Chapter 155 - Rules Defining An Equivalent Basis for Cost Comparison Between State Employee and Private Contractor Provision of Service

Chapter 155 (Word)

State of Maine
Department of Administrative and Financial Services
Bureau of General Services
Division of Purchases


Table of Contents

Part One. General

  • Section 1. Purpose and Scope
    • This section states the purpose and scope of the Bureau of General Services' rules governing the equitable selection of contractor personal services.
  • Section 2. Definitions
    • This section defines terms used in the rule. Terms may be found in the text of the rule or the associated form s which require completion by the agency/department and bidders. Statutory definitions relating to the subject matter are contained in 5 MRSA 1825-A. Definitions.

Part Two. Construction of the Rule

  • Section 1. Creating an Equal Basis
    • This section discusses the issues with respect to the creation of an equivalent basis for considering personal services proposals.
  • Section 2. Responsibilities
    • This section outlines the responsibilities of the Agency or Department and the bidders when preparing requests and submitting proposals which would result in a contract for personal services.

Part Three. Application and Forms

  • Section 1. Applying the Provisions of the Rule
    • This section requires the use of a standard calculation to determine the best value to the State of Maine and suggests standard language to be included in the request for proposal document.
  • Section 2. Applicable Forms
    • This section outlines the information required to be collected and suggests a format for the collection, presentation, and analysis of the information.

Part One. General

Section One. Purpose and Scope

Summary: This section states the purpose and scope of the Bureau of General Services' rules governing the equitable selection of contractor personal services.

  • 1.1.1 Contracting for Personal Services Allowed.
    5 MRSA 1816-A allows contracting for personal services when any number of conditions is met. Generally examples include, but are not limited to, services which are highly specialized or technical in nature, when it's necessary to protect against a conflict of interest, if the location is such that state employees are not available, or the services are urgent, temporary or occasional in nature.

    When contracting for personal services, agencies and departments are required to utilize a process of competitive bidding.
  • 1.1.2 Rules Assuring an Equivalent Basis for Cost Comparison.
    Contracting for personal services as part of 5 MRSA 1816-A is permitted to achieve actual cost savings when other conditions are met. However, 5 MRSA 1816-A, 2, I requires that an equivalent basis for cost comparison between state employee and private contractor provision of services must be calculated by rules adopted by the State Purchasing Agent to assure that the private contractor provides the best value. All personal services contracts are subject to this rule.

Section Two. Definitions

Summary: This section defines terms used in the rule. Terms may be found in the text of the rule or the associated forms which require completion by the agency/department and bidders. Statutory definitions relating to the subject matter are contained in 5 MRSA 1825-A. Definitions.

 

Administrative Costs

The charges made by a contractor providing personal services to recruit, select, retain, train, place, and supervise temporary workers; profit; and associated allowed costs, calculated on an annualized basis per FTE.

Classification Specification

Positions so sufficiently alike with respect to duties, responsibilities and authority that the same descriptive title may be used with clarity to designate each such position; the same knowledge, skill, and ability applied; the same process used to recruit, qualify and examine persons for each such position; and the same schedule of pay applied with equity to each such position.

Comparable Position

A state position that completes job duties similar to those being requested under a personal services contract. Job duties of state workers must be those described in a comparable classification specification.

Competitive Bidding Process

CBP

Depending on the circumstances, a process which allows use of either a solicited proposal or quotation for services from all known service providers in an area if the expected annual contract value is less than twenty thousand dollars (<$20,000).

Cost Differentials

In general, the difference between the temporary worker base cost and the state worker base cost. Cost differentials are calculated in the aggregate over the life of the contract.

Equivalent Basis

(see mathematical expression)

The dollar value of an employee's Fully Burdened Employee Cost (FBEC) less health benefits and retirement benefits, calculated on an annualized basis.

Equivalent Basis = FBEC - (health insurance + retirement benefit costs).

Full Time Equivalent

FTE

(see mathematical expression)

A computed statistic representing the number of full-time employees that could have been employed if the reported number of hours worked by part-time, temporary, or intermittent employees had been worked by full-time employees. This statistic is calculated by dividing the hours worked per year by 2080 and is commonly reported as a whole number, decimal or fraction.

Full Time Equivalent = hours worked in 12 months/2080

Fully Burdened Employee Cost

FBEC

The total cost of an employee's salary and benefits including the base salary and all premium adjustments and stipends, state paid amounts for retirement, health, dental, and life insurance, and the amount associated with workers' compensation. This amount is found as the "total cost" on the employee Position Profile Report.

