North Carolina Should Eliminate the Use of Personal Services Contracts in Favor of Using Existing Mechanisms (February 2015)

In order to ensure open competition and transparency, the procurement of goods and services by North Carolina state agencies and institutions is subject to numerous laws, rules, and regulations. The Program Evaluation Division found that agencies and institutions have circumvented state law when procuring personal services and have also compensated contractors at high rates. In addition, Executive Branch agencies have violated state law by not obtaining approval for IT personal services contracts, and the Office of Information Technology Services (OITS) lacks a process to ensure compliance. Personal services contracts are unnecessary because mechanisms with greater oversight already exist. The General Assembly should enact legislation prohibiting the use of personal services contracts; requiring Executive Branch agencies to use these existing mechanisms; and requiring OITS and the Office of State Budget and Management (OSBM) to approve the procurement of IT services from individuals, report on a biennial basis, and conduct compliance reviews.

Final Report

Executive Summary



Relevant Legislation:

  • Session Law 2015-241, Section 26.2 mandates that personal services contracts for executive branch agencies shall be subject to the same requirements and procedures as service contracts; that no information technology personal services contract, nor any contract that provides personnel to perform information technology functions regardless of the cost of the contract, may be established or renewed without written approval from the Department of Information Technology and the Office of State Budget and Management; and that all State agencies that utilize temporary employees to perform work that is not information technology-related shall employ them through the Temporary Solutions Program administered by the Office of State Human Resources.

Agency Actions:

  • OSHR has developed a new Temporary Employment Policy which includes a purpose statement, definitions, roles, responsibilities, and general provisions. The final policy was approved by the State Human Resources Commission on October 6, 2016 with an effective date of November 1, 2016.
  • The transition of all temporary employees to Temporary Solutions is complete for all state agencies with the exception of the Department of Agriculture and Consumer Services and the Department of Natural and Cultural Resources. The transition will be completed in phases to ensure agency-specific business operations are not interrupted.
  • The State Human Resources Director will review all approved exceptions on an annual basis to determine if the exception is still warranted and to ensure that agencies are adhering to the Temporary Employment Policy. To date, 10 exceptions have been granted to eight different agencies.
  • OSHR has developed a new tracking system to capture the employment data of temporary employees provided to state agencies by private staffing companies. State agencies will be required to submit this data to Temporary Solutions on a quarterly basis. The data will be combined with employment data of temporary employees within the BEACON system to identify temporary employment trends within state government.

Press Coverage: