Case Title: Service Employees International Union, Local 509 v. Auditor of the Commonwealth

Citation: 

Docket Number: SJC-12126

State: massachusetts

Court: Massachusetts Supreme Court

Date: 2016-12-09T00:00:00Z

Document:
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SJC-12126 
 
SERVICE EMPLOYEES INTERNATIONAL UNION, LOCAL 509, & others1  vs.  
AUDITOR OF THE COMMONWEALTH & others.2 
 
 
 
Suffolk.     September 6, 2016. - December 9, 2016. 
 
Present:  Gants, C.J., Botsford, Lenk, Hines, Gaziano, Lowy, & 
Budd, JJ. 
 
 
Privatization Act.  Auditor.  Commissioner of Mental Health.  
Public Welfare, Department of Health and Human Services.  
Mental Health.  Practice, Civil, Action in nature of 
certiorari. 
 
 
 
 
Civil action commenced in the Supreme Judicial Court for 
the county of Suffolk on April 8, 2016. 
 
 
The case was reported by Spina, J. 
 
 
 
Ian O. Russell (Katherine D. Shea & James F. Lemond with 
him) for the plaintiffs. 
 
Bryan F. Bertram, Assistant Attorney General (Daniel J. 
Hammond, Assistant Attorney General, with him) for the 
defendants. 
 
 
                     
 
1 Massachusetts Nurses Association, and American Federation 
of State, County and Municipal Employees Council 93. 
 
 
2 Department of Mental Health, and Executive Office of 
Health and Human Services (EOHHS). 
2 
 
 
LENK, J.  The plaintiffs, Service Employees International 
Union, Local 509 (SEIU), the Massachusetts Nurses Association, 
and the American Federation of State, County and Municipal 
Employees, Council 93, challenge a decision by the Auditor of 
the Commonwealth approving a proposed privatization contract 
pursuant to G. L. c. 7, §§ 52-55 (Pacheco Law).  The Pacheco Law 
establishes "[p]rocedures that agencies must follow when 
beginning the bidding process for and entering into a 
privatization contract."  Massachusetts Bay Transp. Auth. v. 
Auditor of the Commonwealth, 430 Mass. 783, 786 (2000) (MBTA).  
The Auditor of the Commonwealth must review all privatization 
proposals to determine if they comply with the Pacheco Law.  Id. 
 
In January, 2016, the Department of Mental Health (DMH) 
submitted a proposal to the Auditor that would privatize certain 
of its State-run mental health services.  Under the terms of the 
proposal, the Massachusetts Behavioral Health Partnership 
(MBHP), a privately owned State-wide mental health provider, 
would take over from DMH the provision of mental health services 
in the Southeast region of Massachusetts.  In March, 2016, the 
Auditor issued a written decision concluding that DMH's 
privatization proposal met the requirements of the Pacheco Law, 
specifically, that the privatization was procured properly, that 
it would not result in a net cost to the Commonwealth, and that 
it would not cause a decline in the quality of mental health 
3 
 
services provided in the Southeast region.  The plaintiffs then 
filed a petition in the nature of certiorari in the county 
court, seeking review of the Auditor's decision.  A single 
justice reserved and reported the matter to the full court. 
 
We conclude that the Auditor did not abuse her discretion 
in determining that DMH's privatization proposal met the 
requirements of the Pacheco Law.  Accordingly, we affirm the 
Auditor's decision. 
 
1.  Background.  DMH administers mental health services to 
low and moderate income residents of the Commonwealth through 
the "MassHealth" program.3  The provision of these services is 
divided into five geographic regions within the Commonwealth, 
each containing several emergency service programs (ESPs):  
Metro Boston, Western Massachusetts, Central Massachusetts, 
Southeast and Northeast-Suburban.4  In each region, the ESPs 
provide twenty-four hour emergency mental health services to 
MassHealth members, uninsured individuals, and others requiring 
mental health crisis intervention.  Prior to the effective date 
of the Pacheco Law in 1993, DMH contracted with private 
                     
 
3 DMH is an agency within EOHHS.  For clarity, we will refer 
to DMH as the contracting party throughout the opinion, even 
though EOHHS simultaneously played a role in the contracting 
process. 
 
