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NEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A2022 SPONSOR: Bronson
TITLE OF BILL: An act to amend the state finance law, in relation to the cost effectiveness of consultant contracts by state agencies   PURPOSE OR GENERAL IDEA OF BILL: Sets forth conditions when an agency shall enter into a contract for consultant services. Requires agencies to conduct a cost comparison prior to entering into a contract for consultant services to determine if there is a less expensive alternative.   SUMMARY OF SPECIFIC PROVISIONS: Amends the state finance law by amending section 163 to add a new subdi- vision 16, setting forth conditions that must be met when an agency shall enter into a contract for consulting services of more than $750,000, The agency shall compare costs to determine whether the work can be performed at lower cost by utilizing state employees rather than consultants. Certain exceptions are specified when this cost comparison is not required. The agency must retain documentation of the cost comparison as a public record.   JUSTIFICATION: The purpose of this bill is to require state agencies to do cost compar- isons before entering into contracts for consultant services. Any time the taxpayers' money is used to fund a contract. for services there is a need to insure that this expenditure is necessary and prudent, The State of New York spends over $2 Billion per year on consultants, In many cases these consultants perform work that could be done by profes- sional state employees and the cost of using consultants is substantial- ly higher. In 1998 the use of engineering consultants by the State Department of Transportation was studied by the State, Comptroller and OSC concluded that the State could save millions of dollars by reducing the use of consultants. The Comptroller recommended cost/benefit. analysis prior to contracting with consultants. Other studies have confirmed this find- ing, including an analysis by the State Assembly in 2009 that estimated the state could save $250 million over three years by reducing the use of information technology consultants. In 2010 The state Senate Task Force on Government Efficiency estimated that the Department of Trans- portation could save about $46 million per year by implementing this policy. In 2009 the Federal Office of Management and Budget issued a directive to Federal government agencies that calls for them to perform a cost benefit analysis before entering into contracts and to initiate pilot projects for in-sourcing work in cases where the cost analysis supports the conclusion that the work can be performed by government employers at lower cost that by using contractors. OMB estimates that this and other contracting reforms can save the Federal government $40 billion.   PRIOR LEGISLATIVE HISTORY: A10781 of 2011-12: vetoed; A7506 of 2013-14: referred to Government Operations; A2499 of 2015-16: referred to Government Operations   FISCAL IMPLICATIONS: None.   EFFECTIVE DATE: This act shall take effect on the ninetieth day after it shall have become a law, with provisions.
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STATE OF NEW YORK ________________________________________________________________________ 2022 2017-2018 Regular Sessions IN ASSEMBLY January 17, 2017 ___________ Introduced by M. of A. BRONSON -- read once and referred to the Commit- tee on Governmental Operations AN ACT to amend the state finance law, in relation to the cost effec- tiveness of consultant contracts by state agencies The People of the State of New York, represented in Senate and Assem- bly, do enact as follows: 1 Section 1. Legislative intent. The legislature hereby finds and 2 declares that it is in the public interest to enact a cost benefit 3 review process when a state agency enters into contracts for personal 4 services. New York State spends over $3.5 billion annually on personal 5 service contracts, over $840 million more than the State spent on these 6 contracts in SFY 2003-04, a 32% increase. Despite an Executive Order 7 that has implemented a post contract review process for some personal 8 service contracts the cost of those contracts continues to escalate 9 every year well above the inflation rate. In addition the State Finance 10 Law does not require state agencies to compare the cost or quality of 11 personal services to be provided by consultants with the cost or quality 12 of providing the same services by the state employees. Numerous audits 13 by the Office of State Comptroller as well as a KPMG study commissioned 14 by the department of transportation have found that consultants hired 15 under personal service contracts can cost between fifty percent and 16 seventy-five percent more than state employees that do the exact same 17 work including the cost of state employee benefits. The Contract Disclo- 18 sure Law (Chapter 10 of the laws of 2006) required consultants who 19 provide personal services to file forms for each contract that outline 20 how many consultants they hired, what titles they employed them in and 21 how much they paid them. A review of these forms show that the average 22 consultant makes about fifty percent more than state employees doing 23 comparable work. It is