Report Title:

Privatization; Managed Competition

 

Description:

Establishes a system of managed competition in the State. Regulates the privatization of government services. (HB510 HD1)

HOUSE OF REPRESENTATIVES

H.B. NO.

510

TWENTY-SECOND LEGISLATURE, 2003

H.D. 1

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

RELATING TO GOVERNMENT.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"CHAPTER

MANAGED COMPETITION

§ -1 Purpose. (a) The purpose of this chapter is to make government operations more efficient and economical by establishing a managed competition process that encourages government agencies to maximize the efficiency and economy of their operations, but also permits them to acquire services from contractors without violating civil service and collective bargaining laws when additional economies and efficiencies can be achieved by contracting with the private sector.

The process is premised on the assumption that efficiencies and economies are more likely to be realized when:

(1) Public agencies are permitted to choose between securing the services they need or are required to perform from the public or private sector; and

(2) The public and private sectors are given the opportunity to compete against each other to provide or deliver those services.

To achieve efficiencies and economies, agencies may determine on an individualized basis whether services they need are best performed in-house or out—of—house.

(b) The process for managed competition is intended to further the following interests:

(1) Agency self-assessment to improve efficiencies and economies, and reduce the cost of government;

(2) Competition between public employees and the private sector to secure the services government needs or is required to provide or perform;

(3) Reasoned decision making; and

(4) Public—private partnerships.

§ -2 Establishment of process for managed competition; exceptions. (a) There is established a process for managed competition that state and county agencies shall use to obtain the services they need or are required to provide. The process for managed competition shall consist of:

(1) Effective July 1, 2003, agency determinations made each odd year thereafter that consider recommendations of agency employees, to identify whether services an agency needs or is required to provide are performed more efficiently and economically in-house by public employees or out—of—house by contractors;

(2) Agency formulation of objective performance specifications and evaluation criteria for selecting a service provider competitively; and

(3) Selection of a service provider from among public agency and private sector participants, using the specifications and criteria developed pursuant to subsection (a)(2), and the procurement procedures of chapter 103D or 103F.

(b) To maximize the effectiveness of the process for managed competition and to allow state and county agencies to realize the efficiencies and economies the process is designed to help them achieve:

(1) The directors of finance of the state and each of the counties shall coordinate with individual departments to:

(A) Establish a single, uniform system that all agencies within their respective jurisdictions shall use to identify, analyze, assign, and quantify relevant costs attendant to using public employees to perform the services an agency needs or is required to provide;

(B) Specify the amounts of those actual direct and indirect costs of the past fiscal year that are common to all agencies within their respective jurisdictions that the agencies shall use to measure efficiencies and economies under subsection (a)(1) and (3); and

(C) Require individual departments to prescribe performance standards and quality measures and procedures to monitor the effectiveness of agency determinations to use agency employees or private contractors to perform the services an agency needs;

(2) If there are any employees in collective bargaining units impacted by this process, the State and each of the counties shall use the layoff provisions of civil service and the respective collective bargaining contracts to release employees displaced from their positions by the process for managed competition. Prior to implementing any layoff provision of the civil service laws or a collective bargaining contract, the State and each of the counties shall use their resources for placing, retraining, and providing voluntary severance incentives for displaced employees. Methods that may be used to minimize or avoid the adverse effects of an agency's decision to secure needed services from contractors may include:

(A) Coordination with the private service provider awarded the contract under subsection (a)(3) to continue a displaced employee's employment as an employee of the contractor;

(B) Reassignment to another position the employee is qualified to fill;

(C) Retraining to qualify the employee for reassignment; and

(D) Severance incentives;

(3) Agencies, employees, and exclusive collective bargaining representatives may propose alternatives for performing or providing services an agency needs or is required to perform more efficiently and economically. Proposals shall be made in writing. Agency and employee proposals shall be submitted to all affected exclusive collective bargaining representatives, and proposals from exclusive collective bargaining representatives shall be submitted to all affected agencies. Agencies, employees, and the employees' exclusive collective bargaining representatives shall be available to discuss proposals. All discussions shall be completed in forty-five working days after receipt of a written proposal by the agency or the exclusive collective bargaining representative, unless the time limit is mutually extended. Upon completion of these discussions, alternatives proposed and discussed and the costs associated with each shall be considered by the agency in determining whether needed services will be provided in- or out-of-house; and

