States such as Maryland, California and Massachusetts passed laws that restricted the ability of state agencies to contract out services. For example, in Maryland the law requires that, with a few exceptions, state employees perform all state functions within state-operated facilities in preference to contracting with the private sector. In addition, a finding of substantial cost savings is required prior to contracting out. Benefits and wages must be comparable to the industry's level and may not significantly undercut state pay rates. In addition, the contract may not result in the displacement of civil service employees.
Displacement includes demotion and involuntary transfers to different title or location.
Savings must be large enough to account for private sector and state cost changes throughout the term. There must be a publicized competitive bidding process. The contract must contain a provision relating to the qualifications of the staff as well as assurances that the contractors' hiring practices meet nondiscrimination and affirmative action standards. Later, California established guidelines that required union involvement in the decision making process. Less powerful legislation was passed in Maine in 1989.