in the public interest for state agencies to 24 compare the cost of doing work by consultants with the cost of doing the 25 same work with state employees as well as document whether or not that EXPLANATION--Matter in italics (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD03040-01-7A. 2022 2 1 such work can be done by state employees. If state government is to be 2 smarter, more efficient, and transparent then a cost benefit analysis 3 process that makes its findings public should be required by law. 4 § 2. Section 163 of the state finance law is amended by adding a new 5 subdivision 16 to read as follows: 6 16. Consultant services. a. Before a state agency enters into a 7 contract for consultant services which is anticipated to cost more than 8 seven hundred fifty thousand dollars in a twelve month period the state 9 agency shall conduct a cost comparison review to determine whether the 10 services to be provided by the consultant can be performed at equal or 11 lower cost by utilizing state employees, unless the contract meets one 12 of the exceptions set forth in paragraph g of this subdivision. As used 13 in this section, the term "consultant services" shall mean any contract 14 entered into by a state agency for analysis, evaluation, research, 15 training, data processing, computer programming, the design, development 16 and implementation of technology, communications or telecommunications 17 systems or the infrastructure pertaining thereto, including hardware and 18 software, engineering including inspection and professional design 19 services, health services, mental health services, accounting, auditing, 20 or similar services and such services that are substantially similar to 21 and in lieu of services provided, in whole or in part, by state employ- 22 ees, but shall not include legal services or services in connection with 23 litigation including expert witnesses and shall not include contracts 24 for construction of public works. For purposes of this subdivision, the 25 costs of performing the services by state employees shall include any 26 salary, pension costs, all other benefit costs, costs that are required 27 for equipment, facilities and all other overhead. The costs of consult- 28 ant services shall include the total cost of the contract including 29 costs that are required for equipment, facilities and all other overhead 30 and any continuing state costs directly associated with a contractor 31 providing a contracted function including, but not limited to, those 32 costs for inspection, supervision, monitoring of the contractor's work 33 and any pro rata share of existing costs or expenses, including adminis- 34 trative salaries and benefits, rent, equipment costs, utilities and 35 materials. The cost comparison shall be expressed where feasible as an 36 hourly rate, or where such a calculation is not feasible, as a total 37 estimated cost for the anticipated term of the contract. 38 b. Prior to entering any consultation services contract for the priva- 39 tization of a state service that is not currently privatized, the state 40 agency shall develop a cost comparison review in accordance with the 41 provisions of paragraph a of this subdivision. 42 c. (i) If such cost comparison review identifies a cost savings to the 43 state of ten percent or more, and such consultant services contract will 44 not diminish the quality of such service, the state agency shall develop 45 a business plan, in accordance with the provisions of paragraph d of 46 this subdivision, in order to evaluate the feasibility of entering any 47 such contract and to identify the potential results, effectiveness and 48 efficiency of such contract. 49 (ii) If such cost comparison review identifies a cost savings of less 50 than ten percent to the state and such consultant services contract will 51 not diminish the quality of such service, the state agency may develop a 52 business plan, in order to evaluate the feasibility of entering any such 53 contract and to identify the potential results, effectiveness and effi- 54 ciency of such contract, provided there is a significant public policy 55 reason to enter into such consultant services contract.A. 2022 3 1 (iii) If any such proposed consultant services contract would result 2 in the layoff, transfer or reassignment of fifty or more state agency 3 employees, after consulting with the potentially affected bargaining 4 units, if any, the state agency shall notify the state employees of such 5 bargaining unit, after such cost comparison review is completed. Such 6 state agency shall provide an opportunity for said employees to reduce 7 the costs of conducting the operations to be privatized and provide 8 reasonable resources for the purpose of encouraging and assisting such 9 state employees to organize and submit a bid to provide the services 10 that are the subject of the potential consultant services contact. 11 d. Any business plan developed by a state agency for the purpose of 12 complying with paragraph c of this subdivision shall include: (i) the 13 cost comparison review as described in paragraph b of this subdivision, 14 (ii) a detailed description of the service or activity that is the 15 subject of such business plan, (iii) a description and analysis of the 16 state agency's current performance of such service or activity, (iv) the 17 goals to be achieved through the proposed consultant services contract 18 and the rationale for such goals, (v) a description of available options 19 for achieving such goals, (vi) an analysis of the advantages and disad- 20 vantages of each option, including, at a minimum, potential performance 21 improvements and risks attendant to termination of the contract or 22 rescission of such contract, (vii) a description of the current market 23 for the services or activities that are the subject of such business 24 plan, (viii) an analysis of the quality of services as gauged by stand- 25 ardized measures and key performance requirements including compen- 26 sation, turnover, and staffing ratios, (ix) a description of the specif- 27 ic results based performance standards that shall, at a minimum be met, 28 to ensure adequate performance by any party performing such service or 29 activity, (x) the projected time frame for key events from the beginning 30 of the procurement process through the expiration of a contract, if 31 applicable, (xi) a specific and feasible contingency plan that addresses 32 contractor nonperformance and a description of the tasks involved in and 33 costs required for implementation of such plan, and (xii) a transition 34 plan, if appropriate, for addressing changes in the number of agency 35 personnel, affected business processes, employee transition issues, and 36 communications with affected stakeholders, such as agency clients and 37 members of the public, if applicable. Such transition plan shall contain 38 a reemployment and retraining assistance plan for employees who are not 39 retained by the state or employed by the contractor. If any part of such 40 business plan is based upon evidence that the state agency is not suffi- 41 ciently staffed to provide the services required by the consultant 42 services contract, the state agency shall also include within such busi- 43 ness plan a recommendation for remediation of the understaffing to allow 44 such services to be provided directly by the state agency in the future. 45 e. Upon the completion of such business plan, the state agency shall 46 submit the business plan to the state comptroller. 47 f. (i) Not later than sixty days after receipt of any business plan, 48 the state comptroller shall transmit a report detailing its review, 49 evaluation and disposition regarding such business plan to the state 50 agency that submitted such cost comparison review. Such sixty-day period 51 may be extended for an additional thirty days upon a showing of good 52 cause. 53 (ii) The state comptroller's report shall include the business plan 54 prepared by the state agency, the reasons for approval or disapproval, 55 any recommendations or other information to assist the state agency inA. 2022 4 1 determining if additional steps are necessary to move forward with a 2 consultant services contract. 3 (iii) If the state comptroller does not act on a business plan submit- 4 ted by a state agency within ninety days of receipt of such business 5 plan, such business plan shall be deemed approved. 6 g. A cost comparison shall not be required if the contracting agency 7 demonstrates: 8 (i) the services are incidental to the purchase of real or personal 9 property; or 10 (ii) the contract is necessary in order to avoid a conflict of inter- 11 est on the part of the agency or its employees; or 12 (iii) the services are of such a highly specialized nature that it is 13 not feasible to utilize state employees to perform them or require 14 special equipment that is not feasible for the state to purchase or 15 lease; or 16 (iv) the services are of such an urgent nature that it is not feasible 17 to utilize state employees; or 18 (v) the services are anticipated to be short term and are not likely 19 to be extended or repeated after the contract is completed; or 20 (vi) a quantifiable improvement in services that cannot be reasonably 21 duplicated. 22 h. Nothing in this section shall be deemed to authorize a state agency 23 to enter into a contract which is otherwise prohibited by law. 24 i. All documents related to the cost comparison and business plan 25 required by this subdivision and the determinations made pursuant to 26 paragraph g of this subdivision shall be public records subject to 27 disclosure pursuant to article six of the public officers law. 28 § 3. On or before December 31, 2020 the state comptroller shall 29 prepare a report, to be delivered to the governor, the temporary presi- 30 dent of the senate and the speaker of the assembly. Such report shall 31 include, but need not be limited to, an analysis of the effectiveness of 32 the cost comparison review program and an analysis of the cost savings 33 associated with performing such cost comparison. 34 § 4. This act shall take effect on the ninetieth day after it shall 35 have become a law and shall apply to all contracts solicited or entered 36 into by state agencies after the effective date of this act; provided, 37 however, the amendments to section 163 of the state finance law made by 38 section two of this act shall not affect the repeal of such section and 39 shall be deemed repealed therewith.