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F I S C A L I M P A C T R E P O R T

SPONSOR Griego

DATE TYPED 1/26/05

HB

SHORT TITLE Attorney General Review of Certain Contracts

SB 207

ANALYST Wilson

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

See Narrative

SOURCES OF INFORMATION

LFC Files

Responses Received From

Attorney Generals Office (AG0)

Corrections Department (CD)

Information Technology Commission (ITC)

SUMMARY

Synopsis of Bill

Senate Bill 207 amends the Procurement Code to impose new requirements on information tech-

nology contracts. It would also require Attorney General’s Office (AGO) review and approval of

most state agency contracts having a cost exceeding $200 thousand.

The bill defines “information technology projects” to generally include the purchase and imple-

mentation of software systems. With regard to contracts for those projects having a cost exceed-

ing $200 thousand, the bill requires the contracting agency to withhold ten percent of the contract

funds from payment until the agency and Chief Information Office (CIO) determine that the

terms of the contract have been satisfied and any software purchased is performing to standards.

Those contracts must also contain a six month warranty period. The warranty must include a cer-

tification that the technology meets industry standards at the time the project commenced.

The bill imposes an additional requirement of “independent verification and validation” reviews

for information technology project contracts over $1 million. The verification must be per-

formed by an organization independent of the development organization. The reviews must be

Senate Bill 207-- Page 2

performed at least on a quarterly basis and provided to the contracting agency the Department of

Finance and Administration (DFA), the CIO, and certain legislative committees. The review

must determine compliance with contract requirements.

The bill also requires Attorney General’s Office review and approval of most state agency con-

tracts having a cost exceeding $200 thousand, including information technology project con-

tracts. Emergency procurements and contracts exempt from the Procurement Code are not sub-

ject to this requirement. This review would include professional services agreements, services

agreements, and construction contracts.

Significant Issues:

For several decades the AGO has independently reviewed state agency professional services con-

tracts having a cost exceeding $200 thousand pursuant to a rule enacted by the DFA. That rule

was recently deleted by DFA. This bill would codify the prior review obligations of the AGO. It

also expands the review obligations beyond professional services agreements and appears to re-

quire AGO review of services contracts and construction contracts too.

Presumably this bill is also intended to address issues which arise during large state agency in-

formation technology projects. Several of those past projects have faced issues of non-

performance, non-compliance with contract specifications, and obsolescence. Those issues have

led to increased costs and non-performing systems. It should be noted that the CIO has the au-

thority under existing state law to review executive agency information technology projects and

plans. NMSA Section 15-1C-7 1978 comp.

FISCAL IMPLICATIONS

The bill requires an independent verification and validation process for information technology

software contracts exceeding $1,000,000. The process must be performed by an organization

independent of the development organization. This may increase the cost to the contracting

agency as well as the reviewing agency.

On the other hand, the CD believes compliance with the provisions of this bill could actually im-

prove the performance of the State’s information technology projects or systems by requiring

better quality systems from the contractors who develop or install them.

ADMINISTRATIVE IMPLICATIONS

The bill imposes new review and approval requirements on the AGO and the CIO. Additional

staff time will be required and contract review and approval might be delayed based upon the

quantity and complexity of contracts. The AGO staff will have to acquire knowledge required to

review complex construction contracts.

TECHNICAL ISSUES

The AGO believes the bill is intended to limit the new review and verification requirements to

contracts entered into by state agencies. This is not clearly stated. It is implied by reference to the

“contracting state agency” in certain portions of the bill. This limitation should be clearly stated

in the definition of “information technology project” in order to avoid the implication that local

Senate Bill 207-- Page 3

government contracts are subject to the new requirements.

DW/rs