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SJC-12126
SERVICE EMPLOYEES INTERNATIONAL UNION, LOCAL 509, & others1 vs.
AUDITOR OF THE COMMONWEALTH & others.2
Suffolk. September 6, 2016. - December 9, 2016.
Present: Gants, C.J., Botsford, Lenk, Hines, Gaziano, Lowy, &
Budd, JJ.
Privatization Act. Auditor. Commissioner of Mental Health.
Public Welfare, Department of Health and Human Services.
Mental Health. Practice, Civil, Action in nature of
certiorari.
Civil action commenced in the Supreme Judicial Court for
the county of Suffolk on April 8, 2016.
The case was reported by Spina, J.
Ian O. Russell (Katherine D. Shea & James F. Lemond with
him) for the plaintiffs.
Bryan F. Bertram, Assistant Attorney General (Daniel J.
Hammond, Assistant Attorney General, with him) for the
defendants.
1
Massachusetts Nurses Association, and American Federation
of State, County and Municipal Employees Council 93.
2
Department of Mental Health, and Executive Office of
Health and Human Services (EOHHS).
2
LENK, J. The plaintiffs, Service Employees International
Union, Local 509 (SEIU), the Massachusetts Nurses Association,
and the American Federation of State, County and Municipal
Employees, Council 93, challenge a decision by the Auditor of
the Commonwealth approving a proposed privatization contract
pursuant to G. L. c. 7, §§ 52-55 (Pacheco Law). The Pacheco Law
establishes "[p]rocedures that agencies must follow when
beginning the bidding process for and entering into a
privatization contract." Massachusetts Bay Transp. Auth. v.
Auditor of the Commonwealth, 430 Mass. 783, 786 (2000) (MBTA).
The Auditor of the Commonwealth must review all privatization
proposals to determine if they comply with the Pacheco Law. Id.
In January, 2016, the Department of Mental Health (DMH)
submitted a proposal to the Auditor that would privatize certain
of its State-run mental health services. Under the terms of the
proposal, the Massachusetts Behavioral Health Partnership
(MBHP), a privately owned State-wide mental health provider,
would take over from DMH the provision of mental health services
in the Southeast region of Massachusetts. In March, 2016, the
Auditor issued a written decision concluding that DMH's
privatization proposal met the requirements of the Pacheco Law,
specifically, that the privatization was procured properly, that
it would not result in a net cost to the Commonwealth, and that
it would not cause a decline in the quality of mental health
3
services provided in the Southeast region. The plaintiffs then
filed a petition in the nature of certiorari in the county
court, seeking review of the Auditor's decision. A single
justice reserved and reported the matter to the full court.
We conclude that the Auditor did not abuse her discretion
in determining that DMH's privatization proposal met the
requirements of the Pacheco Law. Accordingly, we affirm the
Auditor's decision.
1. Background. DMH administers mental health services to
low and moderate income residents of the Commonwealth through
the "MassHealth" program.3 The provision of these services is
divided into five geographic regions within the Commonwealth,
each containing several emergency service programs (ESPs):
Metro Boston, Western Massachusetts, Central Massachusetts,
Southeast and Northeast-Suburban.4 In each region, the ESPs
provide twenty-four hour emergency mental health services to
MassHealth members, uninsured individuals, and others requiring
mental health crisis intervention. Prior to the effective date
of the Pacheco Law in 1993, DMH contracted with private
3
DMH is an agency within EOHHS. For clarity, we will refer
to DMH as the contracting party throughout the opinion, even
though EOHHS simultaneously played a role in the contracting
process.
4
The Southeast region encompasses Brockton, Cape Cod and
the Islands, Fall River, and Taunton/Attleboro.
4
contractors to provide ESP services throughout Massachusetts,5
with the exception of the Southeast region.6
DMH entered into the most recent contract concerning the
provision of ESP services on July 1, 2012. After a competitive
procurement process, DMH awarded a five-year contract7 to MBHP
to manage all of the ESPs in the Commonwealth except those in
the Southeast region.8 It is undisputed that the 2012 contract
was not subject to the requirements of the Pacheco Law because
the services awarded to MBHP were already privately operated.
5
Mental Health Management of America, a private company,
apparently began to provide mental health services to mentally
ill patients covered by Medicaid in 1992. See Weld to Privatize
Acute Care for Uninsured Mentally Ill, Boston Globe, Jan. 25,
1995, at 1 ("Since 1992, Mental Health Management of America
. . . has been responsible for providing acute care to mentally
ill patients on Medicaid"); The Massachusetts Behavioral Health
Partnership (MBHP) took over the provision of such services from
Mental Health Management of America in 1996. See State Chooses
New Firm to Provide Managed Care For Mentally Ill, Boston
Herald, Jan. 20, 1996, at 6 ("[MBHP] will provide mental health
and substance abuse services to 400,000 Medicaid clients as well
as 30,000 residents who are covered directly by [DMH]").
6
During that period, DMH provided emergency service program
(ESP) services in the Southeast region directly through its own
employees.
7
The contract required MBHP to procure contracts with ESP
providers to deliver "direct care for behavioral-health crises
and emergency services to subscribers to ['MassHealth'],
subscribers to private health insurers, or the uninsured."
8
In procuring the 2012 contract, DMH issued a blanket
request for responses (RFR) seeking a vendor to provide various
medical services in accordance with the provisions of 801 Code
Mass. Regs. §§ 21.00 (2003) and 801 Code Mass. Regs. § 21.06
(1997), which mandate a competitive procurement process for
agency contracts.
5
Under the terms of the contract, DMH reserved the right to amend
it "to implement new initiatives or to modify initiatives."
In 2015, DMH amended its 2012 contract with MBHP in an
effort to privatize ESP services in the Southeast region.
Pursuant to the terms of the amended contract (2015 amendment),
MBHP would take over management of the remaining State-run ESP
services in that region. Toward that end, MBHP was required to
"contract with one locally based provider to administer the ESP
for each catchment area,"9 issue a "request for responses (RFR)"
to procure ESP services for the Southeast region and "select
winning bidders" to provide services in accordance with a set of
guidelines established by DMH. DMH created the criteria for
selection of the winning bids and retained final approval
authority over the selection of the winning bidders. After
seeking interested bidders, MBHP ultimately recommended two
organizations to provide ESP services in the Southeast region.
In accordance with its obligations under the Pacheco Law,
in January, 2016, DMH provided written notice and certification
to the Auditor of its privatization proposal and a comprehensive
analysis of how the proposal comported with the Pacheco Law.10
9
A "catchment area" is a geographical term used by DMH to
divide the Commonwealth into different divisions.
10
The Pacheco Law requires that any agency that wishes to
enter into a privatization contract must, "in consultation with
the executive office for administration and finance, first
6
The submission included a detailed analysis of the financial
benefits of privatization,11 the structure of services that the
private ESP providers would deliver, and a model contract
between MBHP and each private ESP provider in the Southeast
region.12 Shortly thereafter, SEIU submitted a series of
objections to the Auditor, pursuant to provisions in the Pacheco
Law, challenging a number of aspects of the privatization
proposal.
On March 30, 2016, the Auditor issued her "Independent
State Auditor's Determination on the Department of Mental
Health's Proposal to Privatize Its Southeast Emergency Services
Program," approving the privatization proposal. Shortly after
compl[y] with" several requirements. G. L. c. 7, § 54. The
agency head must certify in writing to the Auditor that the
agency solicited "competitive sealed bids for the privatization
contracts," G. L. c. 7, § 54 (1); that the privatization
contract provides a guaranteed minimum wage rate set out in the
statute and the same health insurance benefits for each
previously public position as was provided by the State, G. L.
c. 7, § 54 (2); that the privatization contract results in net
savings compared to "the costs of regular agency employees[]
providing the subject services in the most cost-efficient
manner," G. L. c. 7, § 54 (4); and that the "quality of services
to be provided" will "equal or exceed the quality of services
which could be provided by regular agency employees," G. L.
c. 7, § 54 (7) (ii).
