An Act To Ensure the Cost-efficiency of Contracting out Services by the State
Maine Legislature, Session 128, LD 1193
Committee: State and Local Government
Sponsors: WARREN, MIRAMANT, DUNPHY, HUBBELL, JORGENSEN, MARTIN, SPEAR, TIPPING, DION
Amends: 3 MRSA §994

Legislative Document
No. 1193
H.P. 830
House of Representatives, March 28, 2017
An Act To Ensure the Cost-efficiency of Contracting out Services by 
the State
Reference to the Committee on State and Local Government suggested and ordered printed.
ROBERT B. HUNT
Clerk
Presented by Representative WARREN of Hallowell.
Cosponsored by Senator MIRAMANT of Knox and
Representatives: DUNPHY of Old Town, HUBBELL of Bar Harbor, JORGENSEN of 
Portland, MARTIN of Sinclair, McLEAN of Gorham, SPEAR of South Thomaston, TIPPING 
of Orono, Senator: DION of Cumberland.
Be it enacted by the People of the State of Maine as follows: 
Sec. 1.  3 MRSA §994, sub-§13 is enacted to read: 
13.  Review of privatization contracts.  Upon the request of the State Auditor in 
accordance with Title 5, section 1824-B, subsection 3, paragraph D, to review proposed 
privatization contracts and recommend to the State Auditor whether a proposed contract 
should be objected to under Title 5, section 1824-B, subsection 3. 
Sec. 2.  5 MRSA c. 167 is enacted to read: 
CHAPTER 167 
PRIVATIZATION CONTRACTS 
§2041.  Privatization contracts 
1.  Definitions.  As used in this section, unless the context otherwise indicates, the 
following terms have the following meanings. 
A.  "Agency" means an executive office, department, division, board, commission or 
other office or officer in the executive branch of the government of the State. 
B.  "Commissioner" means the Commissioner of Administrative and Financial 
Services. 
C.  "Department" means the Department of Administrative and Financial Services. 
D.  "Dependent" means the spouse or child of an employee if that person would 
qualify for dependent status under the United States Internal Revenue Code or for 
whom a support order has been or could be granted under Title 19-A, Part 2 or 3. 
E.  "Privatization contract" or "contract" means an agreement or a combination or 
series of agreements with a term of no more than 5 years by which a 
nongovernmental person or entity agrees to provide services valued at $200,000 or 
more, which are substantially similar to and in lieu of services previously provided in 
whole or in part by employees of an agency.  "Privatization contract" does not 
include: 
(1)  An agreement subsequent to an executed privatization contract, including an 
agreement resulting from a rebidding of the services provided under the contract; 
(2)  An agreement renewing or extending an executed privatization contract; or 
(3)  An agreement solely to provide legal, management consulting, planning, 
engineering or design services. 
2.  Requirements for privatization contract; validity and enforceability; bid 
process.  An agency may not make a privatization contract unless the agency, in 
consultation with the department, has complied with the requirements of this subsection 
and the State Auditor does not object to the contract under subsection 3.  A privatization 
contract made by an agency that has not complied with the requirements of this 
subsection, or that contains terms or conditions intended to avoid the requirements of this 
subsection, or that is objected to by the State Auditor under subsection 3, is invalid and 
unenforceable.  In addition to the requirements provided under this subsection, the bid 
process described in this subsection is subject to the competitive bid process requirements 
of subchapter 1-A. 
A.  The agency must prepare a written statement describing the services proposed to 
be provided under a privatization contract, including the specific quantity and 
standard of quality of such services.  This statement is a public record and must be 
made available by the agency for public inspection.  The agency must file the 
statement with the department and transmit the statement to the State Auditor for 
review under subsection 3. 
B.  The agency must solicit competitive sealed bids for the privatization contract 
based upon the statement required under paragraph A.  The deadline for accepting the 
sealed bids must be the same for all parties. 