 
4 The Southeast region encompasses Brockton, Cape Cod and 
the Islands, Fall River, and Taunton/Attleboro. 
4 
 
contractors to provide ESP services throughout Massachusetts,5 
with the exception of the Southeast region.6 
 
DMH entered into the most recent contract concerning the 
provision of ESP services on July 1, 2012.  After a competitive 
procurement process, DMH awarded a five-year contract7 to MBHP  
to manage all of the ESPs in the Commonwealth except those in 
the Southeast region.8  It is undisputed that the 2012 contract 
was not subject to the requirements of the Pacheco Law because 
the services awarded to MBHP were already privately operated.  
                     
 
5 Mental Health Management of America, a private company, 
apparently began to provide mental health services to mentally 
ill patients covered by Medicaid in 1992.  See Weld to Privatize 
Acute Care for Uninsured Mentally Ill, Boston Globe, Jan. 25, 
1995, at 1 ("Since 1992, Mental Health Management of America 
. . . has been responsible for providing acute care to mentally 
ill patients on Medicaid"); The Massachusetts Behavioral Health 
Partnership (MBHP) took over the provision of such services from 
Mental Health Management of America in 1996.  See State Chooses 
New Firm to Provide Managed Care For Mentally Ill, Boston 
Herald, Jan. 20, 1996, at 6 ("[MBHP] will provide mental health 
and substance abuse services to 400,000 Medicaid clients as well 
as 30,000 residents who are covered directly by [DMH]"). 
 
 
6 During that period, DMH provided emergency service program 
(ESP) services in the Southeast region directly through its own 
employees. 
 
 
7 The contract required MBHP to procure contracts with ESP 
providers to deliver "direct care for behavioral-health crises 
and emergency services to subscribers to ['MassHealth'], 
subscribers to private health insurers, or the uninsured." 
 
 
8 In procuring the 2012 contract, DMH issued a blanket 
request for responses (RFR) seeking a vendor to provide various 
medical services in accordance with the provisions of 801 Code 
Mass. Regs. §§ 21.00 (2003) and 801 Code Mass. Regs. § 21.06 
(1997), which mandate a competitive procurement process for 
agency contracts. 
5 
 
Under the terms of the contract, DMH reserved the right to amend 
it "to implement new initiatives or to modify initiatives." 
 
In 2015, DMH amended its 2012 contract with MBHP in an 
effort to privatize ESP services in the Southeast region.  
Pursuant to the terms of the amended contract (2015 amendment), 
MBHP would take over management of the remaining State-run ESP 
services in that region.  Toward that end, MBHP was required to 
"contract with one locally based provider to administer the ESP 
for each catchment area,"9 issue a "request for responses (RFR)" 
to procure ESP services for the Southeast region and "select 
winning bidders" to provide services in accordance with a set of 
guidelines established by DMH.  DMH created the criteria for 
selection of the winning bids and retained final approval 
authority over the selection of the winning bidders.  After 
seeking interested bidders, MBHP ultimately recommended two 
organizations to provide ESP services in the Southeast region. 
 
In accordance with its obligations under the Pacheco Law, 
in January, 2016, DMH provided written notice and certification 
to the Auditor of its privatization proposal and a comprehensive 
analysis of how the proposal comported with the Pacheco Law.10  
                     
 
9 A "catchment area" is a geographical term used by DMH to 
divide the Commonwealth into different divisions. 
 
10 The Pacheco Law requires that any agency that wishes to 
enter into a privatization contract must, "in consultation with 
the executive office for administration and finance, first 
6 
 
The submission included a detailed analysis of the financial 
benefits of privatization,11 the structure of services that the 
private ESP providers would deliver, and a model contract 
between MBHP and each private ESP provider in the Southeast 
region.12  Shortly thereafter, SEIU submitted a series of 
objections to the Auditor, pursuant to provisions in the Pacheco 
Law, challenging a number of aspects of the privatization 
proposal. 
 
