SB1670 - 562R

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 41-2559, Arizona Revised Statutes, is amended to read:

START_STATUTE41-2559. Public-private partnership contracts

A. The director may enter into public-private partnership contracts to finance the technology needs of the purchasing agency. The funding for services under a public-private partnership contract entered into pursuant to this section shall be contingent on and computed according to established performance standards and shall be attributable to the successful implementation of the technology program for the period specified in the contract. The director may issue requests for information and requests for proposals to solicit private partners that are interested in providing programs under a contract entered into pursuant to this section.

B. Each request for proposals issued pursuant to this section shall require each private partner to propose specific performance improvements and measurement approaches to be used to measure the value delivered by the vendor technology solution. The director shall include an assessment of the proposed value of the vendor technology solution in its evaluation criteria to select the best value solution for the purchasing agency.

C. A contract entered into between the director and an automated systems vendor or an information technology VENDOR shall provide for payment of fees on a contractually specific amount based on the achievement of measured performance improvements that are mutually agreed to by the contractor and the director and monies for payment of these fees are not subject to legislative appropriation. The following are subject to review and approval by the director:

1. The terms of contracts entered into pursuant to this section relating to the measurement of the performance improvement attributable to the vendor technology program.

2. Payment of fees based on the achievement of the established performance measures.

D. Before a public-private partnership contract is awarded pursuant to this section, the joint legislative budget committee staff shall be consulted with regard to the potential fiscal impact of the contract to the state. If the joint legislative budget committee staff finds a significant negative fiscal impact to the state, the staff shall report its findings to the joint legislative budget committee. END_STATUTE

Sec. 2. Title 41, chapter 23, article 3, Arizona Revised Statutes, is amended by adding section 41-2559.01, to read:

START_STATUTE41-2559.01. Public-private partnership contracts; procurement officer; joint legislative budget committee; joint committee on capital review; report

A. The director may authorize a procurement officer to enter into a public-private partnership contract to do the following:

1. Finance or provide construction services, operations services and maintenance services of buildings, infrastructure or improvements to or on state property.

2. Finance or otherwise facilitate the development of state property.

3. Develop programs or services that enable a purchasing agency to expand or enhance any of its operations, including training, employee support and customer service to achieve desired results that serve the interests of this state, are consistent with the legal authority and responsibilities of the purchasing agency and are best accomplished by a public-private partnership contract.

B. A public-private partnership contract issued pursuant to this section shall only result from a request for proposals issued by the purchasing agency authorized to solicit private partners interested in providing construction, development, services or other functions under a public-private partnership contract entered into pursuant to this section. The director may authorize a procurement officer to issue requests for information at any time pursuant to this section to facilitate the development of or modifications to a request for proposals.

C. Before issuing the request for proposals pursuant to subsection B of this section, the procurement officer of the purchasing agency seeking a public-private partnership contract shall submit to the director justification regarding the reason the public-private partnership contract approach is being sought and why it is essential or comparatively advantageous over other contracting options. The justification shall also include information about any financial obligations the purchasing agency would have under the proposed public-private partnership contract and whether the purchasing agency's current appropriations or other funding sources are sufficient to meet those obligations. The director shall determine in writing whether to approve the justification. If approved, the director shall address details regarding how the procurement is to be solicited and awarded and any limits associated with the director's approval.

D. Any request for proposals issued pursuant to this section shall require each responding potential private partner to propose specific details of the design, construction, services, programs or other functions associated with its response to the request for proposals. Each respondent shall also provide an assessment of the potential value of its proposal to this state, along with identifying methods of funding its expenses beyond any state funding that may have been specified in the request for proposals. The director shall include an assessment of the proposed value of each proposal as a component within the evaluation criteria developed to select the best solution. In any response to a request for proposals pursuant to this section, potential private partners may not ask the purchasing agency, the department or this state to guarantee funding or the securing of funding in connection with the proposal. Unless specifically addressed in the request for proposals that the purchasing agency, the department or this state is seeking assistance in funding alternatives for some aspect of the proposed partnership, potential private partners may not ask in any response to a request for proposals pursuant to this section for the assistance of the purchasing agency, the department or this state in securing funding in connection with the potential private partner's proposal.