Health Benefit Costs

Annualized dollar value of major medical and dental insurance provided at the expense of the employer, covering the employee only. For state workers, these are the health and dental costs shown on the Position Profile Report.

Job Duties

The functional tasks of a position, expressed in percentage of time per FTE, describing fundamental responsibilities which account for five percent (5%) or more of the work. Job duties for state workers must significantly correlate to or be those listed in the classification specification of the specific position.

Lay-off Notice Cost

(see mathematical expression)

The cost associated with the lay-off notice period. This cost is the sum of total benefits and total salary as taken from the Position Profile Report divided by 52 and multiplied by the number of weeks of the lay-off notice period.

Lay-off Notice Cost = FBEC/52 x Number of Weeks in Lay-off Notice Period.

Lay-off Notice Period

The period of notice required for lay-offs of state workers as specified in collective bargaining agreements.

Position Profile Report

A report from the Budget and Financial Management System produced for each authorized position in state government summarizing the salary and benefit costs of the position.

Request For Proposal

RFP

A formal and structured inquiry published by an agency or department of state government soliciting information by which a selection may be made of a contractor to provide specific services.

Retirement Benefit Costs

Annualized employer contributions to Social Security or the Maine State Retirement System. Retirement benefits for state workers are the sum of normal and unfunded liability and administrative costs on behalf of the Retirement System and health costs taken from the Position Profile Report.

Social Security

Contributions made by the employer pursuant to the Federal Insurance Contributions Act.

State Worker Base Cost

SWBC

(see mathematical expression)

The cost to the state to utilize state employees to provide services. This is calculated as the Fully Burdened Employee Cost (FBEC) less health and retirement benefits plus a supervisory adjustment, unemployment costs, and the lay off notice cost at step 3 of the pay range.

SWBC = FBEC - (health insurance and retirement benefit costs) + supervisory adjustment + unemployment costs + lay off notice cost.

Supervisory Adjustment

The estimated additional cost to the State, calculated on an annualized basis, associated with the need to add supervisory staff to deal with the administration of state workers when temporary workers cannot be hired. It is the product of the number of additional supervisors required and the supervisors' compensation.

Supervisor's Compensation

The sum of the total salary and the value of the total benefits, taken from the Position Profile Report, for the supervisor of the comparable position.

Temporary Worker Base Cost

TWBC

(see mathematical expression)

The annualized cost for the provision of temporary, non-civil service workers. This is calculated as the annual value of the hourly wage less the combined health and retirement benefits plus administrative costs.

TWBC = Hourly Wage Annualized - (health insurance and retirement benefit costs) + administrative costs.

Total Benefits

The total benefits of a specific position, taken from the Position Profile Report.

Total Salary

The total salary of a specific position, taken from the Position Profile Report.

Unemployment Costs

The arithmetic mean of the state's total unemployment costs over the preceding five years, or years for which data are available, expressed as the product of a percentage of the base cost and the state worker base salary over a 26 week period.

Unemployment Costs = (( S State Unemployment Cost/ S State Payroll) n1..n5 /n) * Annual Equivalent Cost * 0.5) The sum of State Unemployment Costs divided by the sum of State Payroll Costs for up to 5 years multiplied by the Annual Equivalent Cost times 0.5.

 

Part Two. Construction of the Rule

Section One. Creating an Equal Basis

Summary: This section discusses the issues with respect to the creation of an equivalent basis for considering personal services proposals.

  • 2.1.1 Recognizing the Need to Create an Equivalent Basis for Comparison.
    Personal services' contracting is permitted by statute when certain conditions are met. Among the provisions listed is one to assure "...an equivalent basis for comparison between state employee and private contractor provision of services..." in rules adopted by the State Purchasing Agent. The intent of the rule is then to create an equal basis for the comparison of proposals.
  • 2.1.2 Satisfying the Need to Create an Equivalent Basis for Comparison.
    It is the intent to consider cost as one of the factors in a decision. Agencies and departments are faced with the dilemma of considering unequal health and retirement benefit programs and any associated expense. A challenge is to determine the value of the associated program expenses for all parties to the bid and, effectively, consider the state as one of the bidders. Equality can be introduced by removing health and retirement benefit costs from the cost consideration for all parties, including the state, to the bid.
  • 2.1.3 Other Costs.
    There are also other costs dealing with either the provision of service by contractors or state employees. These are typically overhead and profit and a supervisory adjustment, unemployment costs, and layoff notice costs. These costs are more consistent in their content and intent, and would be identified , and be part of the comparison protocol.
  • 2.1.4 Supervisory Adjustment.
    The table lists the number of additional Full Time Equivalent supervisors involved with personnel administration required for the proposed numbers of workers. The number of additional supervisory administrators required is for the full complement of additional state employees and would be prorated to reflect the actual number of positions. Note: The values in column two, Numbers of Additional Supervisory Administrators Required, may vary among agencies and departments.