On March 30, 2016, the Auditor issued her "Independent 
State Auditor's Determination on the Department of Mental 
Health's Proposal to Privatize Its Southeast Emergency Services 
Program," approving the privatization proposal.  Shortly after 
                                                                  
compl[y] with" several requirements.  G. L. c. 7, § 54.  The 
agency head must certify in writing to the Auditor that the 
agency solicited "competitive sealed bids for the privatization 
contracts," G. L. c. 7, § 54 (1); that the privatization 
contract provides a guaranteed minimum wage rate set out in the 
statute and the same health insurance benefits for each 
previously public position as was provided by the State, G. L. 
c. 7, § 54 (2); that the privatization contract results in net 
savings compared to "the costs of regular agency employees[] 
providing the subject services in the most cost-efficient 
manner," G. L. c. 7, § 54 (4); and that the "quality of services 
to be provided" will "equal or exceed the quality of services 
which could be provided by regular agency employees," G. L. 
c. 7, § 54 (7) (ii). 
 
 
11 DMH's submission noted that privatization would save the 
Commonwealth $7,007,864 in its first year, and would provide 
similar savings in subsequent years. 
 
 
12 The sample contract between MBHP and each ESP provider 
included a list of metrics by which MBHP would measure the 
performance of each provider, and noted that the contract would 
be in effect until June 30, 2017. 
7 
 
the decision was issued, the plaintiffs filed a petition in the 
nature of certiorari, G. L. c. 249, § 4, in the county court.  
The parties then jointly asked the single justice to reserve and 
report the case to the full court.  The single justice did so.13 
 
The plaintiffs maintain that the Auditor's decision was 
arbitrary and capricious because DMH failed to seek competitive 
bids before entering into the 2015 amendment with MBHP; DMH 
improperly delegated the solicitation process of ESP providers 
to MBHP; the privatization proposal fails to uphold the minimum 
wage and benefits protections of the Pacheco Law; the Auditor 
failed to take into account the costs of "bumping" and seniority 
rights; and the quality of services provided by MBHP would be 
lower than those currently provided by DMH. 
2.  Discussion.  a.  Standard of review.  In the absence of 
a statutory right of appeal, the plaintiffs sought review of the 
Auditor's decision by requesting relief in the nature of 
certiorari, G. L. c. 249, § 4.  "The function of a civil action 
in the nature of certiorari . . . is 'to relieve aggrieved 
parties from the injustice arising from errors of law committed 
in proceedings affecting their justiciable rights when no other 
means of relief are open.'"  Figgs v. Boston Housing Auth., 469 
                     
 
13 The defendants' attorney represented during argument 
before us that DMH has not proceeded with implementation of the 
2015 amendment pending the outcome of this litigation. 
8 
 
Mass. 354, 361 (2014), quoting Swan v. Justices of the Superior 
Court, 222 Mass. 542, 544 (1916). 
An action in the nature of certiorari is an appropriate 
means by which to challenge the Auditor's determination whether 
a privatization contract complies with the Pacheco Law.  See 
MBTA, 430 Mass. at 790-791.  "The legislative history of the 
[Pacheco Law] and the law itself express the Legislature's 
intent that the Auditor exercise discretion in reviewing the 
contract."  Id. at 791.  In considering a discretionary decision 
by an administrative agency, as here, "a reviewing court . . . 
is limited to determining whether the decision is legally 
erroneous or so devoid of factual support as to be arbitrary and 
capricious."  MacLaurin v. Holyoke, 475 Mass. 231, 238 (2016).14  
In conducting our review, we are mindful that "[a] decision 
is . . . arbitrary and capricious [where] there is no ground 
which 'reasonable [persons] might deem proper' to support it."  
Garrity v. Conservation Comm'n of Hingham, 462 Mass. 779, 792 
(2012), quoting T.D.J. Dev. Corp. v. Conservation Comm'n of N. 
Andover, 36 Mass. App. Ct. 124, 128 (1994). 
b.  Procurement process.  We first address the plaintiffs' 
argument that, in contravention of the Pacheco Law, DMH did not 
                     
14 The plaintiffs' counsel acknowledged at argument before 
us that the arbitrary and capricious standard of review was 
applicable. 
9 
 
publicly procure the services covered by the 2015 amendment.15  
The 2015 amendment, inter alia, transferred managerial 
responsibilities concerning the Southeast region ESPs from DMH 
to MBHP and tasked MBHP with procuring private vendors to run 
the ESPs.  The Auditor's analysis of the privatization 
proposal's compliance with the procurement requirements of the 
Pacheco Law began with the unremarkable determination that the 
privatization contract at issue here constituted a "series or 
combination of agreements."16  She then determined that "[i]n a 
more complicated privatization proposal such as this, it is 
essential that all the agreements are subject to a public 
procurement process . . . ."  The Auditor went on to construe 
the Pacheco Law as requiring that only "[t]he essential 
contracts in a series of contracts" must be competitively 
procured "at the time of the privatization."  "[E]ssential 
contracts" are, in this regard, "the contracts that govern the 
provision of public services formerly provided by [S]tate 
                     
