1.1                          A bill for an act 
  1.2             relating to state government; placing limits on use of 
  1.3             consultants; making changes in laws governing 
  1.4             contracts, including contracts for professional or 
  1.5             technical services; amending Minnesota Statutes 2002, 
  1.6             sections 16A.11, subdivision 3; 16C.05, subdivision 2, 
  1.7             by adding a subdivision; 16C.06, subdivision 1, by 
  1.8             adding a subdivision; 16C.07; 16C.08, subdivisions 2, 
  1.9             3, by adding a subdivision; proposing coding for new 
  1.10            law in Minnesota Statutes, chapter 16C. 
  1.11  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.12                             ARTICLE 1 
  1.13       MORATORIUM ON PROFESSIONAL/TECHNICAL SERVICE CONTRACTS 
  1.14     Section 1.  [CONSULTANT CONTRACTS.] 
  1.15     Subdivision 1.  [MORATORIUM.] (a) An entity in the 
  1.16  executive, legislative, or judicial branch of state government, 
  1.17  including the Minnesota state colleges and universities, may not 
  1.18  enter into a new contract or renew an existing contract for 
  1.19  professional or technical services before July 1, 2005.  This 
  1.20  prohibition does not apply to a contract that relates to: 
  1.21     (1) a threat to public health, welfare, or safety that 
  1.22  threatens the functioning of government, the protection of 
  1.23  property, or the health or safety of people; or 
  1.24     (2) care of persons in state institutions. 
  1.25     (b) An entity may request a waiver from this subdivision 
  1.26  for a contract that is necessary to avoid disruption of an 
  1.27  essential state function or that is necessary to avoid a legal 
  1.28  liability.  Waiver requests under this subdivision must be 
  2.1   submitted to the governor for executive agency contracts, to the 
  2.2   legislative coordinating commission for legislative branch 
  2.3   contracts, to the chancellor of the Minnesota state colleges and 
  2.4   universities for contracts affecting the Minnesota state 
  2.5   colleges and universities system, and to the chief justice of 
  2.6   the supreme court for judicial branch contracts.  Each entity 
  2.7   with authority to grant waivers must publicly post its 
  2.8   procedures for review of waiver requests.  Before acting on a 
  2.9   waiver request, the entity receiving a waiver request must 
  2.10  consult with a representative of employees of the entity 
  2.11  requesting the waiver.  The employee representative must be 
  2.12  appointed by an exclusive representative of employees if there 
  2.13  is one.  
  2.14     (c) A monthly report of all waivers granted under paragraph 
  2.15  (b) must be published by the entity granting the waiver on a 
  2.16  state Web site.  Copies must be provided to the chairs of the 
  2.17  house ways and means and senate finance committees and to the 
  2.18  legislative reference library. 
  2.19     Subd. 2.  [CONTRACT EXPENDITURE REDUCTION.] The governor 
  2.20  must reduce executive agency expenditures on contracts for 
  2.21  professional or technical services by at least $100,000,000 in 
  2.22  the biennium ending June 30, 2005, compared to the biennium 
  2.23  ending June 30, 2003.  Meeting the expenditure reduction 
  2.24  requirement of this subdivision does not authorize executive 
  2.25  agencies to enter into contracts in violation of subdivision 1. 
  2.26     Subd. 3.  [DEFINITIONS.] For purposes of this section, 
  2.27  "professional or technical services" has the meaning given in 
  2.28  Minnesota Statutes, section 16C.08, subdivision 1; and 
  2.29  "executive agency" has the meaning given in Minnesota Statutes, 
  2.30  section 16A.011, subdivision 12, and includes constitutional 
  2.31  officers and the Minnesota state colleges and universities. 
  2.32                             ARTICLE 2 
  2.33                     CHANGES IN CONTRACTING LAW 
  2.34     Section 1.  Minnesota Statutes 2002, section 16A.11, 
  2.35  subdivision 3, is amended to read: 
  2.36     Subd. 3.  [PART TWO:  DETAILED BUDGET.] (a) Part two of the 
  3.1   budget, the detailed budget estimates both of expenditures and 
  3.2   revenues, must contain any statements on the financial plan 
  3.3   which the governor believes desirable or which may be required 
  3.4   by the legislature.  The detailed estimates shall include the 
  3.5   governor's budget arranged in tabular form. 
