Chapter 296 of the Acts of 1993 -- “the Privatization Law” -- outlines the process that must be followed by agencies and applicable authorities seeking to contract for a service that is presently performed by state or authority employees.  The law applies to contracts that have an aggregate value of $543,442 or more.  The authorities covered by this law are: the MBTA, the Massachusetts Port Authority, the Massachusetts Department of Transportation, and the Woods Hole, Martha’s Vineyard and Nantucket Steamship Authority.

Pursuant to the Privatization Law, a specific process must be followed to demonstrate and certify to the Office of the State Auditor (OSA) that the total cost to perform the service by contract will be less than the in-house cost and at least of equal quality.

The process that the agency must follow includes:

  1. Preparing a detailed written statement of services,
  2. Estimating the most cost-efficient method of providing those services with agency employees,
  3. Selecting a contractor through a competitive bidding process, and
  4. Comparing the in-house cost estimate to the cost of contract performance.

In addition, the agency is responsible for assuring that the private bids and the private contract, if ultimately awarded, contain specific provisions regarding wages, health insurance, the hiring of qualified agency employees, nondiscrimination, and affirmative action. 

It is the responsibility of the OSA to determine independently whether the process followed by the agency meets the requirements of the law.  The OSA has 30 business days from the receipt of all necessary documentation to approve or reject the agency’s certification.

The OSA has recently issued Guidelines for Implementing the Commonwealth’s Privatization Law, as a resource for Commonwealth agencies that are considering privatizing one or more in-house services.

For further information about the Privatization Law, please go to the State Auditor’s Privatization Law Webpage.