E. A public-private partnership contract entered into between a purchasing agency and a private sector partner shall address, if applicable, the matter of payment of any fees by the purchasing agency to the partner based on the achievement of contract requirements, milestones or goals that are mutually agreed to by the partner and the agency director. Fees collected pursuant to this subsection are not subject to legislative appropriation, although fee provisions and notice of payment of fees shall be reported to the joint legislative budget committee and the joint committee on capital review in a timely manner.

F. A public-private partnership contract entered into between a purchasing agency and a private sector partner shall address, if applicable, the matter of payment of fees by the partner to the purchasing agency to cover administrative overhead, goods, services, leasing of state land, buildings or space or other costs associated with the partnership that are mutually agreed to by the partner and the purchasing agency director. Monies obtained by the purchasing agency from the partner from any such fees shall be separately accounted for by the purchasing agency and are not subject to legislative appropriation as long as they are used for meeting the obligations of this state or requirements of the partnership. Fee collections by a purchasing agency from a public-private partnership contract and expenditures from such collections shall be reported annually to the joint legislative budget committee and the joint committee on capital review.

G. The term of a public-private partnership contract shall be clearly stated in any request for proposals and is at the discretion of the director, in consultation with the purchasing agency, for a period of not more than twenty-five years. The director's determination for contract length shall be based on all of the following:

1. The request of the purchasing agency involved following a consultation.

2. Information gathered on matters, including the following:

(a) Required lead time before operations.

(b) Expected time required to achieve a reasonable return on any investments made or expenses incurred resulting from a similar contract.

(c) The current and projected availability of potential vendors that can adequately perform the scope of envisioned work.

(d) The costs and risks associated with short contract time frames or multiple renewal periods.

H. Notwithstanding subsection G of this section, if the director determines it is in the best interests of this state, the director may extend, on mutual agreement with the vendor, the length of a public-private partnership contract beyond what was stated in the request for proposals to facilitate the transition to a new vendor resulting from a new request for proposals or any other allowable process or decision for contract termination pursuant to the terms of the contract. The terms of any extension pursuant to this subsection shall be shared with the joint legislative budget committee staff before the execution of the extension. If the joint legislative budget committee staff finds a significant negative fiscal impact to this state, the staff shall report its findings to the joint legislative budget committee or the joint committee on capital review, as appropriate.

I. Public-private partnership contracts issued pursuant to this section shall address the ownership of any infrastructure or buildings developed and constructed during a public-private partnership.

J. Public-private partnership contracts issued pursuant to this section are subject to modification within the contracted time frame for the public-private partnership as long as the modification fits into the scope of work included in the request for proposals from which the contract was awarded. If the director determines that modifications involve new construction that cannot be considered required maintenance or improvements, new services or other new functions not contemplated in the original request for proposals, a new request for proposals shall be issued. If a public-private partnership contract involves the use of military or law enforcement aircraft, vehicles, equipment or technology, the use by the purchasing agency of new or updated aircraft, vehicles, equipment or technology or the expansion of buildings, airfields or training areas to accommodate new or updated aircraft, vehicles, equipment or technology, that use or expansion shall be considered to have been contemplated in the original request for proposals.

K. Public-private partnership contract modifications involving payment of new or increased fees shall be reported to the joint legislative budget committee staff with regard to the potential fiscal impact of the contract on this state. If the joint legislative budget committee staff finds a significant negative fiscal impact to this state, the staff shall report its findings to the joint legislative budget committee or the joint committee on capital review, as appropriate.