Table 1.

Number of FTE Administrators per Additional FTE Employees

Number of Additional State Employees in FTEs

Number of Additional Supervisory Administrators Required

0-6

0

7-12

0.5

13-18

1

19-24

1.5

25-30

2

31-36

2.5

  • 2.1.5 Providing Information to Allow the Comparison.
    As part of the Competitive Bidding Process, CBP, submission to the Division of Purchases, the Agency or Department would be required to provide certain information from each of the bidders as well as the Agency or Department on forms stipulated for use by the Division of Purchases. Any proposal received that does not have the required information must be rejected as non-responsive to the CBP and eliminated from consideration.

Section Two. Responsibilities

Summary: This section outlines the responsibilities of the Agency or Department and the bidders when preparing requests and submitting proposals which would result in a contract for personal services.

  • 2.2.1 Responsibilities of the Agency or Department.
    The Agency or Department desiring to become involved in the CBP seeking a personal services contract shall prepare a report on forms stipulated for use by the Division of Purchases and submit the material to the Director, Division of Purchases with the CBP to the Division for approval. The report shall include, but not be limited to:
    • a projection of all job duties being sought, summed in hours by job duty and rounded to the nearest whole hour;
    • the FTEs for each job duty;
    • the comparable position for the job duties; and,
    • the state worker base cost for each comparable position.

    No CBP submission shall be released if the Director finds this report to be inadequate, incorrect or inconsistent with the personal services requested in the associated CBP.
  • 2.2.2 Responsibilities of the Bidder.
    The Director, Division of Purchases, shall develop standard language for CBPs that describe the information required of bidders to allow calculation of cost differentials. This shall include, but not limited to, the identification of the temporary worker base cost for each position proposed. The Director may require that the information required to calculate cost differentials be submitted using a standard form. Proposals that do not provide the information required must be rejected as non-responsive to the CBP and be eliminated from consideration.

Part Three. Application and Forms

Section One. Applying the Provisions of the Rule When Making the Selection

Summary: This section requires the use of a standard calculation to determine the best value to the State of Maine and suggests standard language to be included in the request for proposal document.

  • 3.1.1 Including Standard Language and Demonstrating Best Value.
    Agencies or Departments desiring to become involved in a CBP seeking a personal services contract shall include standard language and a calculation, both referenced below, in making a selection. The calculation must be provided to the Division of Purchases for consideration by the State Purchases Review Committee. No selection will be approved without this information.

    For each position the agency must demonstrate that the Temporary Worker Base Cost [TWBC] multiplied by the number of FTEs is less than the State Worker Base Cost [SWBC] multiplied by the number of FTEs in order to allow consideration of that bidder's proposal. Should the calculation result in the SWBC being less than the TWBC, there would be no further consideration of that bidder's proposal.
  • 3.1.2 Standard Language
    In each proposal issued, the Agency or Department must include the following standard language approved by the Division of Purchases.

    Maine law and rules require a comparison to determine if selecting the private contractor provides the best value to the State Of Maine . The Division of Purchases has reviewed the data collection forms and the proposed assessment method and considers these to be compliant with statute and rule.

Section Two. Applicable Forms

Summary: This section outlines the information required to be collected and suggests a format for the collection, presentation, and analysis of the information.

  • 3.2.1 Bidder Information
    A suggested format for use by bidders providing submissions for personal services is shown below as a Bidder Position Cost Submission. NOTE: A distinctive font has been used to better present the data to be entered by the Agency/Department and the Bidder on the form. The position(s) would be identified by the Agency or Department and shown in column titled, "Position Name," together with the Annualized Hours for which the services of the position(s) are required (column 2). To allow a proper comparison to the State Employee data, this value would be "2080." Bidders would be required to provide the Hourly Wage, the Annualized Value of Health and Retirement Benefit Costs for the position(s), and the Annualized Prorated Share of Administrative Costs for the position(s). The resulting value(s) for the " Temporary Worker Base Cost TWBC " for the position(s) would be computed and entered into the table.

