-w-r3 ep441 to:40)n 714k kAAiEMORANDUM TO: Doug Brown 70$3 FROM: Don Cavness DATE: September 12, 1979 RE: Use of outside consultants by State departments It has been a widespread practice with State departments for many years to utilize outside consultants for certain services. The consultants are not State employees and are normally paid on a flat fee basis (hourly, daily or monthly) at whatever rate the consultant and the department agree on. The departments are not required to seek bids or process these contracts through any other agency except as noted below. The Legislature passed a bill in 1977 requiring departments to advertise in advance in the Texas Register if a consultant contract is to exceed $10,000. The bill was amended in the Board of Control Act this year to require advance notice to Legislative Budget Board and the Governor's Budget Office also on contracts of $10,000 or more. The limit applies to services by any one person in any one year. The Act excludes professional services by attorneys, engineers, architects, physi- cians, dentists, actuaries or investment counselors. A rider was adopted in the Appropriations Bill this year to require an advance finding of need by the Governor for contracts of $10,000 or more. There is no requirement for bidding or any advance notice on contracts under $10,000. As you know, some departments have retained former employees as consultants (sometimes immediately after their retirement) for sizeable sums of money. I recommend: 1. We get a report from B.P.O. or the L.B.B. on use of consultants in the past two years showing both number of contracts and dollar volume. B.P.O. can survey State departments, colleges and universities for this information. 2. We draft a bill prohibiting a State department, college or university from paying a consultant fee to a former employee of the State for two years following termination or retirement of the employee unless approved in advance by the Governor. The bill could be part of the legislative program of the Governor for the next regular session. There is no restriction at this time regarding former employees, and this is a situation that is wide open to abuse. This would not prohibit the use of knowledgeable or experienced people, hut it would require justification to a responsible office outside the using agency. If the report from B.P.O. justifies it, such a bill could also require competitive bidding for services under $10,000 per year and reporting of all expenditures for consultant services rather than just those over $10,000. A bill of this nature could put an end to considerable abuse.