(4) On an ongoing basis, agencies are encouraged to:

(A) Regularly identify and monitor costs;

(B) Establish performance and quality standards to measure efficiencies and economies; and

(C) Make reasonable efforts, including competitiveness collaboration and training, job skills retraining, reorganizing the workforce, and revising procedures;

to enhance the ability of employees to compete, enhance in-house effectiveness and efficiency, and generally modernize agency operations.

(c) The process for managed competition established by this section need not be used to obtain a service an agency needs or is required to provide, if a statute, county charter or ordinance, or administrative rule authorizes the service to be performed or provided by noncivil servants including contractors, or by persons holding positions exempt from the civil service.

(d) The state director of finance shall submit the policy documents establishing the uniform system required by subsection (b)(1) to the office of collective bargaining and managed competition. The chief negotiator of the office of collective bargaining and managed competition shall determine whether the system established by the document complies with the requirements of subsection (b)(1). When the chief negotiator determines that the requirements of subsection (b)(1) have been complied with, the chief negotiator shall publish a notice statewide to that effect in accordance with the requirements of section 1-28.5.

§ -3 Managed competition determinations. (a) Each state and county agency shall have exclusive and sole discretion to determine whether a service it needs or is required to provide will be performed by its employees, or obtained from other public agencies or private contractors. In making this determination, the agency shall consider:

(1) The nature of the service the agency needs, including whether:

(A) The service is self—contained or part of a larger service delivery system;

(B) The service is geographically dispersed;

(C) The service is a core or ancillary government service and if in-house resources are available or needed;

(D) Government control is necessary;

(E) Government accountability can be shared; and

(F) Governmental authority will be diluted;

(2) The potential for achieving cost savings, including:

(A) The need to abandon or repurchase capital improvements or equipment that are not fully depreciated;

(B) The extent to which the service is available in the private sector marketplace; and

(C) The extent to which federal or state restrictions may reduce private sector interest in providing or performing the needed or required service;

(3) Impact upon existing employees;

(4) The extent to which the services that are needed or required, and the criteria to select a service provider competitively can be described in objective specifications; and

(5) The risk of:

(A) Contract breaches, default, or cost overruns; and

(B) Complications attendant to transferring and resuming operations at the start and end of a contract.

(b) Agency employees may develop and make recommendations to improve the way they perform the services an agency needs or is required to provide. These recommendations shall be considered by the agency in identifying and determining which services are more efficiently and economically performed in-house or out-of-house under section     -2. Agencies shall also use the costs assigned by the director of finance of their respective jurisdictions to make the determinations described in this section and section     -2. In addition, agencies shall use their resources for placing, retraining, and providing incentives for voluntary severance before any layoff provision of the civil service law or a collective bargaining contract is applied.

(c) An agency's determination shall be final and no suit may be brought under any law, including the laws relating to civil service, collective bargaining, public contracts, or procurement, to challenge an agency's determination once a determination is made."

SECTION 2. Section 46-33, Hawaii Revised Statutes, is amended to read as follows:

"§46-33 Exemption of certain county positions. In any county with a population of 500,000 or more, the civil service to which this section refers is [comprised] composed of all positions in the public service of [such] that county, now existing or hereafter established, and embraces all personal services performed for [such] that county, except the following:

(1) Positions of officers elected by public vote; positions of heads of departments; position of the clerk; position of the manager of the board of water supply; and position of the chief of police[.];

(2) Positions in the office of mayor, but such positions, except those of the heads of the offices of information and complaint and budget director, shall be included in the position classification plan. Employees of the municipal library and of the offices of information and complaint and budget director, other than the heads of such offices, however, shall not be exempted from civil service[.];

(3) Positions of deputies of the corporation counsel, deputies of the prosecuting attorney, and law clerks[.];

(4) Positions of members of any board, commission, or equivalent body[.];

(5) Positions filled by inmates, patients, or students in city institutions or in the schools[.];

(6) Positions of district magistrates, jurors, and witnesses[.];

(7) Personal services obtained by contract where the director of civil service has certified that the service is special or unique, is essential to the public interest and that, because of circumstances surrounding its fulfillment, personnel to perform such service cannot be obtained through normal civil service recruitment procedures. Any such contract may be for any period not exceeding one year[.];

(8) Personal services of a temporary nature needed in the public interest where the need for the same does not exceed ninety days, but before any person may be employed to render such temporary service, the director of civil service shall certify that the service is of a temporary nature and that recruitment through normal civil service recruitment procedures is not practicable. The employment of any person for service of a temporary nature may be extended for good cause for an additional period not to exceed ninety days upon similar certification by the director subject to approval of the civil service commission[.];

(9) Personal services performed on a fee, contract or piecework basis by persons who may lawfully perform their duties concurrently with their private business or profession or other private employment, if any, and whose duties require only a portion of their time, where it is impracticable to ascertain or anticipate the portion of time devoted to the service of the city and such fact is certified to by the director of civil service[.];

(10) Positions of temporary election clerks in the office of the clerk employed during the election periods, but the positions filled by such employees shall be included in the position classification plan[.];

(11) Positions of one first deputy and private secretaries to heads of departments and their first deputies, but private secretarial positions shall be included in the position classification plan. The first deputy in the department of civil service, however, shall not be exempt from civil service[.]; and

(12) Services provided by private contractors in accordance with chapter .

The director of civil service shall determine the applicability of this section to specific positions."

SECTION 3. Section 46-36, Hawaii Revised Statutes, is amended by amending subsections (b) and (c) to read as follows:

"(b) If a county executes a contract with a private contractor pursuant to the managed competition process authorized under this section[,] and chapter , the county may use the layoff provisions of the civil service laws and the respective collective bargaining contracts to release employees displaced from their positions by the managed competition process. Prior to implementing any layoff provision of the civil service laws or a collective bargaining contract, the county shall use its resources for placing, retraining, and providing voluntary severance incentives for displaced employees. Methods that may be used to minimize or avoid the adverse effects of an agency's decision to secure needed services from contractors may include:

(1) Coordination with the private service provider awarded the contract under this section and chapter , to continue a displaced employee's employment as an employee of the contractor;

(2) Reassignment to another civil service position the employee is qualified to fill;

(3) Retraining to qualify the employee for reassignment; and

(4) Severance incentives.

(c) As used in this section, "managed competition" means the process established in this section and chapter , by which the county and a private contractor compete to provide government services."

SECTION 4. Section 76-16, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) The civil service to which this chapter applies shall comprise all positions in the State now existing or hereafter established and embrace all personal services performed for the State, except the following:

(1) Commissioned and enlisted personnel of the Hawaii national guard as such, and positions in the Hawaii national guard that are required by state or federal laws or regulations or orders of the national guard to be filled from those commissioned or enlisted personnel;

(2) Positions filled by persons employed by contract where the director of human resources development has certified that the service is special or unique or is essential to the public interest and that, because of circumstances surrounding its fulfillment, personnel to perform the service cannot be obtained through normal civil service recruitment procedures. Any such contract may be for any period not exceeding one year;

(3) Positions that must be filled without delay to comply with a court order or decree if the director determines that recruitment through normal recruitment civil service procedures would result in delay or noncompliance, such as the Felix-Cayetano consent decree;

(4) Positions filled by the legislature or by either house or any committee thereof;

(5) Employees in the office of the governor and office of the lieutenant governor, and household employees at Washington Place;

(6) Positions filled by popular vote;

(7) Department heads, officers, and members of any board, commission, or other state agency whose appointments are made by the governor or are required by law to be confirmed by the senate;

(8) Judges, referees, receivers, masters, jurors, notaries public, land court examiners, court commissioners, and attorneys appointed by a state court for a special temporary service;

