Establishes procedures and standards regarding public service privatization contracts.

A1695

ASSEMBLY, No. 1695

STATE OF NEW JERSEY

222nd LEGISLATURE

�

PRE-FILED FOR INTRODUCTION IN THE 2026 SESSION

Sponsored by:

Assemblywoman VERLINA REYNOLDS-JACKSON

District 15 (Hunterdon and Mercer)

Assemblyman ANTHONY S. VERRELLI

District 15 (Hunterdon and Mercer)

Assemblywoman ANNETTE QUIJANO

District 20 (Union)

Co-Sponsored by:

Assemblymen Guardian, Sampson, McClellan and DeAngelo

SYNOPSIS

���� Establishes procedures and standards regarding public
service privatization contracts.

CURRENT VERSION OF TEXT

���� Introduced Pending Technical Review by Legislative
Counsel.

��

An Act

establishing procedures and standards with respect to certain privatization
contracts and supplementing Title 52 of the Revised Statutes.

����
Be It Enacted

by the Senate and General Assembly of the State of New
Jersey:

���� 1.��� The Legislature finds
and declares that:

���� a.���� Using private
contractors to provide public services formerly provided by public employees
does not always promote the public interest;

���� b.��� Decisions to use private
contractors to provide public services must be based on factors which promote
the public interest;

���� c.���� To ensure that citizens
of the State receive high quality public services at low cost, with due regard
for the taxpayers of the State and the needs of public and private workers, it
is necessary to regulate privatization contracts for public services and to
require a thorough review and analysis of potential cost impacts prior to
entering into any such privatization contract; and

���� d.��� It is appropriate to
require that cost savings of the contract to the State 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 when the contracting commences, and the ability of an
agency to resume the public provision of services under those circumstances may
be hindered by factors such as the divestment of equipment and capital and the
loss of experienced, highly qualified personnel in connection with the
contract.

����� 2.�� As
used in this act:

����� �Agency�
means any department, division, board, commission or other office or officer of
the State or of any political subdivision of the State, or any authority or
other instrumentality of the State.

����� �Employee
benefits� means all benefits provided to employees, including, but not limited
to, pensions, paid time off and health insurance plans, including coverage
provided under those plans to the employee, the employee's spouse and dependent
children.

����� �Local
agency� means any department, division, board, commission or other office or
officer of any political subdivision of the State.

����� �Privatization
contract� or �contract� means an agreement or combination or series of
agreements valued at a total of $500,000 or more, if an agency is a local
agency, or $1,000,000 or more if the agency is not a local agency, by which a
non-governmental person or entity agrees with the agency to provide services
which are substantially similar to, and in lieu of, services previously
provided, in whole or in part, by regular employees of the agency which results
in a loss of employment for the regular employees, except that none of the
following shall be considered a privatization contract:

����� (1)
any agreement solely to provide legal, management consulting, planning,
engineering or design services;

����� (2)
any contract solely for public work subject to the prevailing wage requirements
of P.L.1963, c. 150 (C.34:11-56.25 et� seq.
)
;

����� (3) any contract to have services
principally
provided by
persons with disabilities employed
by

rehabilitation facilities as defined under the provisions of the
�
Rehabilitation Facilities Set-Aside Act,
�
P.L.1981, c.488 (C.30:6-23 et seq.)
;

����� (4)
any contract with a vendor providing software or other information technology
or equipment for the purpose of enhancing or increasing the productivity,
efficiency, or effectiveness of regular employees of the agency in providing
services; or

����� (5)
any contract under which a vendor provides services during an emergency or
other unpredictable situation which creates a need for more services than the
current regular employees are able to provide during the emergency or
situation, provided that there is no loss of employment for regular employees
who normally provide the services.

