Bill Text - SB493 (2010)

Establishing best value contracting practices in the state procurement system.


Revision: Jan. 28, 2010, midnight

SB 493-FN – AS INTRODUCED

2010 SESSION

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05/09

SENATE BILL 493-FN

AN ACT establishing best value contracting practices in the state procurement system.

SPONSORS: Sen. DeVries, Dist 18; Sen. Lasky, Dist 13; Sen. Houde, Dist 5; Rep. P. McMahon, Merr 3; Rep. Schlachman, Rock 13

COMMITTEE: Executive Departments and Administration

ANALYSIS

This bill establishes best value contracting practices to be used by the department of administrative services, director of plant and property management and other state agencies. The bill also establishes a best value procurement implementation commission to develop rules and criteria to determine best value contracting practices for the state procurement system.

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Explanation: Matter added to current law appears in bold italics.

Matter removed from current law appears [in brackets and struckthrough.]

Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

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05/09

STATE OF NEW HAMPSHIRE

In the Year of Our Lord Two Thousand Ten

AN ACT establishing best value contracting practices in the state procurement system.

Be it Enacted by the Senate and House of Representatives in General Court convened:

1 Findings. The New Hampshire general court:

I. Recognizes that the state’s procurement of goods and services, including the construction of public works and facilities, represents a significant contribution to the economic development of the state, injecting over one billion dollars in fiscal years 2006 and 2007 into the economy. The general court recognizes a further opportunity to promote the economic development of the state through a multiplier effect of its procurement dollars in the stream of commerce.

II. Recognizes its responsibility to taxpayers to maximize the value of their dollars as the state procures goods and services for them. New Hampshire taxpayer dollars should be spent in a way that best supports New Hampshire taxpayers. The general court defines value in procurement as the efficient allocation of public dollars that seeks the highest quality result for the lowest cost possible to benefit New Hampshire citizens over the long-term.

III. Seeks to reduce procurement costs for taxpayers by seeking a low bid and eliminating waste in project overruns, delays, and suboptimal quality. The general court seeks to strengthen quality by awarding public contracts to employers that comply with the law and public regulations, deliver a durable product or service to taxpayers that meets its intended purpose and withstands public scrutiny, employ New Hampshire citizens, and provide sustaining wages and benefits to workers.

IV. Recognizes that heightened competition strengthens the outcome of the state’s procurement of goods and services and should therefore be encouraged through greater transparency.

V. Recognizes that the state of New Hampshire needs a more strategic approach to developing and implementing procurement policy to ensure that the state’s procurement expenditure is being spent in the most effective and efficient manner. In today’s climate of tight budgets and ever-increasing demand, it is critical that the state makes optimum use of the resources available to it.

VI. Recognizes that some state agencies already consider non-price factors, such as quality of work product, in addition to price. The general court identifies this protocol as a best practice for maximizing value of taxpayer dollars and seeks to standardize the use of this best practice across the state’s procurement policies.

2 Division of Plant and Property Management. Amend the introductory paragraph of RSA 21-I:11 to read as follows:

21-I:11 Division of Plant and Property Management. There is hereby established the division of plant and property management under the supervision of an unclassified director of plant and property management who shall be responsible for the following functions, in accordance with RSA 21-S and other applicable law:

3 Division of Plant and Property Management; Bidding. RSA 21-I:11, III is repealed and reenacted to read as follows:

III. Requiring bidding in accordance with RSA 21-S.

4 New Chapter; State Procurement Guidelines. Amend RSA by inserting after chapter 21-R the following new chapter:

CHAPTER 21-S

STATE PROCUREMENT GUIDELINES

21-S:1 Definitions. In this chapter:

I. “Supplies” shall mean all materials, equipment, printing, furniture, furnishings, and books, of every name and nature, including computer hardware, software, related licenses, media, and documentation, and standard off-site support and maintenance generally offered to the public for such computer hardware or software.

II. “Agency” shall mean any board, department, commission, hospital, sanitarium, home, library, school, college, prison, or other institution conducted or operated by or for the state of New Hampshire.