11
DMH's submission noted that privatization would save the
Commonwealth $7,007,864 in its first year, and would provide
similar savings in subsequent years.
12
The sample contract between MBHP and each ESP provider
included a list of metrics by which MBHP would measure the
performance of each provider, and noted that the contract would
be in effect until June 30, 2017.
7
the decision was issued, the plaintiffs filed a petition in the
nature of certiorari, G. L. c. 249, § 4, in the county court.
The parties then jointly asked the single justice to reserve and
report the case to the full court. The single justice did so.13
The plaintiffs maintain that the Auditor's decision was
arbitrary and capricious because DMH failed to seek competitive
bids before entering into the 2015 amendment with MBHP; DMH
improperly delegated the solicitation process of ESP providers
to MBHP; the privatization proposal fails to uphold the minimum
wage and benefits protections of the Pacheco Law; the Auditor
failed to take into account the costs of "bumping" and seniority
rights; and the quality of services provided by MBHP would be
lower than those currently provided by DMH.
2. Discussion. a. Standard of review. In the absence of
a statutory right of appeal, the plaintiffs sought review of the
Auditor's decision by requesting relief in the nature of
certiorari, G. L. c. 249, § 4. "The function of a civil action
in the nature of certiorari . . . is 'to relieve aggrieved
parties from the injustice arising from errors of law committed
in proceedings affecting their justiciable rights when no other
means of relief are open.'" Figgs v. Boston Housing Auth., 469
13
The defendants' attorney represented during argument
before us that DMH has not proceeded with implementation of the
2015 amendment pending the outcome of this litigation.
8
Mass. 354, 361 (2014), quoting Swan v. Justices of the Superior
Court, 222 Mass. 542, 544 (1916).
An action in the nature of certiorari is an appropriate
means by which to challenge the Auditor's determination whether
a privatization contract complies with the Pacheco Law. See
MBTA, 430 Mass. at 790-791. "The legislative history of the
[Pacheco Law] and the law itself express the Legislature's
intent that the Auditor exercise discretion in reviewing the
contract." Id. at 791. In considering a discretionary decision
by an administrative agency, as here, "a reviewing court . . .
is limited to determining whether the decision is legally
erroneous or so devoid of factual support as to be arbitrary and
capricious." MacLaurin v. Holyoke, 475 Mass. 231, 238 (2016).14
In conducting our review, we are mindful that "[a] decision
is . . . arbitrary and capricious [where] there is no ground
which 'reasonable [persons] might deem proper' to support it."
Garrity v. Conservation Comm'n of Hingham, 462 Mass. 779, 792
(2012), quoting T.D.J. Dev. Corp. v. Conservation Comm'n of N.
Andover, 36 Mass. App. Ct. 124, 128 (1994).
b. Procurement process. We first address the plaintiffs'
argument that, in contravention of the Pacheco Law, DMH did not
14
The plaintiffs' counsel acknowledged at argument before
us that the arbitrary and capricious standard of review was
applicable.
9
publicly procure the services covered by the 2015 amendment.15
The 2015 amendment, inter alia, transferred managerial
responsibilities concerning the Southeast region ESPs from DMH
to MBHP and tasked MBHP with procuring private vendors to run
the ESPs. The Auditor's analysis of the privatization
proposal's compliance with the procurement requirements of the
Pacheco Law began with the unremarkable determination that the
privatization contract at issue here constituted a "series or
combination of agreements."16 She then determined that "[i]n a
more complicated privatization proposal such as this, it is
essential that all the agreements are subject to a public
procurement process . . . ." The Auditor went on to construe
the Pacheco Law as requiring that only "[t]he essential
contracts in a series of contracts" must be competitively
procured "at the time of the privatization." "[E]ssential
contracts" are, in this regard, "the contracts that govern the
provision of public services formerly provided by [S]tate
15
Here, the plaintiffs object to the procurement process as
provided by the Pacheco Law, not as set forth in the regulations
established in 801 Code Mass. Regs. § 21:06. Although the
plaintiffs earlier made an objection to the Auditor that the
procurement process in this case did not comport with State
procurement regulations, before us the plaintiffs explicitly
disclaim that objection.