����� 3.�� No
agency shall enter into a privatization contract, and no privatization contract
with the agency shall be valid, unless all of the following requirements are
met:

����� a.�� The
agency shall solicit competitive sealed bids for each privatization contract
based on a comprehensive written statement, prepared by the agency, of the
quality and quantity of the services proposed to be the subject of the
privatization contract, any fees, fares or other charges to the public, the
current costs to the agency of providing those services, the qualifications,
compensation and benefits of agency personnel currently performing those
services, and a comprehensive description of the information the prospective
contractor is required to provide as part of the bid as required for the
evaluation of the bid pursuant to this section, and, if the bidder is awarded
the contract, a comprehensive description of the information that the
contractor is required to provide, including the quarterly reports required
pursuant to subsections b. and c. of this section for ongoing oversight and the
post-audits conducted pursuant to this act.� The day designated by the agency
upon which it will accept the sealed bids shall be the same for any and all
parties.� The statement shall be a public record, and shall be transmitted to
the Office of the State Comptroller for review.� The term of a privatization
contract shall not exceed five years.� No amendment to a privatization contract
shall be valid if it has the purpose or effect of avoiding any requirement of
this section.

����� b.�� Every
bid for a privatization contract and every privatization contract shall require
that the public not be subject to any fees, fares, or other charges greater
than those currently charged, that the quantity and quality of the services
performed under the contract equal or exceed the quantity and quality of
services currently performed by agency employees, that the contractor has the
demonstrated ability and experience to provide services of that quantity and
quality, that the staff used by the contractor have certification, licensing
and levels of job proficiency equal to or exceeding those of the agency
employees currently performing the services, and that the rate of wages and
employee benefits for each position not be less than the rate of wages and
employee benefits for comparable agency employees.� Each bid shall include a
requirement that, in addition to the quarterly payroll records required
pursuant to subsection c. of this section, quarterly reports be made to the
agency regarding contractor compliance with the requirements of this subsection
regarding the quality and quantity of services and any charges imposed on the
public, and those reports shall be made public by the agency.� The agency shall
have access to all contractor records relevant to compliance with the
requirements of this section.

����� c.�� For
each position in which a bidder will employ any person pursuant to the
privatization contract, the statement made by the agency pursuant to subsection
a. of this section shall include the rate of wages and employee benefits paid
by the agency to the regular agency employee or employees most comparable to
the position under the privatization contract.� Each bid for a privatization
contract and every privatization contract shall include provisions specifically
stating the rate of wages and employee benefits for each position, which shall
not be less than the rate of wages and employee benefits stated by the agency
for comparable agency employees.� Each contractor shall submit quarterly
payroll records to the agency, listing the name, hours worked, the hourly wage
and employee benefit rates paid to each employee, and the agency shall make the
records available upon request to any labor organization representing employees
of the contractor or employees or displaced employees of the agency.� Any
contractor who fails to pay the rates of wages and employee benefits required
by the contract pursuant to this subsection shall be subject to the remedies
which apply in connection with a failure to pay the prevailing wage pursuant to
the �New Jersey Prevailing Wage Act,� P.L.1963, c.150 (C.34:11-56.25 et seq.),
including, but not limited to, the withholding of payments from the agency to
the contractor pursuant to section 9 of P.L.1963, c.150 (C.34:11-56.33), the
imposition of fines and penalties by the Commissioner of Labor and Workforce
Development pursuant to sections 11 and 15 of P.L.1963, c.150 (C.34:11-56.35
and 34:11-56.39), debarment from contracting pursuant to sections 13 and 14 of
P.L.1963, c.150 (C.34:11-56.37 and 34:11-56.38), and the actions by workers to
recover unpaid amounts in civil actions pursuant to section 16 of P.L.1963,
c.150 (C.34:11-56.40). The commissioner shall have the same authority and
responsibility to conduct investigations, inspections and other activities to
enforce wage and benefit payments due under contracts pursuant to this section
as he has to conduct investigations, inspections and other activities to
enforce payments of prevailing wages pursuant to the �New Jersey Prevailing
Wage Act,� P.L.1963, c.150

(C.34:11-56.25 et seq.).