III. “Purchase” shall mean all contracts for the purchase of supplies or services, as well as the act of purchasing.

IV. “Emergency” shall mean any situation requiring the immediate purchase of supplies arising from any unavoidable casualty or disaster.

V. “Services” shall mean services provided for general agency use including, but not restricted to, the following: credit card agreements, elevator maintenance, hazardous waste testing and removal, janitorial services, laboratory services, rubbish removal, recycled materials pickup, security services, snow removal, soil testing, transportation, office machine maintenance, vehicle repair, vehicle rental and leasing, and warehousing. “Services” shall not mean services provided solely to one agency.

VI. “Best value” shall mean, as predetermined in the solicitation, the overall combination of quality, price, and various elements of required services that in total are optimal relative to a public body’s needs. It is the most advantageous balance of price, quality, and performance achieved through competitive procurement methods in accordance with stated selection criteria.

VII. “Purchasing agency” shall mean any governmental body which is authorized to enter into contracts.

VIII. “Procurement officer” shall mean any person duly authorized to enter into and administer contracts and make written determinations with respect thereto. The term shall also include an authorized representative acting within the limits of authority.

21-S:2 Best Value Contracting.

I. All agencies shall require competitive sealed best value bidding before making any purchase for the state pursuant to the laws of the state, except:

(a) When the best interests of the state would be served thereby and the purchase involves a total expenditure of not more than $2,000 or is a purchase in an approved class;

(b) When after reasonable investigation, it appears that any required unit or item of supply, or brand of such unit or item, is procurable by the state from only one source;

(c) When, after reasonable investigation, it appears that any required service, unit or item of supply, or brand of such unit or item, has a fixed market price at all sources available to the state; or

(d) When, in the opinion of the governor, an emergency exists of a nature which requires the immediate procurement of supplies, the governor may authorize the purchasing director to make a purchase without competitive bidding; and where the rates filed with and approved by the insurance commissioner are uniform, the purchase of state insurance and public state official and employee bonds are specifically excluded from competitive bidding as to price; provided, however, that nothing contained in this subparagraph shall preclude the purchasing director from inviting plans of insurance coverage from any resident licensed insurance agent.

II. An invitation for bids under competitive sealed best value bidding shall be made in the same manner as for competitive bidding.

III. The purchasing agency may allow a bidder to submit prices for enhancements, options, or alternatives to the base bid for a commodity or service that will result in a product or service to the state having the best value at the lowest cost. The invitation for bids for competitive sealed best value bidding shall clearly state the purchase description of the commodity or service being solicited and the types of enhancements, options, or alternatives that may be bid; except that the functional specifications integral to the commodity or service may not be reduced.

IV. The price for enhancements, options, or alternatives to the bid may be evaluated by the head of a purchasing agency to determine whether the total of the bid price and the price for enhancements, options, or alternatives provide a contract with the best value at the lowest cost to the state. This evaluation shall be made using the rules of the best value procurement implementation commission adopted under RSA 21-S:3.

V. A contract may be awarded to a bidder where the total amount of a bid price and the price for enhancements, options, or alternatives of the bidder exceed the total amount of the bid price and the price for enhancements, options, or alternatives of another bidder if it is determined pursuant to paragraph IV that the higher total amount provides a contract with the best value at the lowest cost to the state.

VI. The criteria or formula for evaluation shall include objective consideration of the costs and savings and/or benefits associated with the enhancements, options, or alternatives. Based on the evaluation of the cost of the base bid, the dollar value of enhancements, options, or alternatives, and the determination of which best meet the needs of state of New Hampshire, an award shall be made to the bidder providing the best value to the state of New Hampshire. For purposes of state procurement, “best value” describes the result determined by a procurement method that considers price and performance criteria, which may include, but are not limited to:

(a) The quality of the vendor’s or contractor’s performance on previous projects.

(b) The timeliness of the vendor’s or contractor’s performance on previous projects.

(c) The level of customer satisfaction with the vendor’s or contractor’s performance on previous projects.

(d) The vendor’s or contractor’s record of performing previous projects on budget and ability to minimize cost overruns.