C.  For each position in which a bidder will employ a person under the privatization 
contract and for which the duties of the employee will be substantially similar to the 
duties performed by an agency employee, the statement required under paragraph A 
must include a statement of the minimum wage rate to be paid for the position, which 
is the lesser of step one of the grade or classification under which the comparable 
agency employee is paid or, as determined by the department, the average private 
sector wage rate for that type of position.  Every bid for a privatization contract must 
specifically establish the wage rate for each position under the contract, which must 
be no less than the minimum wage rate determined under this paragraph. 
D.  A bid for a privatization contract and a privatization contract must provide that 
the contractor pay a percentage of the costs of health insurance plans for each 
employee under the bid or contract that will be or is employed for 20 hours or more 
weekly.  The percentage required under the bid or contract must be comparable to the 
percentage paid by the State for health insurance plans for comparable agency 
employees.  A health insurance plan provided to an employee under a privatization 
contract must provide coverage to the employee and the employee's spouse and 
dependent children.  A contractor shall submit quarterly payroll records to the agency 
listing the name, address, social security number, hours worked and hourly wage paid 
for each employee in the previous quarter.  The Attorney General may bring a civil 
action in the Superior Court to enforce this paragraph or to prevent or remedy the 
dismissal, demotion or other action prejudicing any employee as a result of the 
employee's report of a violation of this paragraph by the contractor. 
E.  A privatization contract must require the contractor to offer available employee 
positions under the contract to qualified employees of the agency who satisfy the 
hiring criteria of the contractor and whose state employment is terminated as a result 
of the contract.  The contract must require the contractor to comply with a policy of 
nondiscrimination and equal opportunity for all persons protected under Title 5, 
chapter 337 and to take affirmative steps to provide equal opportunity for those 
persons. 
F.  Prior to soliciting bids for a privatization contract under paragraph B, the agency 
shall prepare a comprehensive written estimate of the costs of agency employees 
providing, in the most cost-efficient manner, the services sought under the proposed 
contract.  The estimate must include all direct and indirect costs of agency employees 
providing such services, including, but not limited to, retirement benefits, insurance 
and other employee benefit costs.  For the purposes of this estimate, an employee 
organization may, at any time before the deadline for the agency to receive sealed 
bids under paragraph B, propose amendments to a collective bargaining agreement to 
which it is a party that are intended to reduce the cost estimate under this paragraph.  
Any amendments to a collective bargaining agreement between the agency and an 
employee organization that are intended to reduce the cost estimate under this 
paragraph must be accounted for by the agency prior to finalizing the estimate under 
this paragraph.  The estimate required under this paragraph shall remain confidential 
until the deadline for the agency to receive sealed bids pursuant to paragraph B has 
passed, at which time the estimate shall be a public record and must be made 
available by the agency for public inspection, filed with the department and 
transmitted to the State Auditor for review under subsection 3. 
G.  Where applicable, the agency shall consult with and provide adequate resources 
to an employee organization for the purpose of encouraging and assisting agency 
employees to organize and submit a bid, which may be made as part of a joint venture 
with other persons, to provide the services sought under the proposed privatization 
contract.  The agency shall consider any such employee bid on the same basis as all 
other bids.  An employee bid submitted under this paragraph is confidential and may 
not be disclosed by the agency, except that the agency may disclose the bid to the 
department or the State Auditor as may be required under this section.  The 
provisions of sections 18, 18-A and 19 do not apply to any actions of an agency 
employee conducted in accordance with this paragraph. 
H.  After soliciting and receiving bids, the agency shall publicly designate the bidder 
to which it proposes to award the privatization contract.  The agency shall prepare a 
comprehensive written analysis of the contract cost based on the designated bid, 
including an analysis of the costs of transition from public to private operation, 
additional unemployment and retirement benefits, if any, and monitoring and 
otherwise administering contract performance.  If the designated bidder proposes to 
perform any or all of the contract outside of the boundaries of the State, the contract 
cost, as determined for the purposes of this analysis, must be increased by the amount 
of income tax revenue, if any, that will be lost to the State by the corresponding 
elimination of agency employees, as determined by the State Tax Assessor. 