����� d.�� The
agency, prior to soliciting bids, shall prepare a comprehensive estimate of the
costs of regular agency employees providing the services subject to the
contract, including the cost of employee benefits and provide the agency
personnel performing the services and the majority representative of those
personnel a period of 30 days to review the agency�s estimates of the cost of
agency personnel performing the services and submit an alternative cost
estimate based on that review and any proposal made by the majority
representative to reduce costs and increase the efficiency of agency operations
in a manner which is in compliance with the requirements of this section,
including all requirements regarding charges to the public, the quantity and
quality of services, and employee remuneration.� The agency shall review any
proposal and revised estimate after bidding has been completed and make a
determination of whether and how much to reduce the agency�s estimates of the
cost of agency personnel performing the services when making the comparison
with the cost to the agency of the contractor�s bid pursuant to this section
and determining whether the bid will provide savings for the agency.� The
agency shall not disclose the majority representative�s alternative estimate or
proposal to reduce costs prior to the completion of the bidding.

����� e.�� The
contract shall require the contractor to comply with a policy of
nondiscrimination and equal opportunity, take affirmative steps to provide that
equal opportunity, and offer available employee positions to qualified regular
employees of the agency who are displaced or dismissed from agency employment,
in whole or in part, because of the privatization contract, and the agency
shall, in consultation with affected agency personnel and their majority
representative, and prior to the commencing of the term of the contract,
prepare a plan of assistance for each employee displaced as a result of the
contract, including any training needed to place the employee in a position
with the contractor or the agency.

����� f.��� The
contractor making the bid, and its subsidiaries, affiliates, principals and
managerial or supervisory employees are not, when the bid is made or the
contract is awarded, or during the ten-year period before the award were not,
subject to debarment, suspension, adjudication or conviction, or any criminal
conviction at any time, which debarment, suspension, adjudication or conviction
is due to substantial or repeated noncompliance with any federal or State law
pertaining to the operation of a business, including, but not limited to, laws
regarding labor relations, workplace standards, occupational safety and health,
public safety and health, environmental protection, nondiscrimination and
affirmative action, tax payment and conflicts of interest.

����� g.�� The
agency shall make public its determination of whether to award a contract
within 60 days of the completion of the bidding.

����� h.�� If
the agency determines, after soliciting and receiving bids, that one or more of
the bids comply with the cost savings requirement and all other requirements of
this section, the agency shall publicly designate to which of the compliant
bidders it proposes to award the contract and issue a comprehensive written
analysis of the total contract cost of the designated bid, including the costs
of transition from public to private operation and any additional unemployment
and retirement benefits of agency employees, and the costs of monitoring and
administering contract performance born pursuant to this act by the agency and
any State entity, including the State Auditor and the Office of the State
Comptroller.� If the designated bidder is headquartered outside the State, or
proposes to perform any or all of the work done under contract outside the
boundaries of the State, the contract cost shall be increased by the amount of
income tax revenue, if any, which will be lost to the State by the
corresponding elimination of agency employees.

����� i.��� The
agency shall provide the Office of the State Comptroller with a copy of the
proposed privatization contract and a written certification:

����� (1)� That
the agency has complied with all provisions of this section;

����� (2)� That
the agency finds that the proposed privatization contract is in the public
interest and meets all requirements of this section;

����� (3)� That
the agency finds that the estimated contract cost is less than the cost of
agency personnel performing the services, taking into account any reduction of
that cost made by the agency pursuant to subsection d. of this section; and

���� (4)�� That
sets forth the agency�s estimate of the total amount of the cost savings to the
agency that would be provided by the contract.

���� 4.��� The Office of the State
Comptroller shall, within 30 business days after receiving the certificate
required by section 3 of this act, review the certification of the agency, and
prohibit the agency from entering into the privatization contract if the office
determines that the bid does not provide cost savings or that the agency has
failed to comply with any other requirement of this section.� The office may
require by summons the attendance and testimony under oath of witnesses and the
production of books, papers and other records relating to that review.� The
office may extend the time for an objection for an additional period of 30
business days beyond the original 30 business days by written notice to the
agency, stating the reason for that extension.� The determination shall be
final and binding on the agency, unless withdrawn due to a revision of the
certification by the agency found satisfactory by the office.� The
certification, the proposed contract, the determination and any revision of the
determination, with supporting documentation, shall be made available by the
office to the public on the Internet.