16
Insofar as the language of the statute defines a
"[p]rivatization contract" as "an agreement or combination or
series of agreements," G. L. c. 7, § 53, this determination is
patently reasonable. The plaintiffs do not contend otherwise.
10
employees." Additionally, the Auditor noted that the
2015 amendment was "part" of the 2012 contract, which had been
publicly procured by competitive bidding at its inception,17
because the additional obligations that the amendment placed
upon MBHP were explicitly contemplated in the language of that
contract.
The Auditor then concluded that the agreements between MBHP
and the ESP providers were the only "essential contracts" in the
series or combination of agreements constituting the proposed
privatization contract. Only those contracts had to be procured
under the Pacheco Law at the time of the privatization. Because
MBHP had in fact solicited competitive bids for the ESP
contracts pursuant to its obligations under the 2012 contract as
amended in 2015, the Auditor concluded that the proposed
privatization contract had met the procurement requirements of
the Pacheco Law.
The plaintiffs contend that the Auditor erred in several
respects. They chiefly object to her determination that the
2015 amendment did not constitute an "essential agreement" in
the privatization contract, contending that it was the vehicle
that set in motion the proposed privatization. Accordingly,
they argue that DMH was obligated to publicly procure the
17
The 2012 contract had been subject to a competitive
procurement process under State procurement regulations. See
801 Code Mass. Regs. § 21:06.
11
services covered by the amendment.18 The plaintiffs do not
assert that either the 2012 contract or MBHP's contracts with
ESP providers failed to satisfy the public procurement
requirements of the Pacheco Law. We address each of the
Auditor's conclusions in turn.
The Auditor's determination that only the "essential"
agreements in a privatization contract, the agreements which
"govern the provision of public services formerly provided by
18
While both the Pacheco Law and state procurement
regulations set forth in 801 Code Mass. Regs. §§ 21:00 require
that public agencies solicit competitive bids with reference to
the procurement of services, the Pacheco Law places several
additional requirements on agencies asking to privatize
services. See 801 Code Mass. Regs. § 21:06 ("All acquisitions
of Commodities or Services, or both, must be competitively
procured unless the acquisition qualifies as an exception under
[801 Code Mass. Regs. § 21:05]"); G. L. c. 7, § 54 (1) ("The
[privatizing] agency shall solicit competitive sealed bids for
the privatization contracts based upon [a written statement of
the services to be privatized]"). For example, the Pacheco Law
provides that "[n]o amendment to a privatization contract shall
be valid if it has the purpose or effect of avoiding any
requirement of this section." Id.
Additionally, the Pacheco Law does not contain the broad
list of exempt institutions that are in the procurement
regulations. See 801 Code Mass. Regs. § 21:01 (2) (2003)
(exempting institutions of higher learning, elected offices,
military division, and independent public authorities). The
differences between the State regulations and the procurement
requirements of the Pacheco Law are not without consequence.
For example, in 2015, the Auditor rejected a privatization
proposal from Roxbury Community College on the basis that
although it was exempt from State procurement regulations, it
was still bound by and had not complied with the procurement
requirements of the Pacheco Law. See Letter dated Nov. 17,
2015, at http://www.mass.gov/auditor/docs/privatization/11-17-
15-signed-objection-letter-for-roxbury-community-college.pdf
[https://perma.cc/NB9Q-T88A].
