Private companies interested in producing goods or services for state entities, through delegation, may file petitions of interest subject to the free enterprise participation process to the commission.
(3) Petitions of interest shall include:
(a) A description of the public good or service that the private company would like to provide for the state entity.
(b) A statement that the private company believes that it can provide the same service, under contract to the state entity, for a lower cost than the present cost with at least comparable quality, efficiency and effectiveness.
(c) A description of the company's financial capacity to provide the service.
(d) A description of the company's technical ability to produce the public good or service, especially evidenced by identical, similar or relevant goods or services provided by the company, whether under public sponsorship or not.
(e) Any additional information the commission deems necessary to make an appropriate decision.
(4) Within ninety (90) days the commission shall determine whether there is sufficient reason to believe that the private company has the financial and technical ability necessary to provide the public good or service.
(5) The commission shall take one (1) of three (3) of the following actions with respect to the petition of interest:
(a) Certification of the petition if the commission finds that the company has sufficient financial and technical ability to provide the good or service. If the commission certifies the petition, the commission shall undertake a make or buy analysis with respect to the public good or service specified in the petition, at the earliest feasible opportunity.
(b) Denial of the petition if the commission finds that the company has insufficient financial and/or technical ability to provide the good or service. The commission shall state its justification for such a finding.
(c) If the commission has already scheduled a make or buy analysis for substantially the same public good or service specified in the petition of interest, it shall notify the petitioner that such an analysis has been scheduled, without making a finding on the petition.
SECTION 10. (1) The make or buy analysis shall be performed through the issuance and evaluation of requests for information and proposals from private companies.
(2) The make or buy analysis shall be conducted as follows:
(a) The commission shall seek the widest reasonable distribution of each request for proposals, and at a minimum shall send each request for proposals to each organization on the interested proposer's list and to each additional organization that requests the specific request for proposal.
(b) The commission shall advertise each request for proposals within ten (10) days of issuance, and in accordance with its general procurement policy.
(c) Submission of proposals shall be required no sooner than forty-five (45) days after the request for proposal advertisement date.
(d) A request for proposals shall clearly specify the goods or services to be procured and include a draft contract.
(e) Any organization may submit its own proposal in response to the request for proposal, subject to the terms and conditions later specified.
(3) The commission shall employ a two-step review process, involving the concurrent submittal of two (2) packages, as follows:
(a) The first step shall be an evaluation of the financial qualifications and technical proposals. The commission shall determine whether each such submittal represents a responsive and responsible proposal.
(b) The second step shall be an evaluation of the cost proposals of the responsive and responsible proposers.
(4) With respect to each request for proposals, the state entity shall award the contract to the private provider or state entity whose responsible and responsive proposal offers the lowest cost.
(5) Any public good or service operated under competitive proposals on the effective date of this act or thereafter shall be subject to a new competitive proposal at least every five (5) years. Renewal options that extend a contract beyond five (5) years shall be prohibited.
(6) In no case shall a good or service operated under competitive proposal be returned to operation not subject to competitive proposal.
(7) A state entity shall not establish or impose any requirement relating to salaries, wages, benefits or labor union representation, staffing levels, work rules or other conditions of employment of private contractor employees. All contractors shall comply with applicable federal and state labor laws.
(8) Each state entity shall make capital facilities and equipment available for operation under competitive proposals by private contractors to the maximum extent feasible, subject to supervision of the state entity. Capital facilities and equipment may be denied use by private contractors only if they would similarly be denied to use by the state entity itself if it were awarded the contract.
(9) All contract prices shall be competitively determined through a request for proposal. No change in contract payment amount to a private contractor or state entity shall be made except as specified in the contract. Payment changes in a contract shall be limited to indices, escalators, deflators, changes in service level and other expressly stated or calculable amounts, consistent with the request for proposal and the proposal of the private contractor or state entity awarded the contract.
