Governor signs agency consolidation/contracting reform

June 20, 2011

Last week Governor Gregoire signed a proposal to consolidate several administrative agencies and create a review process to help identify opportunities for some competitive contracting. Sponsored by Senators Baumgartner and Zarelli, SB 5931 creates a new Department of Enterprise Services and Department of Consolidated Technology Services by consolidating several administrative agencies and activities.

According to the bill report, SB 5931 also requires:

"OFM must examine on a biennial basis which services within DES might be performed by the private sector. OFM will select six activities each biennium to competitively bid to the private sector. If service cannot be provided at a lower rate or more efficiently, OFM will cancel the bid. If the bid is canceled, OFM must notify the legislative fiscal committees. OFM must report on the results of these examinations biennially and the legislative fiscal committees must hold a public hearing on the reports. The Joint Legislative and Audit Review Committee (JLARC) will conduct a study of the implementation of contracting for services at DES and report to the Legislature by January 1, 2018. DES must also examine state procurement practices and report on recommendations for improvement by October 30, 2011."

SB 5931 implements several of the recommendations of the Governor's Budget Transformation Committee which I served on last summer.

From the committee's recommendations:

  • "Create an umbrella administrative agency combining the Department of Information Services (DIS), Office of Financial Management (OFM), Department of Personnel, Department of General Administration, and State Printer. Prioritize essential state services, and define state roles to increase effectiveness and save time and money."
  • "Amend the law to allow for more contracting out and easier state employee competitive bidding in general."

Here is video of the Governor's signing statement on SB 5931:

I testified on a previous version of SB 5931 (HB 1720) at the Governor's request earlier this year to provide lawmakers with a perspective of the Budget Transformation Committee and to offer support for this important reform.

Here is video of my testimony: 

The Governor's signature on SB 5931 is an important step in the right direction to help streamline state government and begin to restore balance concerning competitive contracting and the state's 2002 civil service reform.

As JLARC discovered in its 2007 performance audit and we re-affirmed with a survey of state agencies in 2009, the state's competitive contracting laws under the 2002 civil service reform aren't working as advertised.

Here is what JLARC found in 2007:

“…few agencies have competitively contracted for services in the 16 months since receiving authorization to do so. Agency managers reported two main reasons for not competitively contracting. First, managers perceive the process itself to be complicated and confusing, providing a disincentive to pursue competitive contracting.

Second, competitive contracting is a subject of collective bargaining, which creates additional challenges by requiring labor negotiations. Managers must bargain, at a minimum, the impacts of competitive contracting. Additionally, some agency collective bargaining agreements include provisions which prohibit agencies from competitively contracting.”

In a 2009 update of the JLARC audit, I asked the state Office of Financial Management’s contract division how many personal service contracts have been requested or approved by agencies under the “Civil Service Competition” provision of the 2002 law. The answer was zero.

Among those who voted for the 2002 civil service reform was Sen. Kastama. Explaining his vote in support of SB 5931, one of the reasons he gave was that “To date no substantial contracting out has taken place” under the 2002 law.

Sen. Kastama went on to say:

“This was a bargain that was made with the people of Washington State in 2002. It’s something I think those of us who voted for it are obligated to carry through. We can’t just say we’re going to go head and put forward civil service reform and that these provisions somehow seem to fade away from memory . . .  This bill I think is a step in that direction. As disagreeable as it may be to many of the particular interest groups I think it’s agreeable to the citizens of Washington state.”

State employee unions, however, believe the status quo was working just fine and asked the Governor to veto the contracting reforms from the bill. Here is a copy of the union's veto request letter.

By declining to issue the requested veto and deciding to move forward with the reforms as proposed by the Budget Transformation Committee and lawmakers, the Governor has helped moved the state a little bit closer to the compromise envisioned in 2002.

As noted by Sen. Baumgartner:

“This reform represents a fundamental shift in the focus of state government toward delivering services as efficiently as possible. This measure, which I am proud to have sponsored, will save taxpayers money and provide greater value for every dollar spent, by allowing agencies to contract-out nonessential services if, and only if, doing so will save the state money.”