Name of Bidder

1

2

3

4

5

 

Position Name

Hourly Wage & Value of Benefits

Annualized Hours

Hourly Wage Annualized

(1 x 2)

Value of Health & Retirement Benefits (Annualized)

Prorated Share of Administrative Costs (Annualized)

TWBC

(3 - 4 + 5)

.. position 1

 

2080

 

 

 

 

.. position 2

 

2080

 

 

 

 

The actual Bidder Position Cost Submission for use by bidders responding to proposals is found on the following page and is available in a paper or electronic form.

State of Maine

Enter Bidder's Name in the Cell Below

 

Bidder Position Cost Submission

Show the Bidder's Name in the box at the upper right. It's possible to enter data which will calculate the Temporary Worker Base Cost for up to two positions by making entries in each of the tables below. See the instructions at the top of each table concerning the detailed entries required. Sheet access is limited; most cells are "write protected."

Instructions: Make numerical entries as dollars per hour to the right of (1), (4), and (6) in the table below and type of name of the position replacing the text "Enter the Name of the Position in this Cell @ (8) ." Other cells are "write protected."

Element

Amount

Explanatory Notes for Various Entries and Position Name

1. Wage and Value of All Benefits Expressed as an Hourly Rate

$0.00

Enter the Hourly Wage and the Value of All Benefits paid to and on behalf of the Employee including FICA, Insurance, and Stipends.

2. Annualized Hours

2080

Enter 2080 for one Full Time Equivalent.

3. Annual Value of Wages & Benefits paid to Employee

$0.00

The cell formula calculates the Annual Value of Wages and Benefits paid to the Employee; otherwise it's the product of the values in (1) and (2) of the middle column.

4. Hourly Rate of Benefits paid to the Employee

$0.00

Calculate and enter the Hourly Rate for Benefits paid to the employee.

5. Annual Value of Benefits paid to Employee

$0.00

The cell formula calculates the Annual Value of Benefits paid to the Employee; otherwise it's the product of the values in (4) and (2) of the middle column.

6. Hourly Rate of Prorated Share of Administrative Costs

$0.00

Calculate and enter the Hourly Rate of the Prorated Share of Administrative Costs.

7. Annual Value of Prorated Share of Administrative Costs

$0.00

The cell formula calculates the Annual Value of the Prorated Share of Administrative Costs; otherwise it's the product of the values in (6) and (2) of the middle column.

8. Temporary Worker Base Cost for the position named at the right.

$0.00

Enter the Name of the Position in this Cell

Using the values in the middle column, begin with (3), deduct the value of (5) and add the value in (7) to calculate the Temporary Worker Base Cost for this position.

Instructions: Make numerical entries as dollars per hour to the right of (1), (4), and (6) in the table below and type of name of the position replacing the text "Enter the Name of the Position in this Cell @ (8) ." Other cells are "write protected."

Element

Amount

Explanatory Notes for Various Entries and Position Name

1. Wage and Value of All Benefits Expressed as an Hourly Rate.

$0.00

Enter the Hourly Wage and the Value of All Benefits paid to and on behalf of the Employee including FICA, Insurance, and Stipends.

2. Annualized Hours

2080

Enter 2080 for one Full Time Equivalent.

3. Annual Value of Wages & Benefits paid to Employee

$0.00

The cell formula calculates the Annual Value of Wages and Benefits paid to the Employee; otherwise it's the product of the values in (1) and (2) of the middle column.

4. Hourly Rate of Benefits paid to the Employee.

$0.00

Calculate and enter the Hourly Rate for Benefits paid to the employee.

5. Annual Value of Benefits paid to Employee

$0.00

The cell formula calculates the Annual Value of Benefits paid to the Employee; otherwise it's the product of the values in (4) and (2) of the middle column.

6. Hourly Rate of Prorated Share of Administrative Costs.

$0.00

Calculate and enter the Hourly Rate of the Prorated Share of Administrative Costs.

7. Annual Value of Prorated Share of Administrative Costs

$0.00

The cell formula calculates the Annual Value of the Prorated Share of Administrative Costs; otherwise it's the product of the values in (6) and (2) of the middle column.