(9) One bailiff for the chief justice of the supreme court who shall have the powers and duties of a court officer and bailiff under section 606-14; one secretary or clerk for each justice of the supreme court, each judge of the intermediate appellate court, and each judge of the circuit court; one secretary for the judicial council; one deputy administrative director of the courts; three law clerks for the chief justice of the supreme court, two law clerks for each associate justice of the supreme court and each judge of the intermediate appellate court, one law clerk for each judge of the circuit court, two additional law clerks for the civil administrative judge of the circuit court of the first circuit, two additional law clerks for the criminal administrative judge of the circuit court of the first circuit, one additional law clerk for the senior judge of the family court of the first circuit, two additional law clerks for the civil motions judge of the circuit court of the first circuit, two additional law clerks for the criminal motions judge of the circuit court of the first circuit, and two law clerks for the administrative judge of the district court of the first circuit; and one private secretary for the administrative director of the courts, the deputy administrative director of the courts, each department head, each deputy or first assistant, and each additional deputy, or assistant deputy, or assistant defined in paragraph (16);

(10) First deputy and deputy attorneys general, the administrative services manager of the department of the attorney general, one secretary for the administrative services manager, an administrator and any support staff for the criminal and juvenile justice resources coordination functions, and law clerks;

(11) (A) Teachers, principals, vice-principals, district superintendents, chief deputy superintendents, other certificated personnel, not more than twenty noncertificated administrative, professional, and technical personnel not engaged in instructional work;

(B) Effective July 1, 2003, teaching assistants, educational assistants, bilingual/bicultural school-home assistants, school psychologists, psychological examiners, speech pathologists, athletic health care trainers, alternative school work study assistants, alternative school educational/supportive services specialists, alternative school project coordinators, and communications aides in the department of education;

(C) The special assistant to the state librarian and one secretary for the special assistant to the state librarian; and

(D) Members of the faculty of the University of Hawaii, including research workers, extension agents, personnel engaged in instructional work, and administrative, professional, and technical personnel of the university;

(12) Employees engaged in special, research, or demonstration projects approved by the governor;

(13) Positions filled by inmates, kokuas, patients of state institutions, persons with severe physical or mental handicaps participating in the work experience training programs, and students and positions filled through federally funded programs that provide temporary public service employment such as the federal Comprehensive Employment and Training Act of 1973;

(14) A custodian or guide at Iolani Palace, the Royal Mausoleum, and Hulihee Palace;

(15) Positions filled by persons employed on a fee, contract, or piecework basis, who may lawfully perform their duties concurrently with their private business or profession or other private employment and whose duties require only a portion of their time, if it is impracticable to ascertain or anticipate the portion of time to be devoted to the service of the State;

(16) Positions of first deputies or first assistants of each department head appointed under or in the manner provided in section 6, Article V, of the State Constitution; three additional deputies or assistants either in charge of the highways, harbors, and airports divisions or other functions within the department of transportation as may be assigned by the director of transportation, with the approval of the governor; four additional deputies in the department of health, each in charge of one of the following: behavioral health, environmental health, hospitals, and health resources administration, including other functions within the department as may be assigned by the director of health, with the approval of the governor; an administrative assistant to the state librarian; and an administrative assistant to the superintendent of education;

(17) Positions specifically exempted from this part by any other law; provided that all of the positions defined by paragraph (9) shall be included in the position classification plan;

(18) Positions in the state foster grandparent program and positions for temporary employment of senior citizens in occupations in which there is a severe personnel shortage or in special projects;

(19) Household employees at the official residence of the president of the University of Hawaii;

(20) Employees in the department of education engaged in the supervision of students during meal periods in the distribution, collection, and counting of meal tickets, and in the cleaning of classrooms after school hours on a less than half-time basis;

(21) Employees hired under the tenant hire program of the housing and community development corporation of Hawaii; provided that not more than twenty-six per cent of the corporation's work force in any housing project maintained or operated by the corporation shall be hired under the tenant hire program;

(22) Positions of the federally funded expanded food and nutrition program of the University of Hawaii that require the hiring of nutrition program assistants who live in the areas they serve;

(23) Positions filled by severely handicapped persons who are certified by the state vocational rehabilitation office that they are able to perform safely the duties of the positions;

(24) One public high school student to be selected by the Hawaii state student council as a nonvoting member on the board of education as authorized by the State Constitution;

(25) Sheriff, first deputy sheriff, and second deputy sheriff;

(26) A gender and other fairness coordinator hired by the judiciary; [and]

(27) Positions in the Hawaii national guard youth challenge academy[.]; and

(28) Services provided by private contractors in accordance with chapter .