  3.6      (b) The detailed estimates must include a separate line 
  3.7   listing, by fund, the total number of amount spent on 
  3.8   professional or technical service contracts and the total cost 
  3.9   of those contracts for the prior biennium and the projected 
  3.10  number of professional or technical service contracts and the 
  3.11  projected costs of those contracts for the current and upcoming 
  3.12  biennium.  They must also include a summary of the personnel 
  3.13  employed by the agency, reflected as full-time equivalent 
  3.14  positions, and the number of professional or technical service 
  3.15  consultants for the current biennium.  The detailed estimates 
  3.16  required by this paragraph must be integrated into the budget 
  3.17  information and proposals for each agency program, and must not 
  3.18  be presented as a separate document. 
  3.19     (c) The detailed estimates for internal service funds must 
  3.20  include the number of full-time equivalents by program; detail 
  3.21  on any loans from the general fund, including dollar amounts by 
  3.22  program; proposed investments in technology or equipment of 
  3.23  $100,000 or more; an explanation of any operating losses or 
  3.24  increases in retained earnings; and a history of the rates that 
  3.25  have been charged, with an explanation of any rate changes and 
  3.26  the impact of the rate changes on affected agencies. 
  3.27     Sec. 2.  [16C.045] [REPORTING OF VIOLATIONS.] 
  3.28     A state employee who discovers evidence of violation of 
  3.29  laws or rules governing state contracts is encouraged to report 
  3.30  the violation or suspected violation to the employee's 
  3.31  supervisor, the commissioner or the commissioner's designee, or 
  3.32  the legislative auditor.  The legislative auditor must report to 
  3.33  the legislative coordinating commission if there are multiple 
  3.34  complaints about the same agency.  The auditor's report to the 
  3.35  legislative coordinating commission under this section must 
  3.36  disclose only the number and type of violations alleged.  An 
  4.1   employee making a good faith report under this section is 
  4.2   covered by section 181.932, prohibiting the employer from 
  4.3   discriminating against the employee. 
  4.4      Sec. 3.  Minnesota Statutes 2002, section 16C.05, 
  4.5   subdivision 2, is amended to read: 
  4.6      Subd. 2.  [CREATION AND VALIDITY OF CONTRACTS.] (a) A 
  4.7   contract is not valid and the state is not bound by it unless: 
  4.8      (1) it has first been executed by the head of the agency or 
  4.9   a delegate who is a party to the contract; 
  4.10     (2) it has been approved by the commissioner; 
  4.11     (3) it has been approved by the attorney general or a 
  4.12  delegate as to form and execution; 
  4.13     (4) the accounting system shows an obligation in an expense 
  4.14  budget or encumbrance for the amount of the contract liability; 
  4.15  and 
  4.16     (5) (4) the combined contract and amendments shall not 
  4.17  exceed five two years without specific, written approval by the 
  4.18  commissioner according to established policy, procedures, and 
  4.19  standards, or unless otherwise provided for by law.  The term of 
  4.20  the original contract must not exceed two years one year unless 
  4.21  the commissioner determines that a longer duration is in the 
  4.22  best interest of the state. 
  4.23     (b) Grants, interagency agreements, and purchase orders, 
  4.24  work orders, and annual plans need not, in the discretion of the 
  4.25  commissioner and attorney general, require the signature of the 
  4.26  commissioner and/or the attorney general.  A signature is not 
  4.27  required for work orders and amendments to work orders related 
  4.28  to department of transportation contracts.  Bond purchase 
  4.29  agreements by the Minnesota public facilities authority do not 
  4.30  require the approval of the commissioner. 
  4.31     (c) A fully executed copy of every contract, amendments to 
  4.32  the contract, and performance evaluations related to the 
  4.33  contract must be kept on file at the contracting agency for at 
  4.34  least three years after completion of the contract. 
  4.35     (d) An agency must not allow a contractor to begin work on 
  4.36  a contract until the contract has been approved and funds 
  5.1   obligated or encumbered in the state's accounting system as 
  5.2   required by this section. 
  5.3      (e) The attorney general must develop standard contract 
  5.4   forms.  If a contract is not based on a form developed by the 
  5.5   attorney general, the contract is not valid and the state is not 
  5.6   bound by it unless the contract is approved by the attorney 
  5.7   general or a delegate. 
