February 27, 2003
TO: Department Directors and Autonomous Agency Heads
FROM: Governor Jennifer M. Granholm
SUBJECT: Restrictions on State Contracting
While this administration is firmly committed to preserving the state’s economic resources and regularly examining the state’s assets and expenditures, the necessity for fiscal responsibility is particularly acute now, due to the state’s budget crisis. Current budgetary conditions warrant an examination of the state’s contractual expenditures for goods and services. Accordingly, I direct:
I. IDENTIFICATION, REPORTING OF, AND MORATORIUM ON NON-ESSENTIAL CONTRACTS FOR SERVICES
A. Within 30 days of the issuance of this Directive, department directors shall identify all contracts for services within their departments and within autonomous agencies located in their departments, which provide for any of the following:
1. Public relations.
2. Conference organization.
3. Public opinion research, surveys, or polling.
4. Lobbying.
5. Promotion or marketing.
6. Personal services for any individual employed within the Executive Branch during the six (6) month period beginning on July 1, 2002 and ending on December 31, 2002.
7. Personal services without competitive bidding.
B. For each contract identified under this section, department directors shall provide the dollar value, any unexpended balances as of December 31, 2002, the beginning date, and the ending date. Department directors shall, according to a schedule and criteria to be developed by the Director of the Department of Management and Budget, determine the necessity for the continuation of each contract, and provide detailed justification for the continuation of the contract. If, in the opinion of the Director of the Department of Management and Budget, clear and convincing justification is not supplied, the contract shall be terminated as soon as practicable by the appropriate department director or agency head upon notification from the Director of the Department of Management and Budget.
C. From the effective date of this Directive, departments and autonomous agencies shall not enter into contracts for any of the following:
1. Public relations.
2. Conference organization.
3. Public opinion research, surveys, or polling.
4. Lobbying.
5. Promotion or marketing.
D. Exceptions to the prohibitions of Paragraph C may be approved by a department director or agency head for compelling and necessary circumstances, with the written concurrence of the State Budget Director.
E. Departments and autonomous agencies shall not request or approve any contract for personal services when the person seeking to contract with the state is employed within state government.
II. IDENTIFICATION, REPORTING OF, AND MORATORIUM ON OTHER NON-ESSENTIAL CONTRACTS
A. Within 60 days of the issuance of this Executive Directive, department directors shall identify all other contracts not identified in Section I within their departments and within autonomous agencies located in their departments. For each contract identified under this section, department directors shall provide the dollar value, any unexpended balances as of December 31, 2002, the beginning date, and the ending date. When contracts are repetitive or duplicative, the department director may identify such contracts by category or type rather than by individual contract. Department directors shall, according to a schedule and criteria to be developed by the Director of the Department of Management and Budget, determine the necessity for the continuation of each contract, and provide detailed justification for the continuation of the contract. If, in the opinion of the Director of the Department of Management and Budget, clear and convincing justification is not supplied, the contract shall be terminated as soon as practicable by the appropriate department director or agency head upon notification from the Director of the Department of Management and Budget.
B. Exceptions to the prohibitions of Paragraph A may be approved by a department director or agency head for compelling and necessary circumstances, with the written concurrence of the State Budget Director.
III. REDUCTION IN CONTRACTUAL EXPENDITURES
A. Within 90 days of the issuance of this Executive Directive each department director and autonomous agency head shall submit a plan satisfactory to the State Budget Director and the Director of the Department of Management and Budget to reduce the contractual expenditures of the department or agency by an annualized rate of at least 7%. Department directors and agency heads shall implement the reduction plan upon approval by the State Budget Director and the Director of the Department of Management and Budget.
B. Options for reducing contractual expenditures include, but are not limited to all of the following:
1. Negotiated reductions in contract pricing.
2. Negotiated discounts in exchange for prompt payment by the State of Michigan.
3. Department- or agency-initiated freezes for non-critical, optional use contracts.
4. Negotiated reductions in pricing with vendors with excellent performance in exchange for contract extensions.
5. Termination of underutilized contracts, such as those in place for more than one year but not utilized in the current fiscal year.
IV. TASK FORCE ON STATE CONTRACTS AND PROCUREMENT
A. A task force is created on state contracts and purchasing procedures consisting of the Director of the Department of Management and Budget, who shall act as chairperson, the State Treasurer, the State Budget Director, the Governor’s Chief Operating Officer, and the Governor’s Legal Counsel. The task force may request the participation as members of the State Personnel Director, the Auditor General, and the Attorney General. Task force members may designate alternates, but the report and recommendations of the task force, which shall be submitted to the Governor within 180 days of the issuance of this Executive Directive, shall be the responsibility of the task force members themselves. The task force shall provide recommendations for improving the state’s contracting and purchasing process, simplifying its operation, eliminating any abuses, reducing contractual expenditures, and shall make recommendations, supported by implementation steps on all of the following:
1. Uniform standards for all state departments establishing adequate administrative and budgetary controls over contracts, including all of the following:
a. The extent to which contract approval authority should be delegated to and within the departments or centralized within the Department of Management and Budget.
b. Uniform and mandatory language for inclusion in contracts, including provisions for payment procedures and cancellation or termination clauses.
c. Standards for pre-qualification of bidders.
2. Procedures to implement Executive Order 2003-1.
3. Recommendation of a process to ensure that all new procurement initiatives have been reviewed by a department director or agency head and certified as a mission-critical need within department or agency budget targets established by the State Budget Director prior to submission to the Department of Management and Budget Office of Acquisition Services.
4. The adequacy of current civil service rules regarding contracting for personal services and procedures to return contractual services to state employees when more efficient.
5. Uniform standards for all departments regarding sole-source procurement, no-bid contracting, and contract amendment or renewal.
6. Properly promulgated rules regarding procurement and purchasing.
7. Requiring state contract managers to disclose their financial interests and relationships.
8. Prohibiting state contract managers from soliciting or receiving campaign contributions from any state vendor.
9. Establishment by the Department of Management and Budget of an on-line, searchable database of state vendor and contract information to increase the transparency of state contractual activities.
V. MISCELLANEOUS
A. Department directors and autonomous agency heads shall ensure that all existing policies and procedures governing contracting and procurement are strictly adhered to and shall be responsible for ensuring that these procedures are followed by personnel directors, contracting officers, other responsible officers and employees within their respective departments and agencies. Department directors and agency heads may delegate the responsibility for review of proposed contracts and purchases. However, each director or agency head remains accountable for the substantive justification for such contracts and purchases.
B. Employees shall report any irregularities or discrepancies involving contracting and procurement as provided in Executive Directive 2003-2. Employees are reminded of their protection under the Whistleblowers Protection Act, 1980 PA 469, MCL 15.361 to 15.369.
C. Department directors and autonomous agency heads shall ensure that neither political considerations nor any element of personal favoritism influences the treatment of requests for or the awarding of contracts.
D. Autonomous agencies shall actively cooperate with department directors in fulfilling the requirements of this Directive.
E. This Directive supercedes Executive Directive 1995-2.
Your cooperation in complying with this Directive is appreciated.
______________________________
Jennifer M. Granholm
Governor
