Compromise reached on state contracting reform

(Sept. 26, 2007) Some state lawmakers had identified state contracting reform as a priority this year and have been working on proposals for several years, but they were not able to reach an agreement before the end of the 2007 regular session. Last week in a special session they finally approved a state contracting reform bill.

SB-1600 creates a State Contracting Standards Board (SCSB) to oversee and regulate state contracts. The bill also addresses the contentious issue of privatization contracts.

Privatization contracts are defined as those in which products or services are provided by a private entity rather than the state when, at least theoretically, the state could perform the duties under the contract itself.

Although less onerous than its predecessors, SB-1600 is still of concern to the business community. For example, the bill includes a 10% cost-benefit savings threshold before a privatization contract is approved. This means that if a privatization contract does not meet a 10% cost-benefit savings, the state contracting agency will develop a plan to provide the services under the contract by utilizing existing state resources.
What’s troubling is that the cost-benefit analysis is not clearly defined and seems very difficult to quantify when applied to services.

In addition, the bill is troubling because it usurps the governor’s power and enables the legislature to oversee state privatization contracts in excess of $150 million in one year or $600 million throughout the life of the contract. These contracts will have to gain the approval of the State Contracting Standards Board and the legislature.

By adding another layer of bureaucracy, the bill could dissuade potential contractors from applying. Ultimately this could lead to more-expensive state services.

Although the bill is less restrictive on privatization contracts than many of the previous proposals were, it’s unclear what the results of this bill will be. The business community hopes that the bill does not reduce the number of bidders for state contracts. That would cost everyone in Connecticut by resulting in more-expensive state services and more state employees, which would increase the state’s salary and benefit expenditures.

For more information, contact CBIA’s Kevin Hennessy at 860-244-1979 or hennessk@cbia.com.

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