Vainieri Huttle & Watson Coleman Bill to Ensure Any Privatization Contract Actually Saves Money Goes to Governor

(TRENTON) - Legislation Assembly Democrats Valerie Vainieri Huttle and Bonnie Watson Coleman sponsored to ensure that no public services are privatized unless there is cost savings recently received final legislative approval, having been approved 48-29 Monday by the Assembly.

The bill (A-998) requires that a contract for the privatization of public services not be entered into without cost analyses demonstrating that there will be actual cost savings for the public agency and the taxpayers without increased fees, fares or other charges to the public, reduced quantity or quality of services or lowered workforce standards, including reduced staff qualifications and remuneration.

"Decisions to use private contractors to provide public services must be based on factors that promote the public interest," said Vainieri Huttle (D-Bergen). "Requiring a thorough review and analysis of potential cost impacts prior to entering into any such privatization contract makes smart fiscal sense. It's appropriate to require that cost savings be substantial and significant because of the hazard that the use of private contractors to provide services may prove, in the long term, to be less efficient or more expensive than expected."

"Using private contractors to provide public services formerly provided by public employees does not always promote the public interest," said Watson Coleman (D-Mercer/Hunterdon). "These decisions must be based on sound policy and savings for the taxpayers, not ideology. This bill will protect the taxpayers, and that's always the right thing to do."

Specifically, the bill prohibits any agency of the state or political subdivision from entering into a contract of $250,000 or more to purchase from private entities services previously performed by agency employees, other than legal, management consulting, planning, engineering or design services, prevailing wage construction work, or work at certain disability rehabilitation facilities, unless:

  • The agency solicits competitive sealed bids for the contracts based on a comprehensive statement of requirements by the agency;
  • The contract requires that the public not be charged fares, fees or other charges greater than those currently charged, that the quantity and quality of the services provided equal or exceed the quantity and quality of services currently provided, that the contractor is qualified, and that contractor employees have qualifications and wage and benefit rates at least equal to the agency employees currently performing the services. Contractors are required to submit payroll records to the agency and, upon any failure to pay the agreed upon wage and benefit rates, are subject to the remedies and penalties provided by the "New Jersey Prevailing Wage Act," P.L.1963, c.150 (C.34:11-56.25 et seq.) for failure to pay the prevailing wage;
  • The agency permits the union of the affected agency employees to review the agency's estimate of current costs and submit an alternative cost estimate and propose cost saving measures compliant with requirements of the bill and the agency reviews the union estimate and proposal and makes a determination whether to reduce the agency's estimate of current costs;
  • The contract requires compliance with antidiscrimination standards, requires available positions to be offered to qualified displaced agency employees, and requires the agency to prepare a plan of training and assistance for displaced employees;
  • The contractor and specified associates have no adjudicated record of substantial or repeated noncompliance with any federal or State law pertaining to the operation of a business, including laws regarding contracting and conflict of interest;
  • After receiving bids, the agency publicly designates the bidder to which it proposes to award the contract and issues a comprehensive written analysis of the total contract cost of the designated bid; and
  • The agency provides written certification that the agency and the proposed contract are in compliance with all provisions of the bill and the total estimated contract cost is less than the cost of agency employees performing the services, with a statement of the amount of the savings.

The Office of the State Comptroller would be required to review the certification and prohibit the agency from entering into the privatization contract if the office provides a written determination that the bid does not provide cost savings or that the agency has otherwise failed to comply with any requirement of the bill.

The State Auditor would be required to conduct post-audits of contracts subject to the bill, evaluating whether the projected cost savings were obtained without raising charges, cutting services, or lowering workforce standards. If the noncompliance was related to agency or contractor misrepresentation, fraud or other malfeasance, misfeasance or nonfeasance, the agency or contractor would be subject to penalties and sanctions including, where appropriate, debarment or rescission of contracts, or reimbursement of excess charges to the public and underpayments of employees.

The requirements of the bill do not apply to any privatization contract first entered into before the effective date of the bill or to the renewal or extension of any privatization contract first entered into prior to that effective date.

The bill now goes to the governor for consideration.
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