A bill awaiting Governor Hochul’s signature or veto would make it more difficult for state agencies to outsource work — and would ignore the Lamont Administration’s negative experience with an almost identical statute in neighboring Connecticut.

The proposal (S5356/A8159), among other things, adds a new layer to the state’s acquisition process, requiring agencies to undertake a “cost comparison review” before they can hire an outside business or nonprofit organization to perform $1 million in work over a 12-month period.

The sponsors argue in their bill memo that in many cases consultants “perform work that could be done by professional state employees and the cost of using consultants is substantially higher.” Agencies, they say, should have to show such hiring is “necessary and prudent.”

This redundant step is designed to make it harder to farm out work that would otherwise be done by the state’s heavily unionized workforce. The legislation has been a major priority for public employee unions, who view privatization as a threat to their revenue streams. Each ‘win’ public-sector unions score at the bargaining table tends to make the use of outside contractors incrementally more attractive.

The state’s constantly changing needs often make it preferable to have an outside entity perform state work rather than bringing in new employees or creating entire new departments. Privatization can be particularly attractive because outside firms can be more flexible than state agencies, which must contend with civil service rules and union contracts that make it difficult to modify roles.

The legislation is designed in most instances to create a hurdle, not a brick wall. But in cases where 50 or more employees would be laid off, transferred, or reassigned, the cost-comparison bill would require the state to “provide reasonable resources” for the purpose of “encouraging and assisting” those employees in submitting a rival bid which would potentially prevent the state from contracting.

The fundamental problem there is that businesses and nonprofits risk insolvency and legal action when they make promises they can’t keep. State employees don’t face nearly the same peril, and executive branch officials and potential bidders would be left to sift through dubious claims about the flexibility and efficiency of the state workforce.

A cost-comparison between state employees and a consultant also would presuppose that the costs would end when the contract period ends — something that is far from certain at a government agency.

The proposal borrows language from a similar statute in Connecticut — but doesn’t carry the related warnings. Writing about this and related obstacles to contracting in the Constitution State, consultants hired by the Lamont Administration last year found:

“[Even when processes are followed] agencies face the threat of the union filing lawsuit to halt contract awards and implementation. Such complexity often makes the review process excessively complicated for individual agencies, disincentivizes bidders, and delays vendor selection and project execution. Many agencies have found it difficult to even contract out work for which state employees lacked the skills or expertise to perform safely. For example, it took 4 years for CTDOT to contract out maintenance of movable bridges despite the fact that the existing workers had no experience in this area.”

Outsourcing is not a panacea. Profit-motivated contractors aren’t necessarily worried about giving the state the best deal—but then again, neither are the state’s public employee unions, which only make money when government employees get paid. The shift at agencies to remote work has made it easier to imagine tasks being completed somewhere outside the four walls of state buildings, making new obstacles to privatization more urgent.

Governor Andrew Cuomo vetoed cost-comparison legislation three times between its introduction in 2012 and his 2021 departure. His veto message in 2020 pointed out that the process was not only duplicative but also risked slowing the contract award process.

This bill — despite having a typographical error — twice passed the Senate unanimously, in June 2021 and May 2022, and passed the Assembly with just ten negatives votes near the end of the 2022 session. Governor Hochul has until Wednesday, December 28 to veto it.

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