(e) The vendor’s or contractor’s ability to minimize change orders.

(f) The vendor’s or contractor’s ability to prepare appropriate project plans.

(g) The vendor’s or contractor’s technical capacities.

(h) The individual qualifications of the contractor’s key personnel.

(i) The vendor’s or contractor’s ability to assess and minimize risks.

(j) A record of quality work or service as determined through the establishment of an objective process to review the qualifications and experience of bidders.

(k) The vendor’s or contractor’s commitment to hire New Hampshire residents for the majority of its workforce for the project.

(1) The fact that the vendor or contractor offers a quality retirement plan to its employees.

(m) The fact that the vendor or contractor offers quality, affordable healthcare benefits to its employees.

(n) The fact that the vendor or contractor implements a federally certified apprenticeship training program, if applicable to the industry.

(o) The fact that the vendor or contractor implements a regimen of safety awareness and related training to its employees.

VII. Except where competitive sealed best value bidding has been employed, no purchase involving an expenditure of more than $2,000 or purchase in an approved class may be made by a purchasing director without the written approval of the commissioner. In requesting such approval, the director shall first state in writing his or her reasons for not employing competitive sealed best value bidding.

21-S:3 Best Value Procurement Implementation Commission.

I. A best value procurement implementation commission is hereby established to develop rules and guidelines for best value contracting practices to be used by purchasing agencies and procurement officers in evaluating contracts and bids under this chapter.

II. The commission shall adopt rules under RSA 541-A, effective July 1, 2011, relative to:

(a) Criteria for objectively measuring prices for enhancements, options, or alternatives to a bid, including relevant formulas or guidelines.

(b) Criteria for objectively determining whether the prices for enhancements, options, or alternatives provide the best value at the lowest cost to the state.

III. On or before June 30, 2013, and each biennium thereafter, the commission shall issue a report evaluating best value procurement practices in the public sector across the state. The report shall be submitted to the president of the senate, the speaker of the house of representatives, the governor, the senate clerk, the house clerk, and the state public library.

IV.(a) The commission’s membership shall not exceed 15 persons. The speaker of the house of representatives shall appoint one member of the house of representatives to the commission, and the president of the senate shall appoint one senator. The balance of the commission’s membership shall be appointed by the governor, consisting of public members and representatives of the following bodies, groups, or interests: business, labor, health care, the environment, career development, and other organizations as appropriate.

(b) The commission’s chairperson and vice-chairperson shall be designated by the governor. Members of the commission shall serve at the pleasure of the appointing authority. Vacancies shall be filled in the same manner as the original appointments were made.

5 Repeal. RSA 21-I:11, IV, relative to criteria for exemption from competitive bidding, is repealed.

6 Effective Date.

I. RSA 21-S:3 as inserted by section 4 of this act shall take effect upon its passage.

II. The remainder of this act shall take effect July 1, 2011.

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01/12/10

SB 493-FN - FISCAL NOTE

AN ACT establishing best value contracting practices in the state procurement system.

FISCAL IMPACT:

      The Department of Administrative Services states this bill will increase state general fund expenditures by $1,838,037 in FY 2011, $1,825,395 in FY 2012, $1,919,498 in FY 2013, and $2,019,707 in FY 2014. There is no fiscal impact on state, county, and local revenue or on county and local expenditures.

METHODOLOGY:

    The Department of Administrative Services states this bill establishes best value contracting practices to be used in the entire State procurement system. The Department states this bill has an impact on 3 of its bureaus: Purchase and Property, Public Works Design and Construction, and Graphic Services, on the Department of Transportation Contracts section, and on all other state agencies. The Department’s basic assumption is that this bill will increase the amount of time it takes to process requests for bids (RFB), requests for proposals (RFP), and requests for quotes (RFQ), hereafter referred to as ‘requests’.

    Currently, the Department of Administrative Services estimates the eight employees of the Purchase and Property bureau, each assumed to work 230 days per year, process roughly 1,300 RFBs, RFPs, and RFQs each year, which translates to approximately 1.41 employee days to process each request ((8 employees × 230 working days) ÷ 1,300 documents). The Department estimates this bill’s requirements would add another day of processing time to each document, so the Purchase and Property bureau would need an additional six purchasing agents (labor grade 24) to comply with the proposed legislation ((1,300 documents × 1 additional day) ÷ 230 working days per year = 5.6 ≈ 6 additional employees).

    The Department of Administrative Services estimates its Graphic Services bureau, which has one full-time employee and processes an average of 169 requests annually, would also need an additional purchasing agent (labor grade 24) in order to meet the requirements of this bill.

    The Department of Administrative Services states it currently utilizes the Contract Administration section at the Department of Transportation (DOT) to prequalify and award

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    construction and renovation contracts. If the proposed bill were to become law, the Department states it would continue to use this DOT section to prequalify contractors, however it assumes the bill’s changes to contract award criteria would require creation of its own contracts unit within the Public Works Design and Construction bureau. The Department states the new unit would modify requests, evaluate responses to requests, and create the eventual final contracts. To establish the new unit, the Department estimates it would need to hire a business administrator III (labor grade 27) to oversee the unit, a purchasing agent (labor grade 24) to customize bids and create contract documents, and three project manager III positions (labor grade 27) to serve as part of a team reviewing and evaluating all responses received.

    The Department of Administrative Services states the Contract Administration section at the Department of Transportation (DOT) currently processes bids for 70 highway and bridge projects in a typical year. The Department states the DOT estimates the proposed legislation would entail two additional weeks (10 working days) of bid evaluation for each of the 70 projects, which translate to a need for three additional full time employees ((70 projects × 10 days) ÷ 230 working days per employee per year = 3.04 ≈ 3 additional employees). The Department states the DOT would also require two more employees to ensure it had the specialized bridge and highway expertise necessary to review and award bids in a manner consistent with this bill. The Department states the DOT estimates it would need a total of five additional employees: four project manager III positions (labor grade 27) and a purchasing agent (labor grade 24).

    Because this bill changes the procurement system for the entire government, the Department of Administrative Services states contracts processed by all other state agencies would also be subject to the provisions of this bill. The Departments states in 2006 the Governor and Executive Council approved approximately 1,600 contracts. After accounting for those processed within its division of Plant and Property Management (30) and the Contracts Administration section of the DOT (70), the Department estimates 1,500 contracts are processed by all other state agencies within a typical year and that each contract will need an additional day of processing time under the proposed bill. To comply with these new procurement requirements, the Department estimates 7 additional purchasing agents (labor grade 24) will be needed across the state ((1,500 contracts × 1 additional day) ÷ 230 working days per year = 6.52 ≈ 7 additional employees).

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    In total for the three bureaus, the DOT Contracts Administration section, and the balance of state agencies, the Department estimates it will need to hire 24 additional employees (16 purchasing agents at labor grade 24, 7 project managers at labor grade 27, 1 business administrator at labor grade 27), all with an assumed start date of July 1, 2010. For each of these employees, the Department also estimates annually $1,200 for phone, postage, and supplies, $2,700 for leased office space, $3,100 for equipment, and $300 for in-state mileage reimbursement. The Department also assumes the business administrator, 4 of the project managers, and the 16 purchasing agents would each need $1,300 for computer hardware and software in the first year and $250 for software renewals each year thereafter, and 3 of project managers would each need $2,400 for CADD hardware and software in the first year and $600 for software renewals each year thereafter. The Department estimates the total fiscal impact related to the 24 additional full-time employees as follows:

    2011 2012 2013 2014

    Salaries $ 1,075,620 $ 1,123,356 $ 1,172,652 $ 1,224,288

    Benefits 552,717 594,189 638,996 687,569

    Supplies, postage, etc. 28,800 28,800 28,800 28,800

    Office space 64,800 64,800 64,800 64,800

    Equipment 74,400 0 0 0

    Computer hardware 20,400 0 0 0

    Computer software 14,100 7,050 7,050 7,050

    In-state travel 7,200 7,200 7,200 7,200

    Total $ 1,838,037 $ 1,825,395 $ 1,919,498 $ 2,019,707

    This bill does not contain an appropriation.