 
15 Here, the plaintiffs object to the procurement process as 
provided by the Pacheco Law, not as set forth in the regulations 
established in 801 Code Mass. Regs. § 21:06.  Although the 
plaintiffs earlier made an objection to the Auditor that the 
procurement process in this case did not comport with State 
procurement regulations, before us the plaintiffs explicitly 
disclaim that objection. 
 
 
16 Insofar as the language of the statute defines a 
"[p]rivatization contract" as "an agreement or combination or 
series of agreements," G. L. c. 7, § 53, this determination is 
patently reasonable.  The plaintiffs do not contend otherwise. 
10 
 
employees."  Additionally, the Auditor noted that the 
2015 amendment was "part" of the 2012 contract, which had been 
publicly procured by competitive bidding at its inception,17 
because the additional obligations that the amendment placed 
upon MBHP were explicitly contemplated in the language of that 
contract. 
The Auditor then concluded that the agreements between MBHP 
and the ESP providers were the only "essential contracts" in the 
series or combination of agreements constituting the proposed 
privatization contract.  Only those contracts had to be procured 
under the Pacheco Law at the time of the privatization.  Because 
MBHP had in fact solicited competitive bids for the ESP 
contracts pursuant to its obligations under the 2012 contract as 
amended in 2015, the Auditor concluded that the proposed 
privatization contract had met the procurement requirements of 
the Pacheco Law. 
The plaintiffs contend that the Auditor erred in several 
respects.  They chiefly object to her determination that the 
2015 amendment did not constitute an "essential agreement" in 
the privatization contract, contending that it was the vehicle 
that set in motion the proposed privatization.  Accordingly, 
they argue that DMH was obligated to publicly procure the 
                     
 
17 The 2012 contract had been subject to a competitive 
procurement process under State procurement regulations.  See 
801 Code Mass. Regs. § 21:06. 
11 
 
services covered by the amendment.18  The plaintiffs do not 
assert that either the 2012 contract or MBHP's contracts with 
ESP providers failed to satisfy the public procurement 
requirements of the Pacheco Law.  We address each of the 
Auditor's conclusions in turn. 
The Auditor's determination that only the "essential" 
agreements in a privatization contract, the agreements which 
"govern the provision of public services formerly provided by 
                     
18 While both the Pacheco Law and state procurement 
regulations set forth in 801 Code Mass. Regs. §§ 21:00 require 
that public agencies solicit competitive bids with reference to 
the procurement of services, the Pacheco Law places several 
additional requirements on agencies asking to privatize 
services.  See 801 Code Mass. Regs. § 21:06 ("All acquisitions 
of Commodities or Services, or both, must be competitively 
procured unless the acquisition qualifies as an exception under 
[801 Code Mass. Regs. § 21:05]"); G. L. c. 7, § 54 (1) ("The 
[privatizing] agency shall solicit competitive sealed bids for 
the privatization contracts based upon [a written statement of 
the services to be privatized]").  For example, the Pacheco Law 
provides that "[n]o amendment to a privatization contract shall 
be valid if it has the purpose or effect of avoiding any 
requirement of this section."  Id. 
 