���� 5.��� The State Auditor shall,
as part of his responsibility under R.S.52:24-4, conduct an annual post audit
of each privatization contract entered into after the effective date of this
act and shall issue, and make available to the public and representatives of
employee organizations representing affected employees, an annual report to the
Governor and the Legislature regarding the contract, the first of which shall
be issued not more than 90 days after the end of the first year that the
contract is in effect. �The report shall include an evaluation of the actual
entire cost and any actual cost savings of the contract compared with the
amount of cost and savings estimated when the contract was awarded, with an
analysis of whether any failure to provide the amount of savings was related to
misrepresentation, fraud or other malfeasance, misfeasance or nonfeasance of an
agency or contractor, and a review of the compliance of the agency and the
contractor with the provisions of this act, including all requirements regarding
charges to the public, the quantity and quality of services, and the
qualifications and remuneration of contractor employees, with an analysis of
whether any non-compliance was related to misrepresentation, fraud or other
malfeasance, misfeasance or nonfeasance of an agency or contractor. �Any agency
or contractor, or officer or agent of the agency or contractor, determined to
be responsible for the misrepresentation, fraud or other malfeasance,
misfeasance or nonfeasance shall be subject to penalties and sanctions as
provided by law, including, where appropriate, debarment, contract rescission,
damages, and reimbursement of excess charges to the public and underpayments to
employees.� Any finding by the State Auditor that a contractor has failed to
make the wage or benefit payments required under a privatization contract shall
be referred to the Commissioner of Labor and Workforce Development for
appropriate enforcement actions.� The post-audit reports, with supporting
documentation and records, shall be made available by the State Auditor to the
public on the Internet on an ongoing basis.

����� 6.�� This
act shall take effect on the 90th day after enactment. The provisions of this
act shall apply to any privatization contract first entered into on or after
the effective date of this act and to any renewal extension, or transfer to
another contractor of that privatization contract, but the provisions of this
act shall not apply to any privatization contract which is first entered into
prior to the effective date of this act, or any renewal, extension, or transfer
of that privatization contract.

STATEMENT

����� This bill prohibits the privatization of public
services unless there are cost savings which are not based on increased charges
or reduced services to the public, or lowered workforce standards.� Each
prospective private contractor would be required to demonstrate cost reductions
based on improvements such as management efficiencies or technical innovation,
not based on added burdens imposed on the members of the public using the
services or the employees producing them.

����� The bill 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.� The bill further
requires sustained oversight and public disclosure regarding those contracts to
provide accountability to taxpayers, public users of the services, and
employees producing the services, that the cost savings actually occur without
increased charges, or reduced services or workforce standards, and provides
penalties and sanctions for any noncompliance involving agency or contractor
misrepresentation, fraud or other malfeasance, misfeasance or nonfeasance.

����� The bill�s prohibition on the privatization of public
services does not apply to contracts for: (1) legal, management consulting,
planning, engineering or design services, (2) prevailing wage construction
work, (3) certain services provided by disabled individuals employed by
rehabilitation facilities, (4) a vendor providing software
or other information technology or equipment for the purpose of enhancing or
increasing the productivity, efficiency, or effectiveness of regular employees
of the agency in providing services; or (5) services which a vendor provides
during an emergency or other unpredictable situation which creates a need for
more services than the current regular employees are able to provide during the
emergency or situation, provided that there is no loss of employment for
regular employees who normally provide the services.

����� The bill prohibits any political
subdivision from entering into a contract of $500,000 or more, and any public
body, including the State, from entering into a contract of $1 million or more,
to purchase from private entities services previously performed by agency
employees, unless:

����� 1.�� The agency solicits competitive sealed bids for
the contracts based on a comprehensive statement of requirements by the agency;

����� 2.�� 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;

����� 3.�� 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;

����� 4.�� 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;

����� 5.�� 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;

����� 6.�� 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

����� 7.�� 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 bill requires the agency to make public its
determination of whether to award a contract within 60 days of the completion
of the bidding.

����� 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 apply to any
privatization contract entered into after the effective date of the bill and
any renewal, extension or transfer of that contract, but do not apply to
contracts entered into before the effective date or renewals, extensions or
transfers of those contracts.