Michigan's Civil Service Rules are Amenable to Outsourcing

Hunter at Civil Service mtg
Robert Hunter, shown above, at a Michigan Civil Service Commission meeting.

Contrary to what one might expect, the laws of the state of Michigan are surprisingly fair and even-handed when it comes to contracting out public services to private contractors.

The state Constitution stipulates that no state executive agency can pay any employee or independent contractor for services without the approval of the Michigan Civil Service Commission. The Constitution further stipulates that almost all employees of state executive agencies must be hired, compensated, promoted, and disciplined according to Civil Service Commission rules.

This means that with regard to contracting out services to private vendors, the Michigan Civil Service Commission calls the shots.

Since Commission rules clearly stipulate that the duties listed above must be dealt with according to merit-not according to political patronage-the legal door is open to the possibility that a private vendor may be best qualified to handle a particular public service.

While state agencies generally provide their services through Michigan's 62,000 career civil service employees, as a member of the Commission I can tell you that the body clearly recognizes that it is not always practical or efficient to use civil service employees.

This is why, in fiscal year 1999-2000, state agencies paid $925 million for contracted services.

State Standards for Contracting with Private Vendors

According to the rules of the Michigan Civil Service Commission, before an agency can use private contractors instead of civil service employees to perform a service, it must obtain permission from the Department of Civil Service.

To obtain such permission, the agency must demonstrate a need that meets one or more of the following standards:

 Standard A. The service needed is temporary, intermittent, or irregular (and, hence, does not lend itself to the use of regularly employed career civil service workers);

 Standard B. The service is so specialized that it is not recognized as normal to civil service, or the state agency cannot attract enough qualified candidates willing to accept a civil service position that would perform the service;

 Standard C. The services involve the use of equipment or materials not reasonably available to the state agency and the cost to obtain the equipment or materials and establish the needed civil service positions would be disproportionate to the contract cost; and

 Standard D. The services can be provided under contract at "substantial savings" to the state (when compared to the cost of using civil service employees).

If the Department of Civil Service gives permission to a state agency to hire a private contractor based on these standards, the agency may then obtain bids from vendors, negotiate the necessary contracts, and make the necessary monetary disbursements to the contract employees or independent contractors.

But for many proposed contracts, an agency must file an individual request with, and receive written permission from, the Department of Civil Service before making any disbursements of state funds. If, in such cases, the agency or a union disagrees with the Department's decision to approve or disapprove the proposed payments, an appeal may be taken to the Civil Service Commission.

In other cases, the Department of Civil Service has identified services that clearly meet one or more of its four standards and therefore preauthorizes agencies to contract out for these. For example, an agency may contract any services up to $5,000 in a fiscal year because such services clearly are temporary and thereby meet Standard A. In addition, agencies can disburse state funds without prior approval for any services for up to 28 days when an emergency occurs.

After an agency has received permission from the Department of Civil Service to contract with a private vendor for a service, the Department does not review or approve the contracts themselves or monitor vendor performance. However, if an agency later makes any payments that violate the limits established by the Department of Civil Service-such as spending more money than the Department authorized-the State Personnel Director may disallow the payments.

The Civil Service Commission has carefully crafted its rules to provide a balance between the use of career civil servants with the use of private contract services, so that taxpayers get the most effective and cost-efficient state services possible.

The Michigan Civil Service rules and regulations are available on-line at www.state.mi.us/mdcs.

Robert P. Hunter, is a former member of the National Labor Relations Board, is director of labor policy at the Mackinac Center for Public Policy and a member of the Michigan Civil Service Commission.