Additionally, the Pacheco Law does not contain the broad 
list of exempt institutions that are in the procurement 
regulations.  See 801 Code Mass. Regs. § 21:01 (2) (2003) 
(exempting institutions of higher learning, elected offices, 
military division, and independent public authorities).  The 
differences between the State regulations and the procurement 
requirements of the Pacheco Law are not without consequence.  
For example, in 2015, the Auditor rejected a privatization 
proposal from Roxbury Community College on the basis that 
although it was exempt from State procurement regulations, it 
was still bound by and had not complied with the procurement 
requirements of the Pacheco Law.  See Letter dated Nov. 17, 
2015, at http://www.mass.gov/auditor/docs/privatization/11-17-
15-signed-objection-letter-for-roxbury-community-college.pdf 
[https://perma.cc/NB9Q-T88A]. 
12 
 
[S]tate employees," must be procured publicly by competitive 
bidding "at the time of the privatization" is itself reasonable.  
See Dowling v. Registrar of Motor Vehicles, 425 Mass. 523, 525 
(1997), quoting Massachusetts Med. Soc'y v. Commissioner of 
Ins., 402 Mass. 44, 62 (1988) ("Where the [agency's] statutory 
interpretation is reasonable . . . the court should not supplant 
[its] judgment").  The statutory language does not speak 
directly to whether all or only some parts of a privatization 
contract consisting of a series or combination of agreements 
must be competitively procured.  The Pacheco Law defines a 
privatization contract, however, as a contract by which a 
private entity "agrees with an agency to provide services . . . 
which are substantially similar to and in lieu of, services 
theretofore provided, in whole or in part, by regular employees 
of an agency."  G. L. c. 7, § 53.  The Auditor's judgment that 
the "essential contracts" are those which actually include the 
private providers taking over public services directly aligns 
with this definition. 
The Auditor's challenged determination that the 
2015 amendment does not constitute an "essential agreement" in 
the privatization contract that must be publicly procured at the 
time of the privatization presents a somewhat closer question.  
Her conclusion rests on two grounds.  First, she determined that 
the 2015 amendment was part of the 2012 contract, which already 
13 
 
had been publicly procured.  Second, she found that the only 
contracts that actually "govern the provision of public services 
formerly provided by [S]tate employees" are the contracts 
between MBHP and the ESP providers.  Hence, in her view, the 
2015 amendment did not constitute an "essential" agreement 
because it was part of the 2012 contract and did not actually 
effectuate the privatization. 
The disagreement between the plaintiffs and the Auditor 
boils down to whether the 2015 amendment "govern[s] the 
provision of public services formerly provided by [S]tate 
employees."  The Auditor's determination that the 
2015 amendment, which provided for the expansion of MBHP's 
oversight and solicitation obligations, did not govern the 
provision of public services formerly provided by State workers 
is not an unreasonable resolution of that question.  The 
2015 amendment merely extends MBHP's oversight of State ESP 
services under the 2012 contract and directs it to solicit the 
private providers that will take over the State positions.  
Given that the Auditor advances a reasonable interpretation and 
application of the procurement requirements of the Pacheco Law, 
we cannot conclude that her interpretation, in these 
circumstances, was arbitrary and capricious.  See Massachusetts 
Med. Soc'y v. Commissioner of Ins., 402 Mass. at 62 ("Where [an 
14 
 
agency's] statutory interpretation is reasonable . . . the court 
should not supplant [its] judgment").19 
c.  Delegation by DMH.  We next address the plaintiffs' 
argument that DMH improperly delegated to MBHP the procurement 
process for the privatization contract, in violation of the 
Pacheco Law.  The 2015 amendment charged MBHP with issuing a 
"request for responses (RFR)" to procure ESP services for the 
Southeast region and "select[ing] winning bidders" to provide 
services in accordance with a set of guidelines established by 
DMH.  The plaintiffs contend that DMH's assignment of these 
tasks to MBHP contravened the requirements of the Pacheco Law.  
The Pacheco Law provides, in relevant part, that an "agency" 
intending to enter into a privatization contract "shall solicit 
competitive sealed bids for the . . . contracts," and then 
"publicly designate the bidder to which it proposes to award the 
contract."  G. L. c. 7, § 54 (1), (6).  An "agency" is defined 
as "an executive office, department, division, board, 
commission, or other office or officer in the executive branch 
of the government of the [C]ommonwealth."  G. L. c. 7, § 53.  
The plaintiffs contend that the definition of "agency" in the 
                     
 
19 The plaintiffs also argue that the amendment was invalid 
in any case because it "had the purpose or effect of avoiding" 
the procurement requirements of the Pacheco Law.  See G. L. 
c. 7, § 54 (1).  This argument is unavailing because, as the 
Auditor notes and the plaintiffs repeatedly state in their 
argument, the 2012 contract was not a privatization contract. 
15 
 