  5.8      (f) The attorney general must periodically review and 
  5.9   evaluate a sample of state agency contracts to ensure compliance 
  5.10  with laws. 
  5.11     Sec. 4.  Minnesota Statutes 2002, section 16C.05, is 
  5.12  amended by adding a subdivision to read: 
  5.13     Subd. 2a.  [APPEAL PROCESS.] The commissioner must 
  5.14  establish a process under which an agency may appeal the 
  5.15  commissioner's refusal to approve a proposed agency contract.  
  5.16  The process must involve use of a neutral third party. 
  5.17     Sec. 5.  Minnesota Statutes 2002, section 16C.06, 
  5.18  subdivision 1, is amended to read: 
  5.19     Subdivision 1.  [PUBLICATION REQUIREMENTS.] Notices of 
  5.20  solicitations for acquisitions estimated to be more than 
  5.21  $25,000, or $100,000 in the case of a department of 
  5.22  transportation acquisition, must be publicized in a manner 
  5.23  designated by the commissioner.  To the extent practical, this 
  5.24  must include posting on a state Web site. 
  5.25     Sec. 6.  Minnesota Statutes 2002, section 16C.06, is 
  5.26  amended by adding a subdivision to read: 
  5.27     Subd. 1a.  [NOTICE OF CERTAIN CONTRACTS.] For a contract 
  5.28  valued in excess of $100,000, the commissioner must attempt to 
  5.29  publicize the contract in a manner reasonably calculated to 
  5.30  notify a variety of interested vendors, which may include 
  5.31  publishing the notice in a trade journal or making the notice 
  5.32  available through trade Web sites.  If the commissioner has 
  5.33  delegated contracting authority to another agency, the 
  5.34  commissioner must review and approve the agency's plan to 
  5.35  publicize the contract before the agency solicits bids or 
  5.36  responses. 
  6.1      Sec. 7.  [16C.061] [REPORT ON CONTRACTING ACTIVITY.] 
  6.2      Subdivision 1.  [REQUIREMENT.] The commissioner must report 
  6.3   to the governor and the legislature by September 1 each year on 
  6.4   contracts entered into by executive branch agencies during the 
  6.5   prior fiscal year.  Each agency must report information to the 
  6.6   commissioner, in the time and manner requested by the 
  6.7   commissioner, so the commissioner can make the report required 
  6.8   by this section. 
  6.9      Subd. 2.  [AGGREGATE INFORMATION.] The report required by 
  6.10  subdivision 1 must contain the following aggregate information 
  6.11  on contracting: 
  6.12     (1) the total number and dollar amount of single-source 
  6.13  contracts entered into by each agency, and by all agencies, 
  6.14  during the fiscal year, separately categorized by contracts for 
  6.15  goods, contracts for nonprofessional or technical services, and 
  6.16  contracts for professional or technical services; 
  6.17     (2) the total number and dollar amount of non-single-source 
  6.18  contracts entered into by each agency, and by all agencies, 
  6.19  during the fiscal year, separately categorized by contracts for 
  6.20  goods, contracts for nonprofessional or technical services, and 
  6.21  contracts for professional or technical services; and 
  6.22     (3) the total number and dollar amount of contracts entered 
  6.23  into under master contracts by each agency, and by all agencies, 
  6.24  during the fiscal year, separately categorized by contracts for 
  6.25  goods, contracts for nonprofessional or technical services, and 
  6.26  contracts for professional or technical services. 
  6.27     Subd. 3.  [SINGLE-SOURCE CONTRACTING.] (a) The commissioner 
  6.28  must report to the governor and the legislature by September 1 
  6.29  each year on single-source contracts entered into by executive 
  6.30  branch agencies during the prior fiscal year.  Each agency must 
  6.31  report information to the commissioner, in the time and manner 
  6.32  requested by the commissioner, so the commissioner can make the 
  6.33  report required by this section. 
  6.34     (b) The report required by paragraph (a) must list for each 
  6.35  contract: 
  6.36     (1) a brief description of the goods, services, or 
  7.1   professional or technical services provided under the contract; 
  7.2      (2) the name of the contractor and the contracting agency; 
  7.3      (3) the amount of the contract; 
  7.4      (4) the duration of the contract, including possible 
  7.5   extensions; 
  7.6      (5) why the use of a single-source procedure was justified; 
  7.7   and 
  7.8      (6) the duration of any previous single-source contracts 
  7.9   between the agency and the same contractor. 