12
[S]tate employees," must be procured publicly by competitive
bidding "at the time of the privatization" is itself reasonable.
See Dowling v. Registrar of Motor Vehicles, 425 Mass. 523, 525
(1997), quoting Massachusetts Med. Soc'y v. Commissioner of
Ins., 402 Mass. 44, 62 (1988) ("Where the [agency's] statutory
interpretation is reasonable . . . the court should not supplant
[its] judgment"). The statutory language does not speak
directly to whether all or only some parts of a privatization
contract consisting of a series or combination of agreements
must be competitively procured. The Pacheco Law defines a
privatization contract, however, as a contract by which a
private entity "agrees with an agency to provide services . . .
which are substantially similar to and in lieu of, services
theretofore provided, in whole or in part, by regular employees
of an agency." G. L. c. 7, § 53. The Auditor's judgment that
the "essential contracts" are those which actually include the
private providers taking over public services directly aligns
with this definition.
The Auditor's challenged determination that the
2015 amendment does not constitute an "essential agreement" in
the privatization contract that must be publicly procured at the
time of the privatization presents a somewhat closer question.
Her conclusion rests on two grounds. First, she determined that
the 2015 amendment was part of the 2012 contract, which already
13
had been publicly procured. Second, she found that the only
contracts that actually "govern the provision of public services
formerly provided by [S]tate employees" are the contracts
between MBHP and the ESP providers. Hence, in her view, the
2015 amendment did not constitute an "essential" agreement
because it was part of the 2012 contract and did not actually
effectuate the privatization.
The disagreement between the plaintiffs and the Auditor
boils down to whether the 2015 amendment "govern[s] the
provision of public services formerly provided by [S]tate
employees." The Auditor's determination that the
2015 amendment, which provided for the expansion of MBHP's
oversight and solicitation obligations, did not govern the
provision of public services formerly provided by State workers
is not an unreasonable resolution of that question. The
2015 amendment merely extends MBHP's oversight of State ESP
services under the 2012 contract and directs it to solicit the
private providers that will take over the State positions.
Given that the Auditor advances a reasonable interpretation and
application of the procurement requirements of the Pacheco Law,
we cannot conclude that her interpretation, in these
circumstances, was arbitrary and capricious. See Massachusetts
Med. Soc'y v. Commissioner of Ins., 402 Mass. at 62 ("Where [an
14
agency's] statutory interpretation is reasonable . . . the court
should not supplant [its] judgment").19
c. Delegation by DMH. We next address the plaintiffs'
argument that DMH improperly delegated to MBHP the procurement
process for the privatization contract, in violation of the
Pacheco Law. The 2015 amendment charged MBHP with issuing a
"request for responses (RFR)" to procure ESP services for the
Southeast region and "select[ing] winning bidders" to provide
services in accordance with a set of guidelines established by
DMH. The plaintiffs contend that DMH's assignment of these
tasks to MBHP contravened the requirements of the Pacheco Law.
The Pacheco Law provides, in relevant part, that an "agency"
intending to enter into a privatization contract "shall solicit
competitive sealed bids for the . . . contracts," and then
"publicly designate the bidder to which it proposes to award the
contract." G. L. c. 7, § 54 (1), (6). An "agency" is defined
as "an executive office, department, division, board,
commission, or other office or officer in the executive branch
of the government of the [C]ommonwealth." G. L. c. 7, § 53.
The plaintiffs contend that the definition of "agency" in the
19
The plaintiffs also argue that the amendment was invalid
in any case because it "had the purpose or effect of avoiding"
the procurement requirements of the Pacheco Law. See G. L.
c. 7, § 54 (1). This argument is unavailing because, as the
Auditor notes and the plaintiffs repeatedly state in their
argument, the 2012 contract was not a privatization contract.