Pacheco Law unambiguously required that DMH itself solicit the 
bids and publicly designate the winning proposals in its 
privatization.  By contrast, the Auditor, in approving DMH's 
delegation of certain solicitation-related tasks to MBHP, 
determined that it was "unreasonable to assume that the 
Legislature would only permit an agency to undertake [the tasks 
associated with the solicitation process] directly, even when 
indirectly undertaking those tasks" would best serve the 
purposes of the law as expressed in its preamble. 
The Auditor's determination that, in these circumstances, 
DMH's assignment of certain tasks to MBHP did not violate the 
Pacheco Law is reasonable because DMH retained control over the 
solicitation process.  Nothing in the statutory text of the 
Pacheco Law proscribes an agency from implementing the 
solicitation process through an intermediary acting under the 
agency's direction.  Furthermore, doing so would not contravene 
the purpose of the Pacheco Law where, as the Auditor noted in 
her decision, the agency "indirectly undertaking those 
tasks . . . ensures that the Commonwealth receives high-quality 
public services at low cost with due regard for the taxpayers of 
the Commonwealth and the needs of public and private workers."  
See G. L. c. 7, § 52. 
Here, there was ample evidence before the Auditor that DMH 
controlled the procedure, criteria, and outcome of the 
16 
 
solicitation process.  The 2015 amendment provided DMH with 
control over how MBHP conducted the solicitation process, the 
performance standards that bidders responding to the RFR would 
have to meet in order to qualify as an ESP provider, and final 
approval rights over the selection of the winning bidders.  
Accordingly, the Auditor's determination that DMH's delegation 
of solicitation-related tasks to MBHP did not run afoul of the 
Pacheco Law was not arbitrary and capricious. 
d.  Minimum wage and benefit provisions.  We next turn to 
the plaintiffs' argument that the model contract between MBHP 
and the ESP providers included in the privatization proposal  
fails to require compliance with the minimum wage and benefit 
protections of the Pacheco Law beyond June 30, 2017.  Under the 
Pacheco Law, "[e]very bid for a privatization contract and every 
privatization contract shall include provisions specifically 
establishing the wage rate for each such position, which shall 
not be less than" "the lesser of step one of the grade or 
classification under which the comparable regular agency 
employee is paid, or the average private sector wage rate for 
said position."  G. L. c. 7, § 54 (2).  The statute also 
mandates that successful bidders provide health insurance 
benefits comparable to those previously provided by the 
Commonwealth to State employees performing the same services.  
Id. 
17 
 
The plaintiffs argue that the model contract improperly 
terminates these protections at the end of the current contract 
period, June 30, 2017.  First, they contend that these 
protections cannot be terminated as long as the corresponding, 
previously State-employed jobs still exist.  In the alternative, 
the plaintiffs maintain that the guarantee of the wage and 
health insurance protections for merely one year in the model 
contract constitutes an impermissible end run around the Pacheco 
Law. 
In considering this issue, the Auditor found that the 
Pacheco Law "sets forth no minimum standard for the term of a 
privatization contract."  She then determined that the test that 
she would use in "assessing the legitimacy of the term of a 
privatization contract is whether the contract's term has some 
rational basis or is designed to avoid the requirements of the 
[Pacheco Law]."  Applying this standard to DMH's privatization 
proposal, she found that "the limited timeframe for the contract 
[and therefore for the protections] results from [DMH's] 
preference to provide all ESP services under one umbrella 
contract with MBHP, or whoever the successful bidder is at the 
expiration of the [2012 contract]." 
The Auditor concluded that this was a "rational basis" for 
the short duration of the ESP contracts and the protections they 
provided.  During the review period, DMH had written to the 
18 
 
Auditor that it intended to extend its then-current contract 
with MBHP and would extend these protections under that 
contract.  As noted in the decision, the Auditor's approval of 
the privatization proposal was based in part on that 
representation.20  We conclude that there was no abuse of 
discretion in the Auditor's reliance on DMH's written 
representation that it would comply with her interpretation of 
the Pacheco Law as a factor in her decision to approve the 
privatization proposal.21 
e.  Costs of "bumping" and seniority rights.  The 
plaintiffs maintain that, while the Auditor discussed the 
subject of transition costs resulting from the termination of 
employees as a result of the proposed privatization, she failed 
                     