I.  At the time that the agency publicly designates the bidder to which it proposes to 
award the privatization contract under paragraph H, the head of the agency and the 
commissioner shall each certify in writing to the State Auditor that: 
(1)  The agency has complied with all provisions of this section and any other 
applicable laws and rules; 
(2)  The quality of the services to be provided by the designated bidder is likely 
to satisfy the quality requirements included in the statement prepared under 
paragraph A and to equal or exceed the quality of services that could be provided 
by agency employees as determined under paragraph F; 
(3)  The contract cost as determined under paragraph H will be less than the 
estimated cost as determined under paragraph F, taking into account all 
comparable types of costs; 
(4)  The designated bidder and its supervisory employees have no adjudicated 
record of substantial or repeated willful noncompliance with any relevant federal 
or state law or rule, including, but not limited to, labor relations laws and rules, 
occupational safety and health laws and rules, nondiscrimination and affirmative 
action laws and rules, environmental protection laws and rules and conflicts of 
interest laws and rules; and 
(5)  The proposed privatization contract is otherwise in the public interest. 
The agency and the commissioner shall include a copy of the proposed privatization 
contract with the certificate transmitted to the State Auditor in accordance with this 
paragraph. 
3.  Review by State Auditor; objection; request for review by Office of Program 
Evaluation and Government Accountability.  Except as provided in paragraph D, an 
agency may not make a privatization contract and a privatization contract is invalid and 
unenforceable if, within 30 days of receiving the certificate and other documents required 
under subsection 2, the State Auditor objects to the proposed contract and notifies the 
agency in writing of the objection in accordance with this subsection. 
A.  An objection made under this subsection must state specifically the State 
Auditor's basis for finding that the agency has failed to comply with the requirements 
of subsection 2, including whether the State Auditor finds, based on an independent 
review of all relevant facts, that any of the findings required under subsection 2, 
paragraph I are incorrect. 
B.  In determining compliance by the agency with the requirements of subsection 2, 
the State Auditor may require the attendance and testimony of agency employees and 
other witnesses and the production of books, papers and other records relating to the 
review under this subsection. 
C.  The State Auditor's objection to a proposed privatization contract in accordance 
with this subsection is final and binding on the agency, except when the State 
Auditor, by written notification to the agency, withdraws the objection based on a 
revised certificate submitted by the agency and the commissioner.  If the State 
Auditor withdraws an objection under this paragraph, the specific reasons for the 
withdrawal of the objection, as based on the State Auditor's review of the revised 
certificate, must be stated in the written notification to the agency. 
D.  No later than 30 days after receiving from the agency the certificate and other 
documents required under subsection 2, the State Auditor may request that the Office 
of Program Evaluation and Government Accountability, established under Title 3, 
section 991, review the proposed contract and documents with the joint standing 
committee of the Legislature having jurisdiction over program evaluation and 
government accountability matters and recommend to the State Auditor whether the 
proposed contract complies with the requirements of subsection 2.  If, prior to the 
expiration of the 30-day review period, the Office of Program Evaluation and 
Government Accountability agrees in writing to review the proposed contract, the 
State Auditor is granted an additional 30 days in which to notify the agency of its 
objection to the proposed contract in accordance with this subsection. 
E.  The State Auditor may adopt rules to implement the provisions of this subsection.  
Rules adopted pursuant to this paragraph are routine technical rules as described in 
Title 5, chapter 375, subchapter 2-A. 
4.  Applicability.  The provisions of this section do not apply to any privatization 
contracts executed prior to the effective date of this section. 
SUMMARY 
This bill implements a statutory process for the review of privatization contracts, 
which are agreements with a term of no more than 5 years by which a nongovernmental 
person or entity agrees to provide services valued at $200,000 or more, which are 
substantially similar to and in lieu of services previously provided in whole or in part by 
state agency employees.  Under this process, the State Auditor is given 30 days from the 
date that the agency designates the bidder to which it proposes to award the privatization 
contract to object to, and thereby invalidate, the proposed contract for failure to comply 
with statutory requirements.  The State Auditor is also authorized to seek a review by the 
Office of Program Evaluation and Government Accountability of any privatization 
contract.