15
Pacheco Law unambiguously required that DMH itself solicit the
bids and publicly designate the winning proposals in its
privatization. By contrast, the Auditor, in approving DMH's
delegation of certain solicitation-related tasks to MBHP,
determined that it was "unreasonable to assume that the
Legislature would only permit an agency to undertake [the tasks
associated with the solicitation process] directly, even when
indirectly undertaking those tasks" would best serve the
purposes of the law as expressed in its preamble.
The Auditor's determination that, in these circumstances,
DMH's assignment of certain tasks to MBHP did not violate the
Pacheco Law is reasonable because DMH retained control over the
solicitation process. Nothing in the statutory text of the
Pacheco Law proscribes an agency from implementing the
solicitation process through an intermediary acting under the
agency's direction. Furthermore, doing so would not contravene
the purpose of the Pacheco Law where, as the Auditor noted in
her decision, the agency "indirectly undertaking those
tasks . . . ensures that the Commonwealth receives high-quality
public services at low cost with due regard for the taxpayers of
the Commonwealth and the needs of public and private workers."
See G. L. c. 7, § 52.
Here, there was ample evidence before the Auditor that DMH
controlled the procedure, criteria, and outcome of the
16
solicitation process. The 2015 amendment provided DMH with
control over how MBHP conducted the solicitation process, the
performance standards that bidders responding to the RFR would
have to meet in order to qualify as an ESP provider, and final
approval rights over the selection of the winning bidders.
Accordingly, the Auditor's determination that DMH's delegation
of solicitation-related tasks to MBHP did not run afoul of the
Pacheco Law was not arbitrary and capricious.
d. Minimum wage and benefit provisions. We next turn to
the plaintiffs' argument that the model contract between MBHP
and the ESP providers included in the privatization proposal
fails to require compliance with the minimum wage and benefit
protections of the Pacheco Law beyond June 30, 2017. Under the
Pacheco Law, "[e]very bid for a privatization contract and every
privatization contract shall include provisions specifically
establishing the wage rate for each such position, which shall
not be less than" "the lesser of step one of the grade or
classification under which the comparable regular agency
employee is paid, or the average private sector wage rate for
said position." G. L. c. 7, § 54 (2). The statute also
mandates that successful bidders provide health insurance
benefits comparable to those previously provided by the
Commonwealth to State employees performing the same services.
Id.
17
The plaintiffs argue that the model contract improperly
terminates these protections at the end of the current contract
period, June 30, 2017. First, they contend that these
protections cannot be terminated as long as the corresponding,
previously State-employed jobs still exist. In the alternative,
the plaintiffs maintain that the guarantee of the wage and
health insurance protections for merely one year in the model
contract constitutes an impermissible end run around the Pacheco
Law.
In considering this issue, the Auditor found that the
Pacheco Law "sets forth no minimum standard for the term of a
privatization contract." She then determined that the test that
she would use in "assessing the legitimacy of the term of a
privatization contract is whether the contract's term has some
rational basis or is designed to avoid the requirements of the
[Pacheco Law]." Applying this standard to DMH's privatization
proposal, she found that "the limited timeframe for the contract
[and therefore for the protections] results from [DMH's]
preference to provide all ESP services under one umbrella
contract with MBHP, or whoever the successful bidder is at the
expiration of the [2012 contract]."
The Auditor concluded that this was a "rational basis" for
the short duration of the ESP contracts and the protections they
provided. During the review period, DMH had written to the
18
Auditor that it intended to extend its then-current contract
with MBHP and would extend these protections under that
contract. As noted in the decision, the Auditor's approval of
the privatization proposal was based in part on that
representation.20 We conclude that there was no abuse of
discretion in the Auditor's reliance on DMH's written
representation that it would comply with her interpretation of
the Pacheco Law as a factor in her decision to approve the
privatization proposal.21
e. Costs of "bumping" and seniority rights. The
plaintiffs maintain that, while the Auditor discussed the
subject of transition costs resulting from the termination of
employees as a result of the proposed privatization, she failed
20
The Auditor stated in her decision that "if the
procurement of a successor agreement to the agreement between
[DMH] and MBHP is not completed by the end of June 2017 and
instead the present agreement is extended until a new contract
is negotiated, the wage and benefit requirements of the [Pacheco
Law] should continue to apply as well until that new contract is
finalized." Elaborating on her view, she added that "[a]ny
amendment at that time that would, in extending the length of
the contract, also affect the wage and benefit protections of
the [Pacheco Law] would be inconsistent with this view."