(10) A state entity may execute interim standby competitive contracts with one or more private contractors to provide any good or service on an interim basis in the event that the state entity is required to do so by the public welfare. Any good or service operated under a standby contract shall be subject to competitive proposal within six (6) months of standby contract service award.
(11) No state entity shall make or be bound by any contract, agreement or assurance that restricts its ability to comply with this act in any respect.
SECTION 11. Any state entity may compete to provide the public good or service subjected to make or buy analysis by submitting its own proposal, subject to the following conditions:
(a) That it submit a sealed proposal before the advertised deadline for such proposals, that the proposal not be altered after that deadline and that the proposal be publicly opened and made public at such deadline.
(b) That any labor provision assumed in the proposal shall have been finally executed and binding on the state entity with respect to the public good or service subjected to a make or buy analysis.
(c) That it take reasonable steps to ensure an objective and fair evaluation process including prohibition of proposal evaluation participation by personnel or departments which were involved in preparing the state entity's proposal.
(d) That its proposal price be not less than its attributable fully allocated cost for the service, and that its proposal price not be based on part-time labor provisions or other less costly labor provisions to a greater percentage than such provisions are employed in comparable positions within the state entity, and that its proposal price be consistent with currently adopted budgets and financial plans.
(e) That it shall make or be bound by no contract, agreement or assurance that creates or extends any form of obligation for continued employment or employee compensation, except for pension, beyond the contract expiration date under the provisions of the request for proposal for employees assigned to the service.
(f) That it shall be bound by the same terms, conditions and performance and other standards as would have applied to a private provider awarded the contract under the request for proposal.
(g) That its costs shall not at any point during the contract period rise by an amount greater than that specified for the corresponding period in the state entity's proposal. If the state entity's cost performance is not in compliance with this provision, the state entity shall issue a new request for proposal for the good or service within ninety (90) days.
SECTION 12. (1) A commission shall report to the Governor, the Legislature, affected public and private entities, and the general public the results of any make or buy analysis, including the amount of any profit and cost savings achieved, regardless of whether the contract was awarded to a private firm or awarded to a state entity.
(2) The commission shall certify all cost savings and profit unless it has reason to believe the savings and profits to be incorrect. If the commission has reason to believe that the savings and profits are incorrect, the commission shall arrange for one or more independent audits of the cost before and after make or buy analysis.
(3) The commission shall certify to the Legislature and the public actual cost savings and profits from privatization and shall identify which portions of the savings and profits that are recurring, and which are one-time, with the total amount of recurring and one-time saving equalizing the amount certified.
SECTION 13. (1) On or before December 1 of each year, the commission shall issue a report to the Legislature and the Governor which shall:
(a) Describe each program or activity in the pool of candidates for privatization;
(b) Summarize the cost/benefit analysis prepared on each candidate;
(c) Provide a detailed summary of any and all privatization recommendations issued by the commission;
(d) Evaluate any privatization activity recommended by the commission that became effective the first day of the previous fiscal year;
(e) Prepare a review of the effectiveness and efficiency of any privatization recommended by the commission that has become effective since the commission came into existence;
(f) Compare the savings that the commission had projected to the savings that were certified, detailing the implications of both the projected and actual savings with respect to taxpayer dividends; and
(g) Certify the savings and profits achieved through new make or buy analyses in the year ending the previous June 30 and the total recurring savings from previous years. This information shall be conveyed to the public and the media.
(2) The Legislative Budget Office shall cooperate with the commission in the completion of any report or reporting activity required by this section.
(3) The commission shall report to the Legislature, in conjunction with the above-required report, an analysis of any legal impediments to future privatization. The report shall also include proposed remedies, including, where appropriate, change to rules and regulations, draft legislation or constitutional amendments.
(4) All reports required under this section shall be provided quarterly to the Joint Legislative Committee on Performance Evaluation and Expenditure Review (PEER) for its review.
SECTION 14. This act shall stand repealed on July 1, 1999.
SECTION 15. This act shall take effect and be in force from and after July 1, 1997.