Cal. Code Regs. tit. 2 § 547.69

Current through Register 2024 Notice Reg. No. 50, December 13, 2024

Section 547.69 - State Agency Notice of Intent to Execute Cost Savings Personal Services Contract

(a) Any state agency proposing to execute a contract pursuant to Government Code section 19130(a), shall file with the board a Notice of Intent to Execute Personal Services Contract.

(b) The Notice of Intent shall include the following:

(1) A complete copy of the proposed contract;

(2) The following information with respect to those civil service employees who would otherwise perform the services to be rendered under the contract:

(A) The number of civil service employees in each classification who would otherwise perform the services;

(B) The number of hours required for each civil service employee to perform the services;

(C) The base hourly wage, as set forth in the State of California Civil Service Pay Scale, that the agency would be required to pay civil service employees to perform those services to be rendered under the contract.

(i) The cost of any employee benefits, as set forth in section (b)(2)(D), direct overhead costs, as set forth in section (b)(2)(E), indirect overhead costs, as set forth in section (b)(2)(F), or any other costs, shall not be included in the base hourly wage calculation, unless specifically authorized by this section;

(ii) The cost of any recruitment or retention pay bonus or differential, or any geographic pay bonus or differential, that the agency is required by law or collective bargaining agreement to pay to employ civil service employees to perform those services to be rendered under the contract, shall be calculated as part of the base hourly wage. If the bonus or differential is disbursed as a lump sum payment, the cost of the bonus or differential shall be amortized over the term of the proposed contract. The cost of any remuneration paid to an employee due to the employee possessing specialized skills or abilities (e.g., bilingual verbal and written skills), shall not be included as part of the base hourly wage, unless the specialized skill or ability is a prerequisite for employment in the civil service position that performs those services to be rendered under the contract. The state agency shall provide detailed, factual information concerning its assertion that it is required to pay any recruitment or retention pay bonus or differential, or any geographic pay bonus or differential, or that it incurs any additional costs to compensate individuals with specialized skills or abilities, in order to employ civil service employees to perform those services to be rendered under the contract.

(D) The hourly cost of employee benefits the agency would be required to provide to each civil service employee to perform those services to be rendered under the contract.

(i) For those proposed contracts not subject to the provisions of Government Code section 19134, employee benefits shall be itemized and limited to the following: health insurance premiums; dental insurance premiums; vision insurance premiums; employer contributions to employee retirement plans, including social security; paid holidays; sick leave benefits; and vacation leave benefits. For purposes of this section, hourly benefit costs shall be derived by calculating the annual cost per employee for each specified benefit, divided by the number of hours each employee is employed on an annual basis. The state agency shall also disclose the basis for, and methodology utilized, in arriving at its conclusions as to the annual cost for each specified employee benefit;

(ii) For those proposed contracts subject to the provisions of Government Code section 19134, hourly benefit costs shall be established using rates based on single employee, employee plus one dependent, and employee plus two or more dependents, or the costs may be based on a blended rate, as set forth in the "Personal Services Contract Pay Rates" published by the Department of Personnel Administration. To the extent that the hourly benefit rates established by the Department of Personnel Administration consist of items that would otherwise be categorized under the base hourly wage, direct overhead cost, or indirect overhead cost provisions of this section, the agency may only include those items as hourly benefit costs;

(E) The hourly cost of direct overhead costs the state agency would incur if it employed civil service employees to perform those services to be rendered under the contract.

(i) For purposes of this section, direct overhead costs shall be itemized and include, but not be limited to, the following: workers compensation insurance budget costs; unemployment insurance budget costs; disability insurance budget costs; additional rent and utilities that would only be incurred if the services in question were performed by the civil service; additional equipment and materials needed to perform those services to be rendered under the contract that would only be incurred if the services in question were performed by the civil service; uniforms; training mandated by law or otherwise required by the agency; background investigations, medical examinations, or drug testing, mandated by law or otherwise required by the agency; and reimbursement for licenses, certificates, or similar requirements needed before a civil service employee can perform those services to be rendered under the contract. For purposes of this section, hourly direct overhead costs shall be derived by calculating the annual cost per employee for each specified direct overhead cost, divided by the number of hours each employee is employed on an annual basis. The state agency shall also disclose the basis for, and methodology utilized, in arriving at its conclusions as to the annual cost for each specified direct overhead cost;

(ii) The cost of any equipment necessary to perform the contracted-for services claimed as a direct overhead cost shall be calculated by establishing the cost incurred each year by the contracting agency for the use of the equipment. (For example, a laptop computer purchased at an initial cost of $2,000.00, depreciates at a rate of $500.00 per year for each year of use. For a contract of three years duration, the state agency can claim computer equipment costs of $500.00 per year, for a total contract cost of $1,500.00.) If the equipment is leased, the contracting agency can claim the annual lease cost of the equipment as an annual direct overhead cost. The state agency shall disclose the basis for, and methodology utilized, in arriving at its conclusions as to the annual cost for each piece of equipment identified as a direct overhead cost incurred in the performance of the contracted-for services.

(iii) The cost of any uniforms claimed as a direct overhead cost shall be calculated by establishing the cost incurred each year by the contracting agency for the purchase of uniforms. (For example, for a contract of four years duration, the state agency purchases uniforms for each civil service employee at a cost of $200.00 during the first year of the contract, and $200.00 during the third year of the contract, for a total of $400.00 during the four year contract term. The state agency can claim $100.00 per employee, per year, in uniform costs.) In those instances where the civil service employee receives an annual uniform allowance, the annual uniform allowance shall be allowed as a direct overhead cost. The state agency shall disclose the basis for, and methodology utilized, in arriving at its conclusions as to the annual cost for each uniform cost identified as a direct overhead cost.

(iv) Any other costs incurred by the state agency when employing civil service employees to perform the contracted-for services, and claimed by the state agency as a direct overhead cost, including, but not limited to, the cost of background investigations, medical examinations, drug testing, license procurement, certificate procurement, or training, shall be calculated by establishing the cost incurred each year by the contracting agency for each cost claimed. (For example, for a contract of four years duration, the state agency conducts drug testing for each civil service employee at a cost of $200.00 during the first year of the contract, and $200.00 during the third year of the contract, for a total of $400.00 during the four year contract term. The state agency can claim $100.00 per employee, per year, in drug testing costs.) The state agency shall disclose the basis for, and methodology utilized, in arriving at its conclusions as to the annual cost for each expense identified as a direct overhead cost.

(F) The hourly cost of indirect overhead costs the state agency would incur if civil service employees were to perform those services to be rendered under the contract. Indirect costs shall not be included unless the cost can be attributed solely to the function in question and would not exist if that function were not performed in state service.

(i) For purposes of this section, indirect overhead costs shall be itemized and include, but not be limited to, the following: the pro rata share of existing administrative salaries and benefits (including managers who do not directly supervise the civil service employees performing those services to be rendered under the contract, human resources staff who process the recruitment, hiring, and separation of the civil service employees performing those services to be rendered under the contract, and executive management staff who have oversight of the program(s) impacted by the contract), rent, utilities, equipment costs and materials. For purposes of this section, hourly indirect overhead costs shall be derived by calculating the annual pro rata cost per employee for each specified indirect overhead cost incurred as a result of the agency performing those services to be rendered under the contract, divided by the number of hours each employee is employed on an annual basis. The state agency shall also disclose the basis for, and methodology utilized, in arriving at its conclusions as to the annual cost for each specified indirect overhead cost;

(G) The total hourly cost, based on those costs set forth in subdivisions (C) through (F), the state agency would incur for each civil service employee, if civil service employees were to perform those services to be rendered under the contract.

(H) A statement explaining why existing civil service employees cannot be re-directed or otherwise utilized to perform those services to be rendered under the contract.

(3) The following information with respect to the contract employees who are to perform the services to be rendered under the contract:

(A) The number of employees required to perform each of the services to be rendered under the contract;

(B) The number of hours each employee shall perform services under the contract;

(C) The base hourly wage that will be paid to each contract employee performing a function under the contract that would otherwise be performed by the civil service.

(i) The contractor shall verify that the cost of any employee benefits, as set forth in section (b)(3)(D), direct overhead costs, as set forth in section (b)(3)(E), or any other costs incurred by the contractor, shall not be included in the base hourly wage calculation, unless specifically authorized by this section. The contractor shall also verify that it is in compliance with all applicable state and federal labor laws;

(ii) The cost of any recruitment or retention pay bonus or differential, or any geographic pay bonus or differential, that the contractor is required to pay to employ private employees to perform those services to be rendered under the contract, shall be calculated as part of the base hourly wage. If the bonus or differential is disbursed as a lump payment, the cost of the bonus or differential shall be amortized over the term of the proposed contract. The cost of any remuneration paid to an employee due to the employee possessing specialized skills or abilities (e.g., bilingual verbal and written skills), shall not be included as part of the base hourly wage, unless the specialized skill or ability is a prerequisite to perform those services to be rendered under the contract. The state agency shall provide detailed, factual information concerning its assertion that the contractor is required to pay any recruitment or retention pay bonus or differential, or any geographic pay bonus or differential, or that the contractor incurs any additional costs to compensate individuals with specialized skills or abilities, in order to employ private employees to perform those services to be rendered under the contract.

(D) The hourly cost of employee benefits that will be provided to each contract employee.