 
20 The Auditor stated in her decision that "if the 
procurement of a successor agreement to the agreement between 
[DMH] and MBHP is not completed by the end of June 2017 and 
instead the present agreement is extended until a new contract 
is negotiated, the wage and benefit requirements of the [Pacheco 
Law] should continue to apply as well until that new contract is 
finalized."  Elaborating on her view, she added that "[a]ny 
amendment at that time that would, in extending the length of 
the contract, also affect the wage and benefit protections of 
the [Pacheco Law] would be inconsistent with this view."  
Finally, she noted that "[i]n a communication with this 
office . . . DMH took the same position, and this office's 
decision not to object to the privatization proposal is based, 
in part, on this assurance." 
 
21 The Auditor did not address the contention that the 
protections provided by the Pacheco Law extend in perpetuity as 
long as the State jobs they correspond to exist.  We, like the 
Auditor, do not reach the question of the length of time a 
private provider must continue to meet the minimum wage and 
benefits requirements of the Pacheco Law. 
19 
 
to account for the costs22 stemming from "bumping" and seniority 
rights in determining that the privatization would provide the 
Commonwealth over-all cost savings.23 
DMH provided the Auditor with a calculation of the 
potential transition costs incurred as a result of the 
privatization, based on the assumption that every DMH employee 
affected by the privatization accepted a layoff and received the 
maximum unemployment benefits to which the employee was 
entitled.  The cost of this worst-case scenario was estimated to 
be approximately $2.2 million.  Taking those transition costs 
into account, the Auditor determined that the reductions in cost 
from the proposed privatization of the Southeast region would 
result in savings of approximately $7 million over the first 
year of privatization. 
The plaintiffs contend that, although the Auditor took 
notice of these cost data, she erred by not taking into account 
                     
 
22 The Pacheco Law mandates that the cost of a privatization 
contract must "be less than the estimated cost" of the "costs of 
regular agency employees[] providing the subject services" "in 
the most cost-efficient manner."  See G. L. c. 7, § 54 (4), (7) 
(iii). 
 
 
23 "Bumping" is a process by which employees with greater 
seniority whose jobs are being eliminated or who face being laid 
off may displace less senior employees.  See, e.g., Andrews v. 
Civil Serv. Comm'n, 446 Mass. 611, 619 (2006); Boston v. 
Salaried Employees of N. Am., Local 5198, 77 Mass. App. Ct. 785, 
786 (2010); Herlihy v. Civil Serv. Comm'n, 44 Mass. App. Ct. 
835, 835 (1998).  For example, a senior DMH employee whose 
position was terminated as part of the privatization could opt 
to take the comparable job of a less senior employee. 
20 
 
the specific costs of retraining transferred employees who moved 
into different jobs as a result of "bumping."  The plaintiffs 
have not, however, made a showing that those retraining costs 
could equal or outweigh the $7 million in savings that the 
Auditor found would stem from the privatization, nor do they 
otherwise contest the Auditor's conclusion concerning the 
reduction in costs the privatization would afford the 
Commonwealth.  Hence, even if the plaintiffs' contention that 
the Auditor did not take into account costs associated with 
"bumping" and seniority rights is correct, her conclusion that 
the privatization would provide savings to the Commonwealth in 
accordance with the requirements of the Pacheco Law would still 
be accurate.  We therefore discern no basis on which to conclude 
that her judgment on this issue was arbitrary and capricious. 
f.  Quality of ESP services following privatization.  The 
plaintiffs' final objection concerns the Auditor's determination 
that there will be no reduction in the quality of services as a 
result of the proposed privatization.  The Pacheco Law requires 
an agency advancing a privatization proposal to demonstrate to 
the Auditor that "the quality of the services to be provided by 
the designated bidder is likely to . . . equal or exceed the 
quality of services which could be provided by regular agency 
employees," G. L. c. 7, § 54 (7) (ii), "providing the subject 
21 
 