The director shall determine the applicability of this section to specific positions.

Nothing in this section shall be deemed to affect the civil service status of any incumbent as it existed on July 1, 1955."

SECTION 5. Section 76-77, Hawaii Revised Statutes, is amended to read as follows:

"§76-77 Civil service and exemptions. The civil service to which this part applies comprises all positions in the public service of each county, now existing or hereafter established, and embraces all personal services performed for each county, except the following:

(1) Positions in the office of the mayor; provided that the positions shall be included in the classification systems;

(2) Positions of officers elected by public vote, positions of heads of departments, and positions of one first deputy or first assistant of heads of departments;

(3) Positions of deputy county attorneys, deputy corporation counsel, deputy prosecuting attorneys, and law clerks;

(4) Positions of members of any board, commission, or agency;

(5) Positions filled by students; positions filled through federally funded programs which provide temporary public service employment such as the federal Comprehensive Employment and Training Act of 1973; and employees engaged in special research or demonstration projects approved by the mayor, for which projects federal funds are available;

(6) Positions of district judges, jurors, and witnesses;

(7) Positions filled by persons employed by contract where the personnel director has certified that the service is special or unique, is essential to the public interest, and that because of the circumstances surrounding its fulfillment, personnel to perform the service cannot be recruited through normal civil service procedures; provided that no contract pursuant to this paragraph shall be for any period exceeding one year;

(8) Positions of a temporary nature needed in the public interest where the need does not exceed ninety days; provided that before any person may be employed to render temporary service pursuant to this paragraph, the director shall certify that the service is of a temporary nature and that recruitment through normal civil service recruitment procedures is not practicable; and provided further that the employment of any person pursuant to this paragraph may be extended for good cause for an additional period not to exceed ninety days upon similar certification by the director;

(9) Positions of temporary election clerks in the office of the county clerk employed during election periods;

(10) Positions specifically exempted from this part by any other state statutes;

(11) Positions of one private secretary for each department head; provided that the positions shall be included in the classification systems;

(12) Positions filled by persons employed on a fee, contract, or piecework basis who may lawfully perform their duties concurrently with their private business or profession or other private employment, if any, and whose duties require only a portion of their time, where it is impracticable to ascertain or anticipate the portion of time devoted to the service of the county and that fact is certified by the director;

(13) Positions filled by persons with a severe disability who are certified by the state vocational rehabilitation office as able to safely perform the duties of the positions;

(14) Positions of the housing and community development office or department of each county; provided that this exemption shall not preclude each county from establishing these positions as civil service positions; [and]

(15) The following positions in the office of the prosecuting attorney: private secretary to the prosecuting attorney, secretary to the first deputy prosecuting attorney, and administrative or executive assistants to the prosecuting attorney; provided that the positions shall be included in the classification systems[.]; and

(16) Services provided by private contractors in accordance with chapter .

The director shall determine the applicability of this section to specific positions and shall determine whether or not positions exempted by paragraphs (7) and (8) shall be included in the classification systems.

Nothing in this section shall be deemed to affect the civil service status of any incumbent private secretary of a department head who held that position on May 7, 1977."

SECTION 6. Section 89-19, Hawaii Revised Statutes, is amended to read as follows:

"§89-19 Chapter takes precedence, when. (a) This chapter shall take precedence over all conflicting statutes concerning this subject matter and shall preempt all contrary local ordinances, executive orders, legislation, or rules adopted by the State, a county, or any department or agency thereof, including the departments of human resources development or of personnel services or the civil service commission.