Finally, she noted that "[i]n a communication with this
office . . . DMH took the same position, and this office's
decision not to object to the privatization proposal is based,
in part, on this assurance."
21
The Auditor did not address the contention that the
protections provided by the Pacheco Law extend in perpetuity as
long as the State jobs they correspond to exist. We, like the
Auditor, do not reach the question of the length of time a
private provider must continue to meet the minimum wage and
benefits requirements of the Pacheco Law.
19
to account for the costs22 stemming from "bumping" and seniority
rights in determining that the privatization would provide the
Commonwealth over-all cost savings.23
DMH provided the Auditor with a calculation of the
potential transition costs incurred as a result of the
privatization, based on the assumption that every DMH employee
affected by the privatization accepted a layoff and received the
maximum unemployment benefits to which the employee was
entitled. The cost of this worst-case scenario was estimated to
be approximately $2.2 million. Taking those transition costs
into account, the Auditor determined that the reductions in cost
from the proposed privatization of the Southeast region would
result in savings of approximately $7 million over the first
year of privatization.
The plaintiffs contend that, although the Auditor took
notice of these cost data, she erred by not taking into account
22
The Pacheco Law mandates that the cost of a privatization
contract must "be less than the estimated cost" of the "costs of
regular agency employees[] providing the subject services" "in
the most cost-efficient manner." See G. L. c. 7, § 54 (4), (7)
(iii).
23
"Bumping" is a process by which employees with greater
seniority whose jobs are being eliminated or who face being laid
off may displace less senior employees. See, e.g., Andrews v.
Civil Serv. Comm'n, 446 Mass. 611, 619 (2006); Boston v.
Salaried Employees of N. Am., Local 5198, 77 Mass. App. Ct. 785,
786 (2010); Herlihy v. Civil Serv. Comm'n, 44 Mass. App. Ct.
835, 835 (1998). For example, a senior DMH employee whose
position was terminated as part of the privatization could opt
to take the comparable job of a less senior employee.
20
the specific costs of retraining transferred employees who moved
into different jobs as a result of "bumping." The plaintiffs
have not, however, made a showing that those retraining costs
could equal or outweigh the $7 million in savings that the
Auditor found would stem from the privatization, nor do they
otherwise contest the Auditor's conclusion concerning the
reduction in costs the privatization would afford the
Commonwealth. Hence, even if the plaintiffs' contention that
the Auditor did not take into account costs associated with
"bumping" and seniority rights is correct, her conclusion that
the privatization would provide savings to the Commonwealth in
accordance with the requirements of the Pacheco Law would still
be accurate. We therefore discern no basis on which to conclude
that her judgment on this issue was arbitrary and capricious.
f. Quality of ESP services following privatization. The
plaintiffs' final objection concerns the Auditor's determination
that there will be no reduction in the quality of services as a
result of the proposed privatization. The Pacheco Law requires
an agency advancing a privatization proposal to demonstrate to
the Auditor that "the quality of the services to be provided by
the designated bidder is likely to . . . equal or exceed the
quality of services which could be provided by regular agency
employees," G. L. c. 7, § 54 (7) (ii), "providing the subject
21
services in the most cost-efficient manner," G. L. c. 7,
§ 54 (4).
We review the Auditor's conclusions as to the quality of
services under the privatization proposal to determine if they
rest on at least one "ground which reasonable [persons] might
deem proper to support it" (quotation and citation omitted).