services in the most cost-efficient manner," G. L. c. 7, 
§ 54 (4). 
We review the Auditor's conclusions as to the quality of 
services under the privatization proposal to determine if they 
rest on at least one "ground which reasonable [persons] might 
deem proper to support it" (quotation and citation omitted).  
See Garrity v. Conservation Comm'n of Hingham, 462 Mass. at 792.  
The plaintiffs argue that the Auditor erred in four respects in 
determining that the quality of services would not decline due 
to the proposed privatization.  They contend that the proposed 
privatization will fail to provide services to patients with 
commercial health insurance; result in fewer licensed clinicians 
serving patients; lead to a harmful reduction in staffing in the 
Southeast region; and reduce the hours of staff availability at 
community centers in the ESPs.  We address each of these 
contentions in turn. 
The plaintiffs first maintain that, contrary to the 
Auditor's findings, the model contract contained in DMH's 
submission to the Auditor does not mandate that ESP providers 
deliver services to commercially insured individuals.  The 
Auditor noted in her decision that the model contract explicitly 
requires that ESPs must provide services "to individuals . . . 
experiencing a behavioral health crisis," and that DMH 
represented to her that ESPs would be required to provide 
22 
 
service to all individuals, regardless of any insurance 
coverage.  The Auditor's reliance on the model contract, as 
augmented by DMH's representation, was not unreasonable. 
The plaintiffs also object that the Auditor's decision does 
not adequately address SEIU's arguments that the private ESP 
providers will employ more unlicensed clinicians than does DMH,24 
and that the proposed privatization will result in a significant 
reduction in staffing in the Southeast region.  The plaintiffs 
contend that both of these occurrences will result in a decline 
in the quality of services in the Southeast region as a result 
of the privatization.  The Auditor's determination addressed 
both of these contentions by stating that the model contract 
requires ESP providers to meet the same standards of care 
currently provided by DMH's State employees.25  Given that the 
Auditor relied on the contractual obligations of the ESP 
                     
 
24 According to the Service Employees International Union, 
Local 509 (SEIU), and undisputed by DMH, eighty-seven per cent 
of DMH clinicians providing ESP services have a professional 
license, while only sixty-eight per cent of ESP clinicians 
Statewide are licensed. 
 
 
25 In this regard, the Auditor had data before her that, 
although disputed by SEIU, she apparently credited.  The data, 
submitted to the Auditor by DMH, based on studies by MBHP, 
purports to show that private ESP providers across the 
Commonwealth have provided equal or better care than the ESPs 
operated directly by DMH.  The private ESPs which purportedly 
performed as well or better than their State counterparts were 
subject to similar licensing requirements as the private ESP 
providers in the Southeast region would be under the model 
contract. 
23 
 
providers in addressing plaintiffs' contentions, her judgment in 
this instance was reasonable. 
Finally, the plaintiffs object to the proposal's reduction 
in walk-in services at community centers in the ESPs from the 
current twenty-four hour per day staffing levels.26  The Auditor 
noted in her decision that the proposed ESP contract guarantees 
services to those in psychiatric distress twenty-four hours each 
day, seven days per week, regardless of the hours when the 
community-based location is staffed,27 and that only 0.63 per 
cent of patient encounters in the Southeast region over the 
prior year took place at the community centers during a time 
when staff would not be present under the terms of the model 
contract.  She determined that any impact on service would be 
"de minimis."  This was not unreasonable. 
We accordingly conclude that the Auditor's judgment that 
the quality of services would not decline as a result of the 
proposed privatization was reasonable.  See Forsyth Sch. For 
Dental Hygienists v. Board of Registration in Dentistry, 404 
Mass. 211, 218 (1989) ("[An agency's decision] can be disturbed 
                     
 
26 Under the model contract, community-based locations in 
Brockton and Taunton would be open for walk-in services between 
8 A.M. and 8 P.M., Monday through Friday, while the locations in 
Cape Cod and Fall River would be open between 7 A.M. and 11 P.M. 
 
 
27 DMH represented to the Auditor during the review process 
that ESPs would use mobile service centers to respond to 
patients in distress. 
24 
 
only if it is based on a legally untenable ground . . . or is 
unreasonable . . ." [quotations and citation omitted]). 
3.  Conclusion.  The matter is remanded to the county court 
for entry of an order affirming the Auditor's determination that 
DMH's 2016 proposal to privatize its southeastern emergency 
service programs comports with the requirements of the Pacheco 
Law. 
 
 
 
 
 
 
 
So ordered.