(b) Notwithstanding subsection (a), all provisions of all collective bargaining agreements entered into pursuant to this chapter after the effective date of Act shall be consistent with the process for managed competition established in chapter   ."

SECTION 7. Chapter 89A, Hawaii Revised Statutes, is amended by amending its title to read as follows:

"[[]CHAPTER 89A

OFFICE OF COLLECTIVE BARGAINING[]] AND MANAGED COMPETITION"

SECTION 8. Section 89A-1, Hawaii Revised Statutes, is amended as follows:

1. By amending subsection (a) to read:

"(a) There shall be established an office of collective bargaining and managed competition in the office of the governor to assist the governor in implementation and review of [the]:

(1) The managed process of public-private competition for particular government services [through the managed competition process] in accordance with chapter ; and [negotiations]

(2) Negotiations between the State and the exclusive representatives on matters of wages, hours, and other negotiable terms and conditions of employment."

2. By amending subsections (e) and (f) to read:

"(e) If the State executes a contract with a private contractor pursuant to the managed competition process authorized under this section[,] and chapter , the State may use the layoff provisions of the civil service laws and the respective collective bargaining contracts to release employees displaced from their positions by the managed competition process. Prior to implementing any layoff provision of the civil service laws or a collective bargaining contract, the State shall use its resources for placing, retraining, and providing voluntary severance incentives for displaced employees. Methods that may be used to minimize or avoid the adverse effects of an agency's decision to secure needed services from contractors may include:

(1) Coordination with the private service provider awarded the contract under this section to continue a displaced employee's employment as an employee of the contractor;

(2) Reassignment to another civil service position the employee is qualified to fill;

(3) Retraining to qualify the employee for reassignment; and

(4) Severance incentives.

(f) As used in this section, "managed competition" means the process established in this section and chapter , which the State and a private contractor complete to provide government services."

SECTION 9. Act 90, Session Laws of Hawaii 2001, is amended as follows:

1. By adding three new sections to the chapter established in section 2 of the Act to be appropriately designated and to read:

"§   -A Review of contract costs. (a) Any State or county department considering whether to enter into a privatization contract shall prepare a public-private cost analysis to evaluate the public costs that will be reduced by contracting out the function. Cost comparisons shall be based on the total costs of the contract, including the costs of transition from public to private operation, monitoring, and administering contract performance, and additional unemployment and retirement benefits paid to displaced workers, if any.

(b) If a bidder proposes to perform any or all of the contract outside of the State, the contract cost shall be increased by the amount of income tax revenue, if any, that would be lost to the State by the elimination of State or county employees, as determined by the department of taxation or the county department of finance to the extent it is able to do so.

§   -B Monitoring and enforcement of privatization contracts. (a) Any private contractor awarded a privatization contract, and any subcontractor to a private contractor subject to these provisions, shall file with the State or county department copies of financial audits prepared at least annually during the term of the contract.

(b) All privatization contracts shall include a contract provision specifying that, to determine compliance with this chapter, the private contractor shall be required to provide the State and the counties, except where prohibited by federal, state, or county laws, regulations, or rules, reasonable access, through representatives of the private contractor, to facilities, records, and employees used in conjunction with the provision of contract services.

(c) The private contractor shall submit a report not less than annually during the term of the privatization contract detailing the extent to which the contractor has achieved the specific quantity and standard of quality of the subject services as specified by the state or county department, and its compliance with all federal, state, and county laws, including any complaints, citations, or findings issued by administrative agencies or courts.

(d) The State or county may seek contractual remedies for any violation of a privatization contract under chapter 103D.

§   -C Public access to information. (a) Any public record that a state or county department provides to a contractor or subcontractor shall remain a public record for the purposes of chapter 92F, and the enforcement provisions of that chapter shall apply to any refusal to disclose records under this section.

(b) With regard to any public record, the state or county department and the contractor or subcontractor shall comply with the requirements of chapter 92F; provided that the determination of whether or not to disclose a particular record or type of record shall be made by the State or county department.