  7.10     Sec. 8.  Minnesota Statutes 2002, section 16C.07, is 
  7.11  amended to read: 
  7.12     16C.07 [EMPLOYEE SKILLS INVENTORY.] 
  7.13     The commissioner of employee relations shall develop a 
  7.14  directory of services that state agencies commonly provide that 
  7.15  are professional or technical in nature. 
  7.16     Before an agency may seek approval of a professional or 
  7.17  technical services contract valued at a total cost in excess of 
  7.18  $25,000, it must certify to the commissioner that it has 
  7.19  publicized the contract by posting notice at appropriate 
  7.20  worksites within agencies and has made reasonable efforts to 
  7.21  determine that no state employee or agency, including an 
  7.22  employee or agency outside the contracting agency, is able and 
  7.23  available to perform the required services.  When possible, This 
  7.24  posting should be done electronically by Internet, in a manner 
  7.25  that is available to all state agencies.  The posting must occur 
  7.26  at least 14 days before the agency solicits responses from 
  7.27  outside contractors.  The commissioner must report to the 
  7.28  legislature by August 1 on the number of times an agency finds a 
  7.29  state employee to perform services as a result of the posting 
  7.30  required by this section. 
  7.31     Sec. 9.  Minnesota Statutes 2002, section 16C.08, 
  7.32  subdivision 2, is amended to read: 
  7.33     Subd. 2.  [DUTIES OF CONTRACTING AGENCY.] Before an agency 
  7.34  may seek approval of a professional or technical services 
  7.35  contract valued in excess of $5,000, including a contract 
  7.36  extension or a contract amendment that substantially changes the 
  8.1   scope of the contract, it must certify to the commissioner that: 
  8.2      (1) no current state employee is able and available to 
  8.3   perform the services called for by the contract; 
  8.4      (2) the normal competitive bidding mechanisms will not 
  8.5   provide for adequate performance of the services; 
  8.6      (3) the contractor has certified that the product of the 
  8.7   services will be original in character; 
  8.8      (4) reasonable efforts were made to publicize the 
  8.9   availability of the contract to the public; 
  8.10     (5) the agency has received, reviewed, and accepted a 
  8.11  detailed work plan from the contractor for performance under the 
  8.12  contract, if applicable; 
  8.13     (6) the agency has developed, and fully intends to 
  8.14  implement, a written plan providing for the assignment of 
  8.15  specific agency personnel to manage the contract, including a 
  8.16  monitoring and liaison function, the periodic review of interim 
  8.17  reports or other indications of past performance, and the 
  8.18  ultimate utilization of the final product of the services; and 
  8.19     (7) the agency will not allow the contractor to begin work 
  8.20  before the contract is fully executed and funds are fully 
  8.21  encumbered; and 
  8.22     (8) the contractor is required to include state employees 
  8.23  in development or training, to the extent necessary to ensure 
  8.24  that after completion of the contract, state employees can 
  8.25  perform any ongoing work related to the same function. 
  8.26     Sec. 10.  Minnesota Statutes 2002, section 16C.08, 
  8.27  subdivision 3, is amended to read: 
  8.28     Subd. 3.  [PROCEDURE FOR PROFESSIONAL OR TECHNICAL SERVICES 
  8.29  CONTRACTS.] (a) Before approving a proposed contract for 
  8.30  professional or technical services, the commissioner must 
  8.31  determine, at least, that: 
  8.32     (1) all provisions of subdivision 2 and section 16C.16 have 
  8.33  been verified or complied with; 
  8.34     (2) the work to be performed under the contract is 
  8.35  necessary to the agency's achievement of its statutory 
  8.36  responsibilities and there is statutory authority to enter into 
  9.1   the contract; 
  9.2      (3) the contract will not establish an employment 
  9.3   relationship between the state or the agency and any persons 
  9.4   performing under the contract; 
  9.5      (4) the contractor and agents are not employees of the 
  9.6   state; 
  9.7      (5) no agency has previously performed or contracted for 
  9.8   the performance of tasks which would be substantially duplicated 
  9.9   under the proposed contract; 
  9.10     (6) the contracting agency has specified a satisfactory 
  9.11  method of evaluating and using the results of the work to be 
  9.12  performed; and 
  9.13     (7) the combined contract and amendments will not exceed 
  9.14  five two years, unless otherwise provided for by law.  The term 
  9.15  of the original contract must not exceed two years unless the 
  9.16  commissioner determines that a longer duration is in the best 
  9.17  interest of the state, or the contract involves an "emergency" 
  9.18  as defined in section 16C.10, subdivision 2; and 
  9.19     (8) the contract provides that the state owns all 
  9.20  intellectual property rights in any report or other product 
  9.21  produced under the contract, unless this requirement is waived 
  9.22  by the attorney general for a specific contract. 
