Proponents of privatizing all public services love to say how much better, cheaper and more efficient everything is when it's done according to the "free market" (you know, the folks who brought us the spectacular crash of Wall Street and the worst recession this side of the Great Depression). One of their favorite targets in Massachusetts is the "Pacheco-Menard Law," which mandates a cost-benefit analysis by the state auditor for any proposal to privatize a public service. Privatization fans say it prevents privatization and costs taxpayers millions of dollars...but the REAL story shows that the Pacheco Law is good for taxpayers and the people who depend on public services, promotes lots of responsible privatization and encourages efficiency and ethics in public service.

The History

In the early 1990s, then-Gov. William Weld decided to privatize many many of the human services that had been provided by public employees. Gov. Weld laid off thousands of employees. The ones who could take the financial hit were re-hired by the private-sector companies now providing the work, but at 30 percent less pay and drastically reduced health insurance benefits. The quality of care provided decreased as service was disrupted and many workers were forced to find other work. Now, more than a decade later, the human services community remains in crisis. Agencies can't afford to pay workers enough, more than half the workers can't afford their employers' health insurance plans, and the quality of care is still at risk.

State watchdogs and the media documented a pattern of abuse in Gov. Weld's push to privatize many state services. They discovered that private vendors with state contracts used taxpayer money to rent posh vacation villas, buy luxury cars, and pay for lobbying activities. Watchdogs also discovered that there was little or no competition for contracts. Lucrative contracts were being awarded to former administration officials and huge executive salaries were being paid to private vendors. In December 1993, Gov. Weld issued an executive order banning "revolving door" hiring by private contractors of the very state officials who gave them contracts.

What the Pacheco-Menard Law Really Does

In response to the decline in quality of services because of those privatization patronage contracts, the legislature passed a measure designed to assure accountability and affordability in the procurement of state services. The law is often referred to as the "Pacheco-Menard Law," named after its two primary sponsors, Sen. Marc Pacheco and then Rep. Joan Menard (who is now a state senator).

Chapter 296 of the Acts of 1993 outlines the process that state agencies and applicable authorities have to follow when they want to contract out for a service now performed by their employees, when the contract has an aggregate value of $200,000 or more. An agency must prepare a detailed written statement of the service to be contracted, estimate the most cost-efficient method of providing the service with agency employees, select a contractor through a competitive bidding process, and compare the in-house cost to the cost of the private contract. Bidders must maintain comparable labor standards.

The state auditor then reviews the the application to ensure that the cost of the contracted service would be less than the in-house cost and maintain at least equal quality of service. The auditor has 30 days to approve or reject the application. A rejection is final and binding unless withdrawn, based on a revised certificate and subsequent approval by the auditor.

Why Pacheco-Menard Law Is Working for Us All

  • The state auditor's office has approved 75% of privatization proposals submitted. The Pacheco-Menard Law isn't a roadblock to privatization--it's a guardrail to ensure privatization is safe, effective and efficient.
  • Contracts may be awarded to companies if even one cent is saved.
  • Public employees are allowed to submit a bid as if they were a private company. Because of their experience on the front lines, public employees often have innovative ideas for improving services and efficiency. The law allows them to do so on an equal footing with private companies.
  • The law protects employees from cost saving measures affecting wages, health insurance, status and hours. When too many workers get hurt in the "race to the bottom" in wages and benefits, no one wins--except the few fat-cat privateers reaping the profits.
  • The law ensures that the people who depend on public services--many of whom are among our most vulnerable residents--will continue to get high quality care, no matter who provides it.