(c) No contractor, subcontractor, employee, or agent of a contractor shall sell, market, or otherwise profit from the disclosure or use of any public records that are in its possession pursuant to a contract, subcontract, or amendment to a contract, except as authorized in the contract, subcontract, or amendment."

2. By amending section –2 of the chapter established in section 2 of the Act to read:

"§ -2 Determination; standards. (a) Notwithstanding any law to the contrary, including but not limited to chapters 46, 76, [77,] 78, 89, and 89A, any other applicable civil service law, customary or historical past practices, or the fact that the services hereinafter described may have been performed by persons or positions in civil service, any state or county official in whom procurement authority is vested by law may enter into a contract financed by public funds, with a private entity to obtain services, including services provided in conjunction with the procurement of goods or construction, from a private entity, when there is reasonable basis to believe that the service of equivalent or better quality than that which could be provided by a government agency can be provided at lower cost.

(b) For purposes of this chapter, a "private entity" is any individual, company, or organization that is not an employee or agency within the federal, state, or county government.

(c) In the determination made pursuant to this chapter, the [state] State or county official shall consider whether contracting with the private entity will:

(1) Jeopardize the government's ability to provide the service if the private entity fails to perform, or the contract becomes unprofitable or impossible for a private entity to perform;

(2) Impact on any employee covered by civil service laws; provided that the impact shall not prevent the procurement of services pursuant to this chapter;

(3) Affect the nature of the service the agency needs, including whether:

(A) The service is self-contained or part of a larger service delivery system;

(B) The service is geographically dispersed;

(C) The service is a core or ancillary government service and if in-house resources are available or needed;

(D) Government control is necessary;

(E) Government accountability can be shared; and

(F) Governmental authority will be diluted;

(4) Increase the potential for achieving cost savings[,] when compared to in-house resources, including:

(A) The need to abandon or repurchase capital improvements or equipment that are not fully depreciated;

(B) The extent to which the service is available in the private sector marketplace; [and]

(C) The extent to which federal or state restrictions may reduce private sector interest in providing or performing the needed or required service; and

(D) The extent to which the savings for the contracting agency are substantial enough to be sustained through any private sector or state cost fluctuations that could normally be expected during the contracting period. The cost savings shall clearly justify the size and duration of the contracting agreement;

and

(5) Affect the extent to which the services are needed or required, and how the criteria to select a service provider can be described in objective specifications.

(d) Any employee displacements shall be subject to section 46-    or 89A-1(e) as appropriate."

3. By amending section –3 of the chapter established in section 2 of the Act to read:

"§    -3 Annual reports. Each [state] State and county department and agency that uses the contracting process set out in this chapter, shall submit a report to the legislature no later than twenty days prior to the convening of the regular session of each year beginning with 2004. The report shall include:

(1) An itemization of all services that were outsourced or subjected to the processes set out in this chapter;

(2) The agency’s or department’s justification that standards for determination were met[;], including an evaluation of the efficiency and effectiveness of the services provided;

(3) The cost of services obtained through the process set out in this chapter;

(4) A copy of all contracts entered into under this chapter; and

(5) An accounting of civil service employees displaced as a consequence of this chapter."

SECTION 10. Act 90, Session Laws of Hawaii 2001, is

repealed.

SECTION 11. The State and the several counties shall develop the cost system, performance and quality standards, employee collaboration, competitiveness training, employee reassignment and retraining, incentive programs, and procedures necessary to support the process for managed competition established by this Act.

SECTION 12. Until all collective bargaining agreements in effect when the governor approves this measure expire by their own terms, state and county agency determinations made pursuant to the chapter added to the Hawaii Revised Statutes by section 1 of this Act may be made only if they are consistent with the provisions of all applicable collective bargaining agreements.

SECTION 13. If any provision of this Act, or the application thereof to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of the Act which can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.

SECTION 14. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 15. This Act shall take effect upon its approval; provided that:

(1) Section 10 shall take effect upon publication of the notice required under section 1 of this Act; and

(2) Section 9 is repealed when section 10 takes effect.