  9.23     (b) An agency must not extend or amend a contract for 
  9.24  professional or technical services in a manner that increases 
  9.25  the hourly rate of compensation to the contractor by more than 
  9.26  ten percent, or that increases the total amount to be paid 
  9.27  during the contract extension by more than ten percent, compared 
  9.28  to the amount paid for performing similar tasks during a similar 
  9.29  period in the original contract.  Before approving a contract 
  9.30  amendment or extension, the commissioner of administration must 
  9.31  determine that the tasks to be performed under the amendment or 
  9.32  extension are substantially similar to those in the original 
  9.33  contract, or that the tasks are so closely related to the 
  9.34  original contract that it would be impracticable for a different 
  9.35  contractor to perform the tasks. 
  9.36     (c) A contract establishes an employment relationship for 
 10.1   purposes of paragraph (a), clause (3), if, under federal laws 
 10.2   governing the distinction between an employee and an independent 
 10.3   contractor, a person would be considered an employee. 
 10.4      Sec. 11.  Minnesota Statutes 2002, section 16C.08, is 
 10.5   amended by adding a subdivision to read: 
 10.6      Subd. 4c.  [PERFORMANCE EVALUATION.] (a) Upon completion of 
 10.7   a professional or technical services contract, an agency 
 10.8   entering into the contract must complete a written performance 
 10.9   evaluation of the work done under the contract.  The evaluation 
 10.10  must include an appraisal of the contractor's timeliness, 
 10.11  quality, cost, and overall performance in meeting the terms and 
 10.12  objectives of the contract.  The agency must keep a record of 
 10.13  the performance evaluation with the contract. 
 10.14     (b) No action may be maintained by a contractor against an 
 10.15  employee or agency who discloses information about a current or 
 10.16  former contractor under this section, unless the contractor 
 10.17  demonstrates by clear and convincing evidence that: 
 10.18     (1) the information was false and defamatory; 
 10.19     (2) the employee or agency knew or should have known the 
 10.20  information was false and acted with malicious intent to injure 
 10.21  the current or former contractor; and 
 10.22     (3) the information was acted upon in a manner that caused 
 10.23  harm to the current or former contractor. 
 10.24     Sec. 12.  [16C.082] [LEGISLATIVE REVIEW OF CONTRACTS.] 
 10.25     The legislative coordinating commission must designate 
 10.26  legislative staff to perform a biennial audit of contracting 
 10.27  practices by executive agencies.  The legislative coordinating 
 10.28  commission must determine the scope of the audit each biennium.  
 10.29  The audit may focus on selected agencies or may be based on a 
 10.30  statewide sample.  In selecting agencies for audits, the 
 10.31  legislative coordinating commission must consider violations of 
 10.32  law reported to it by the legislative auditor.  The audits must 
 10.33  cover at least the following topics: 
 10.34     (1) compliance with laws and rules, including those 
 10.35  governing the competitive bidding process; 
 10.36     (2) the length of contracts; 
 11.1      (3) the use of amendments to extend existing contracts and 
 11.2   cost increases contained in these contract amendments; 
 11.3      (4) the use of single-source contracts; 
 11.4      (5) the use of master lists; and 
 11.5      (6) the hourly costs paid to contracts compared to the 
 11.6   hourly compensation of state employees performing similar work. 
 11.7      Sec. 13.  [EFFECTIVE DATE.] 
 11.8      Sections 1 to 12 are effective the day following final 
 11.9   enactment.  Provisions relating to entering into contracts apply 
 11.10  to contracts for which a solicitation is issued on or after the 
 11.11  effective date.