See Garrity v. Conservation Comm'n of Hingham, 462 Mass. at 792.
The plaintiffs argue that the Auditor erred in four respects in
determining that the quality of services would not decline due
to the proposed privatization. They contend that the proposed
privatization will fail to provide services to patients with
commercial health insurance; result in fewer licensed clinicians
serving patients; lead to a harmful reduction in staffing in the
Southeast region; and reduce the hours of staff availability at
community centers in the ESPs. We address each of these
contentions in turn.
The plaintiffs first maintain that, contrary to the
Auditor's findings, the model contract contained in DMH's
submission to the Auditor does not mandate that ESP providers
deliver services to commercially insured individuals. The
Auditor noted in her decision that the model contract explicitly
requires that ESPs must provide services "to individuals . . .
experiencing a behavioral health crisis," and that DMH
represented to her that ESPs would be required to provide
22
service to all individuals, regardless of any insurance
coverage. The Auditor's reliance on the model contract, as
augmented by DMH's representation, was not unreasonable.
The plaintiffs also object that the Auditor's decision does
not adequately address SEIU's arguments that the private ESP
providers will employ more unlicensed clinicians than does DMH,24
and that the proposed privatization will result in a significant
reduction in staffing in the Southeast region. The plaintiffs
contend that both of these occurrences will result in a decline
in the quality of services in the Southeast region as a result
of the privatization. The Auditor's determination addressed
both of these contentions by stating that the model contract
requires ESP providers to meet the same standards of care
currently provided by DMH's State employees.25 Given that the
Auditor relied on the contractual obligations of the ESP
24
According to the Service Employees International Union,
Local 509 (SEIU), and undisputed by DMH, eighty-seven per cent
of DMH clinicians providing ESP services have a professional
license, while only sixty-eight per cent of ESP clinicians
Statewide are licensed.
25
In this regard, the Auditor had data before her that,
although disputed by SEIU, she apparently credited. The data,
submitted to the Auditor by DMH, based on studies by MBHP,
purports to show that private ESP providers across the
Commonwealth have provided equal or better care than the ESPs
operated directly by DMH. The private ESPs which purportedly
performed as well or better than their State counterparts were
subject to similar licensing requirements as the private ESP
providers in the Southeast region would be under the model
contract.
23
providers in addressing plaintiffs' contentions, her judgment in
this instance was reasonable.
Finally, the plaintiffs object to the proposal's reduction
in walk-in services at community centers in the ESPs from the
current twenty-four hour per day staffing levels.26 The Auditor
noted in her decision that the proposed ESP contract guarantees
services to those in psychiatric distress twenty-four hours each
day, seven days per week, regardless of the hours when the
community-based location is staffed,27 and that only 0.63 per
cent of patient encounters in the Southeast region over the
prior year took place at the community centers during a time
when staff would not be present under the terms of the model
contract. She determined that any impact on service would be
"de minimis." This was not unreasonable.
We accordingly conclude that the Auditor's judgment that
the quality of services would not decline as a result of the
proposed privatization was reasonable. See Forsyth Sch. For
Dental Hygienists v. Board of Registration in Dentistry, 404
Mass. 211, 218 (1989) ("[An agency's decision] can be disturbed
26
Under the model contract, community-based locations in
Brockton and Taunton would be open for walk-in services between
8 A.M. and 8 P.M., Monday through Friday, while the locations in
Cape Cod and Fall River would be open between 7 A.M. and 11 P.M.
27
DMH represented to the Auditor during the review process
that ESPs would use mobile service centers to respond to
patients in distress.
24
only if it is based on a legally untenable ground . . . or is
unreasonable . . ." [quotations and citation omitted]).
3. Conclusion. The matter is remanded to the county court
for entry of an order affirming the Auditor's determination that
DMH's 2016 proposal to privatize its southeastern emergency
service programs comports with the requirements of the Pacheco
Law.
So ordered.