L. The director may delegate all or a portion of the procurement activities described in this section to a purchasing agency seeking a public-private partnership contract. Regardless of any delegation, all of the following are subject to review and approval by the director:

1. The terms of contracts entered into pursuant to this section.

2. Payment of fees by this state based on the achievement of any performance measures established in the contract.

3. The advertising of a public-private partnership request for proposals. The advertisement shall appear not later than thirty days before the submission deadline for the proposal. The director shall ensure that the purchasing agency uses, in addition to the state procurement portal, at least one print or digital publication or website that does the following:

(a) targets the appropriate audience.

(b) advertises the basic description of the request for proposals along with the appropriate links to the state procurement portal and to instructions on how to use the state procurement portal.

M. Before a public-private partnership contract is awarded pursuant to this section, the joint legislative budget committee staff shall be consulted with regard to the potential fiscal impact of the contract to this state. If the joint legislative budget committee staff finds a significant negative fiscal impact to this state, the staff shall report its findings to the joint legislative budget committee or the joint committee on capital review, as appropriate.

N. A public-private partnership contract executed pursuant to this section may not:

1. Cause this state to share in the liabilities of the private sector partner.

2. Exempt the private sector partner from state law and regulations unless such an exemption is specified under the laws of this state.

3. Involve manufacturing a good or delivering a service that is already readily available to the public sector through existing contract mechanisms unless the director determines a public-private partnership is required to address either of the following:

(a) An existing or projected shortfall in supply or availability of the good or service.

(b) A level of complexity, technical capacity or volume of required production or service that existing contract mechanisms cannot provide physically or cannot offer at costs consistent with an agency's legislative appropriations.

O. In order to enter into a public-private partnership contract, a purchasing agency shall already possess the legal authority to procure the goods, services or construction it is seeking. This section alone does not provide any agency with the legal authority to procure goods, services or construction.

P. Any leases or sales of state-owned property as part of a public-private partnership contract pursuant to this section, including any operating agreement or similar arrangement, shall be executed in accordance with state law and reported to the joint legislative budget committee staff in a timely manner.

Q. The joint committee on capital review shall review the following construction-related public-private partnership activities:

1. planned construction activities as part of a public-private partnership in excess of $500,000 on state-owned land.

2. planned construction activities as part of a public-private partnership IN EXCESS OF $500,000, including any amount of monies appropriated by this state, regardless of the ownership of the land.

R. at least ninety days before construction is projected to begin, the department shall submit Construction plans to the joint committee on capital review. The joint committee on capital review may hold a hearing to provide recommendations and advice regarding the planned construction. The director or the director's designee shall cooperate with the committee's staff regarding any requests for construction-related documents.

S. On or before August 30, 2028, the joint legislative budget committee staff shall submit to the president of the senate, the speaker of the house of representatives, the minority leader of the senate and the minority leader of the house of representatives a report detailing the use of public-private partnerships established pursuant to this section. The joint legislative budget committee staff shall analyze information the joint legislative budget committee staff received pursuant to this section as well as other data the joint legislative budget committee staff requested from the department and other agencies participating in public-private partnerships. State agencies involved in public-private partnership matters shall cooperate in a timely manner with the data requests. The report shall ALSO identify and evaluate policy or fiscal issues relating to the use of public-private partnerships in this state pursuant to this section. END_STATUTE

Sec. 3. Delayed repeal

Section 41-2559.01, Arizona Revised Statutes, as added by this act, is repealed from and after September 30, 2029.

Sec. 4. Section 41-2752, Arizona Revised Statutes, is amended to read:

START_STATUTE41-2752. State competition with private enterprise prohibited; exceptions; definition

A. A state agency shall not engage in the manufacturing, processing, sale, offering for sale, rental, leasing, delivery, dispensing, distributing or advertising of goods or services to the public that are also offered by private enterprise unless specifically authorized by law other than administrative law and executive orders.

B. A state agency shall not offer or provide goods or services to the public for or through another state agency or a local agency, including by intergovernmental or interagency agreement, in violation of this section or section 41-2753.