8. Temporary Worker Base Cost for the position named at the right.

$0.00

Enter the Name of the Position in this Cell

Using the values in the middle column, begin with (3), deduct the value of (5) and add the value in (7) to calculate the Temporary Worker Base Cost for this position.

  • 3.2.2 Agency or Department Information
    The format for use by Agencies and Departments when initiating proposals for personal services is shown below.

    A form must be completed for the position(s) for which personal services are requested, identifying the job duty descriptions and projecting the annual hours by duty. The form is available in a spreadsheet format with cell formulas provided to aid completion.

State of Maine

 

State Worker Base Cost Development Worksheet and Bid Comparison

 

Part One. Identifying Job Duties and Projected Annual Hours

 

Instructions: Show the agency name in the space provided. The Projected Job Duty Descriptions and percentage of time associated with each should be for a position which would be named below. That State Equivalent Classification Name and Total Project Annual Hours must be entered on the Bidders' Proposal Form.

Agency Name

 

 

 

enter the Agency Name

 

Show Projected Job Duty Descriptions Below (Make up to 6 entries with Corresponding Estimated Annual Hours per Job Duty )

Estimated Annual Hours

1 >

 

 

2 >

 

 

3 >

 

 

4 >

 

 

5 >

 

 

6 >

 

 

Position Classification Name

Number

0.00

Make entries in all cells with a distinctive blue colored type face.

Enter the Position Name and Number Above for the Duties Described. Total Projected Annual Hours will be summed and should be the basis for the bidder proposal.

Total Projected Annual Hours

Part Two. Developing the State Worker Base Cost for the Position

This section of the form allows development of the State Worker Base Cost for the position named above. Make entries to the right of the text on lines 1, 2, 3, 6, 7 and 8. The values in boxes 4 , 9, 10 and 11 will be entered as a result of cell formulas in the sheet.

1

For the Position Named Above, enter the Fully Burdened Employee Cost at the right . . .

$0.00

 

2

Enter the cost of all Health Insurance at the right . . .

$0.00

 

3

Enter the costs associated with Retirement at the right . . .

$0.00

 

4

Costs of all Health Insurance and Retirement are summed and appear at the right . . .

$0.00

5

The value on line 4 is deducted from the Fully Burdened Employee Cost on line 1

$0.00

6

Show the number of Supervisor FTE's at the right

0.00

 

The percentage for unemployment costs is an average of the last five years of state experience with the payment carried for 26 weeks. The Layoff Notice Cost is based on the Fully Burdened Employee Cost.

7

Show the number of Employee FTE's supervised at the right

0.00

 

8

Show the Supervisor's Compensation at the right . . .

$0.00

 

9

Divide Supervisor by Employee FTE's, then multiply by Compensation & show at the right .

$0.00

10

Enter the Unemployment Costs, calculated elsewhere, in the space at the right . . .

$0.00

0.16%

Show the State Percentage at the left

11

Enter the Layoff Notice Cost, calculated elsewhere, in the space at the right . . .

$0.00

2

Show No. of Weeks in Layoff Notice Period

12

Sum the values on lines 5, 9, 10, and 11 and show the result at the right . . .

$0.00

 

 

This value is the State Worker Base Cost

 

Part Three. Comparison with Bidder's Amount for this Position

 

For the bidders participating in the proposal and answering with forms and data, show the name(s) and the associated amount(s) for this position only. The values should be compared to the amount shown on line 12 in Part Two in order to have an indication of the "best value" calculation required in statute.

13a

Enter the Bidder's Name and Amount for this Position at right

Name

TWBC Amount

 

13b

Enter the Bidder's Name and Amount for this Position at right

Name

TWBC Amount

13c

Enter the Bidder's Name and Amount for this Position at right

Name

TWBC Amount

13d

Enter the Bidder's Name and Amount for this Position at right

Name

TWBC Amount

13e

Enter the Bidder's Name and Amount for this Position at right

Name

TWBC Amount

13f

Enter the Bidder's Name and Amount for this Position at right

Name

TWBC Amount

  • 3.2.3 Advice to Agencies/Departments and Bidders.
    The two forms described above are intended to allow determination of "Best Value." Any RFP issued would require submission of the usual and customary sheets and schedules required by the Division of Purchases to describe the actual scope of services for which the proposal is describing.

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