Governor Deval Patrick's Budget Recommendation - House 1 Fiscal Year 2010

Governor's Budget Recommendation FY 2010

Statewide Contracts Administrative Fee

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Governor Patrick    FY2010 House 1 Budget Recommendation:
    Policy Brief

    Deval L. Patrick, Governor
    Timothy P. Murray, Lt. Governor


Governor’s Proposal

In light of current fiscal challenges, the Operational Services Division (OSD) has proposed a creative and innovative way to mitigate economic uncertainty in order to provide and maintain their current level of procurement services. The division will charge a 1% administrative fee to all statewide contract vendors based upon their gross sales to Commonwealth public purchasers. The revenues generated will be deposited into the new "Statewide Contract Fund Trust" included in the fiscal year 2010 H.1 emergency bill and will be used, over time, to supplant OSD's General Fund appropriation received through the budget.

Operational Services Division

The Operational Services Division is responsible for establishing statewide contracts and overseeing the public procurement activities of Executive departments. In evaluating how other states' procurement departments are funded, OSD discovered that a similar administrative fee is used by other states and by the General Services Administration (GSA) of the Federal Government, in lieu of General Fund dollars. The goal of the fee and the establishment of the trust is to allow OSD to become a self-funded or "enterprise" agency rather than relying on funding from state appropriated line-items. The revenues will allow OSD to not only support its operating costs, but hopefully invest in initiatives, such as the Affirmative Market Program and Small Business Programs under its purview. The division will also be able to perform audit and oversight to ensurecontract compliance and offer contracts that better serve municipalities.

Currently, procurement offices in other states charge their contractors a fee ranging from .5% to 1% in order to cover a portion or all of their operating costs. OSD's proposal estimates that it will be able to gradually decrease the need for state appropriated funding through the statewide contract procurement and renewal process that could take up to six years to fully implement.

Bar graph and table showing how OSD will be able to transition off the operating budget as it generates more administrative fees dedicated to its operation.

The OSD Statewide Contract Fund Trust will serve the purpose of collecting and implementing the statewide contract fee. In fiscal year 2010, OSD will use funds from the trust in order to hire staff to collect, manage and audit the transactions and to maintain existing procurement staff and services to cities and towns that might otherwise be impacted by budget reductions to OSD's appropriation. In keeping with the Patrick-Murray Administration's commitment to diversity initiatives, OSD is working to ensure that such a fee will not adversely impact the Administration's efforts to recruit and employ diverse businesses onto our statewide contract.

Prepared by the Executive Office for Administration and Finance · Rooms 373 & 272 · State House
For more information contact:
Chantal Mont-Louis (

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