Colorado Legislative Council Staff



(replaces fiscal impact dated January 12, 1999)

Drafting Number:

Prime Sponsor(s):

LLS 99-0016

Rep. Pfiffner

Sen. Owen


Bill Status:

Fiscal Analyst:

February 16, 1999

House Appropriations

Steve Tammeus (866-2756)



Fiscal Impact Summary

FY 1999/2000

FY 2000/2001

State Revenues

General Fund



State Expenditures

General Fund



FTE Position Change

0.0 FTE

0.0 FTE

Other State Impact: All state agencies may incur additional annual operating and administrative expenses to implement the provisions of this bill. Refer to the State Expenditures section of this fiscal note.

Effective Date: 90 days after adjournment unless a referendum petition is filed.

Appropriation Summary for FY 1999-2000:

Department of Personnel - $15,676 and 0.0 FTE - General Fund

Local Government Impact: None

Summary of Legislation

            This bill, as amended by the House State Affairs Committee, January 19, 1999, authorizes state agencies to utilize managed competition for personal services contracts, and specifies criteria for program implementation. The State Personnel Director is required to provide assistance to state agencies and ensure that managed competition is administered in accordance with the criteria. A state agency that chooses to implement the program may organize a labor-management cooperation council, comprised of state employees, to focus on general privatization initiatives and employee managed competition projects. The bill requires the agency to submit an annual report to the Governor, the State Personnel Director, and the State, Veterans, and Military Affairs Committees of the House and Senate.

            The bill requires a state agency to undertake certain specific, described measures (for a period of not less than one year prior to making a request for proposals) to improve operations and reduce costs for the services to be provided by the personal services contract. The state agency must provide written documentation that the measures undertaken have not improved operations comparable to the private sector; have not reduced costs to the level of the private sector; and have not resulted in the agency's ability to compete on an equal basis with the private sector.

            The state agency must submit a proposal to the Commission on Government Efficiency and solicit input from the labor-management cooperation council. The proposal must include a cost-benefit analysis of the total fixed, variable, and indirect costs of the current and proposed operations. The bill specifies the cost-benefit analysis criteria, information to be included in the proposal, and the general terms and conditions of the personal services contracts. Following the commission review, the proposal is to be submitted to the Governor.

            The bill requires a state agency to notify employees of the agency's intent to request bids from private entities for a personal services contract, and to provide the employees with adequate training to prepare and submit a competitive bid. The bill prescribes the bid submittal process, and the agency's evaluation and selection criteria. The bill specifies the state agency's obligations for administering and monitoring personal services contracts, and certain conditions for canceling contracts and issuing new requests for bids.

            The bill allows any cost savings gained by a state agency through the use of personal services contracts to be retained by the division in the agency that realized the savings. The calculation of the cost savings is to be made according to procedures to be established by the State Personnel Director and approved by the Commission on Government Efficiency. The bill prescribes how cost savings are to be used by the state agency in the form of employee bonuses, workplace condition improvements, or allocations to other programs.

            The bill creates the Commission on Government Efficiency comprised of seven private citizens, the State Personnel Director, and the State Auditor. The Governor is to select the commission chairman no later than October 1, 1999. Beginning in 2000, the commission is to meet not less than quarterly. The members of the commission are to serve without compensation. The commission may request staff assistance from the Department of Personnel. The activities performed by the commission shall be subject to an annual report by the State Auditor; and beginning March 1, 2000, the commission shall annually report to the State, Veterans, and Military Affairs Committees of the House and Senate. The bill prescribes the commission's powers and duties. The commission is to be repealed July 1, 2004.

            The amended bill provides a General Fund appropriation of $50,767 and 1.0 FTE to the Department of Personnel for FY 1999-2000.

State Expenditures

            This bill will affect state expenditures starting in FY 1999-2000. Some of those costs are readily quantifiable while others are dependent upon whether state agencies elect to implement managed competition for personal services contracts and the level of resources each agency will require to support the program. The Department of Agriculture indicates a cost-benefit analysis for a business unit may cost approximately 0.3 FTE and $30,000. Some agencies may be able to absorb some amount of these costs within existing resources. Others may require additional future appropriations once final resource requirement have been fully identified.

            The bill requires the Department of Personnel to provide assistance to all state agencies and ensure that managed competition is administered in accordance with prescribed criteria. The department is also required to provide staff assistance to the Commission on Government Efficiency. Table 1 provides a summary of the department's estimated annual General Fund expenses to support these efforts. Of the total amount shown in Table 1, the department will be able to absorb the amount of the personal services costs within existing resources.

Table 1 - Department of Personnel

Managed Competition Expenditures


FY 1999-2000

FY 2000/2001

Personal Services

Gen Prof II


Subtotal Personal Services

1.0 FTE - $29,412



1.0 FTE - $29,412



Operating Expenses



Legal Expenses

90 hours - $4,626

45 hours - $2,313

Non-Recurring Expenses



Subtotal Other Expenses



Total Expenses

1.0 FTE - $48,867

1.0 FTE - $40,504

            Any state agency that elects to implement managed competition may incur additional operational and administrative costs to support the program. These costs would be separate from the cost savings benefits intrinsic to the operations of the personal services contracts. Additional costs may be incurred for:


               surveys to determine viable candidates for privatization;

               evaluation of candidate programs and documentation of operations during the one-year period prior to making a request for proposals;

               staff training to prepare and submit proposals;

               evaluations to ensure at least two private entities can submit competitive bids;

               legal and administrative services to support each labor-management cooperation council, contract compliance, and resolution of employee/contractor grievances;

               development of cost-benefit analysis models, and preparation and evaluation of the cost-benefit analysis; and

               development and installation of a state-wide managerial and financial cost accounting system.

            These costs may be realized by any agency that elects to implement managed competition starting in FY 1999-2000. The amount of the costs are dependent upon the number and types of managed competition contracts that may be pursued by each agency. These expenditures may affect state General Fund, cash funds, and federal funds.

State Appropriations

            This fiscal note would imply the Department of Personnel would require a General Fund appropriation of $15,676 and 0.0 FTE for FY 1999-2000. Of this amount, the Department of Law would require a cash fund exempt spending authority of $4,626.

Departments Contacted

            All state agencies