C. The restrictions on activities that compete with private enterprise contained in this section do not apply to:

1. The development, operation and management of state parks, historical monuments and hiking or equestrian trails.

2. Correctional industries established and operated by the state department of corrections if the prices charged for products sold by the correctional industries are not less than the actual cost of producing and marketing the product plus a reasonable allowance for overhead and administrative costs.

3. The office of tourism.

4. The Arizona highways magazine, operated by the department of transportation.

5. Printing and distributing information to the public if the agency is otherwise authorized to do so, and printing or copying public records or other material relating to the public agency's public business and recovering through fees and charges the costs of such printing, copying and distributing.

6. The department of public safety.

7. The construction, maintenance and operation of state transportation facilities.

8. The development, distribution, maintenance, support, licensing, leasing or sale of computer software by the department of transportation.

9. Agreements executed by the Arizona health care cost containment system administration with other states to design, develop, install and operate information technology systems and related services or other administrative services pursuant to section 36-2925.

10. Agreements executed by the department of economic security with other states to design, develop, install and operate support collection technology systems and related services. The department shall deposit, pursuant to sections 35-146 and 35-147, monies received pursuant to this paragraph in the public assistance collections fund established by section 46-295.

11. Educational, vocational, treatment, training or work programs of the department of juvenile corrections and contracts between the department of juvenile corrections and this state, a political subdivision of this state or a private entity in order to provide employment or vocational educational experience.

12. The aflatoxin control technologies of the cotton research and protection council.

13. The lease or sublease of lands or buildings by the department of economic security pursuant to section 41-1958.

14. The Arizona commerce authority.

15. The Arizona game and fish commission, but only for the sale of goods or services and not firearms.

16. The lease or sublease of lands or buildings by the department of child safety pursuant to section 8-460.

17. Agreements executed by the department of child safety with other states to design, develop, install and operate support collection technology systems and related services. The department shall deposit, pursuant to sections 35-146 and 35-147, monies received pursuant to this paragraph in the child safety collections fund established by section 8-461.

18. The lease or sublease of state hospital lands or buildings by the department of health services.

19. The sale or lease of software, computer systems or intellectual property developed by the department of education or associated services provided for the sale or lease of software, computer systems or intellectual property by the department of education. The department shall deposit, pursuant to sections 35-146 and 35-147, sixty percent of the profit from the monies generated pursuant to this paragraph in the state general fund and the remaining forty percent in the department of education intellectual property fund established by section 15-231.04. The department of education may not transfer or expend monies or personnel resources for the purposes of marketing or soliciting goods or services authorized pursuant to this paragraph that were appropriated and authorized for other functions and programs of the department of education.

20. The lease or sublease of any real estate or related infrastructure by the department of emergency and military affairs pursuant to section 26-262, subsection K, paragraph 4.

21. Through October 1, 2029, public-private partnership contracts awarded pursuant to sections 41-2559 and 41-2559.01.

D. The restrictions on activities that compete with private enterprise contained in subsection A of this section do not apply to community colleges and universities under the jurisdiction of a governing board.

E. For the purposes of this section, "profit" means any monies generated from the sale or lease of goods and services after accounting for the costs paid by this state, including appropriations from the state general fund. END_STATUTE

Sec. 5. Saving clause

The repeal of section 41-2559.01, Arizona Revised Statutes, by this act, does not affect any contractual rights, contractual obligations or contractual duties entered into pursuant to this act.

Sec. 6. Exemption from rulemaking

Notwithstanding any other law, for the purposes of this act, the department of administration is exempt from the rulemaking requirements of title 41, chapter 6, Arizona Revised Statutes, for eighteen months after the effective date of this act. Notwithstanding this exemption, the department of administration shall issue proposed rules and hold at least one public meeting regarding the proposed rules not earlier than one month after issuing the proposed rules.

Sec. 7. Emergency

This act is an emergency measure that is necessary to preserve the public peace, health or safety and is operative immediately as provided by law.