(i) For those proposed contracts not subject to the provisions of Government Code section 19134, employee benefits shall be itemized and limited as set forth in section (b)(2)(D)(i), supra;

(ii) For those proposed contracts subject to the provisions of Government Code section 19134, hourly benefit costs shall be established as set forth in Section (b)(2)(D)(ii), supra;

(iii) Pursuant to Government Code section 19134, subdivision (d), if, in lieu of providing actual benefits as listed in subdivision (b)(3)(D)(i) of this section, the private contractor intends to provide a cash equivalent, the amount of the cash equivalent shall be equal to the applicable determination under subdivision (b)(3)(D)(ii) of this section;

(E) The hourly cost of direct overhead costs the private contractor will incur for each employee employed under the contract.

(i) For purposes of this section, direct overhead costs shall be itemized and include, but not be limited to, those items set forth in Section (b)(2)(E)(i) and

(ii), supra;

(F) The total hourly amount the private contractor will charge the state agency for each contract employee to perform those services to be rendered under the contract.

(G) The annual costs the state agency will incur for activities related to inspection, supervision and monitoring activities to ensure proper administration of the contract. Inspection, supervision, and monitoring costs shall include, but not be limited to, the pro rata share of existing administrative salaries and benefits necessary for supervising and monitoring the contract, including costs associated with personnel supervision, invoice review, and the contract bidding process. Inspection, supervision and monitoring costs shall also include additional security or other risk costs incurred by the agency as a result of the contract. The state agency shall disclose the basis for, and methodology utilized, in arriving at its conclusions as to the annual contract inspection, supervision and monitoring costs, and specify the number of hours expended annually by agency staff, on a position-by-position basis, on contract inspection, supervision and monitoring duties. If no costs are claimed for oversight, the state agency shall provide the factual basis for its assertion;

(4) The industry level hourly wage for those services to be rendered under the contract. The term "industry level hourly wage" as used in this section means the prevailing hourly rate of pay for the type of work in question in the local area where the contract would be let, as measured by reliable and statistically representative wage surveys such as those conducted by the Department of Industrial Relations or the Bureau of Labor Statistics. In the event that the most recent relevant wage survey data published by the Department of Industrial Relations differs from the wage survey data published by the Bureau of Labor Statistics, the board shall rely upon the wage survey data published by the Department of Industrial Relations, unless the wage survey data published by the Bureau of Labor Statistics is based on more recent information. The state agency shall identify the wage survey utilized and the date it was issued, and shall specify whether the wage is calculated in terms of mean or median wage.

(5) That the contract will not result in the displacement of civil service employees.

(A) For purposes of this section, displacement shall be limited to: layoff; involuntary demotion; involuntary transfer to a new class; involuntary transfer to a new location requiring a change of residence, and as defined in Department of Personnel dministration regulations; and time base reductions. Displacement does not include: changes in shifts or days off; reassignment to other positions within the same class and general geographic location;

(6) That the contract will not have an adverse impact on State Equal Employment Opportunity efforts, as set forth in Section 547.74;

(7) That the contract was awarded through a publicized, competitive bidding process;

(8) That the contract includes specific provisions pertaining to the qualifications of the staff who will perform each aspect of the work under the contract, as well as assurances that the contractor's hiring practices meet applicable nondiscrimination standards;

(9) That the potential for future economic risk to the state from potential contractor rate increases is minimal.

(10) That the contract is with a firm.

(A) A firm means a corporation, partnership, nonprofit organization, or sole proprietorship; and

(11) That the potential economic advantage of contracting is not outweighed by the public's interest in having a particular function performed directly by the state government.

(12) The state agency shall submit documentary evidence and/or declarations in support of the information provided by the state agency in accordance with the requirements of subsections (2) through (11).

(c) The board shall, within 5 days of receipt of the Notice of Intent to Execute Personal Services contract, forward a copy of the Notice to the employee organization(s) that represent(s) those civil service employees who would otherwise perform those duties to be rendered under the contract.

Cal. Code Regs. Tit. 2, § 547.69

1. Change without regulatory effect adding new article 5 (sections 547.69-547.71) and renumbering former section 279.2 to section 547.69 filed 12-1-99 pursuant to section 100, title 1, California Code of Regulations (Register 99, No. 49).
2. Change without regulatory effect renumbering former article 5 heading to article 6 filed 2-7-2000 pursuant to section 100, title 1, California Code of Regulations (Register 2000, No. 6).
3. Amendment of article heading, renumbering of former section 547.69 to section 547.72 and new section 547.69 filed 1-3-2008; operative 2-2-2008 (Register 2008, No. 1).

Note: Authority cited: Sections 18211, 18216 and 18701, Government Code. Reference: Sections 18670, 19130, 19131 and 19134, Government Code; and Section 10337, Public Contract Code.