# State Personnel and Pensions (GSP)

## Title 13. Contractual Employment and Service Contracts in Executive Branch

### Subtitle 1. Contractual Employee Defined

#### Section 13-101

(a) In this title, "contractual employee" means an individual:

  (1) who, under a written agreement, provides temporary personal services to the State for pay;

  (2) who is not employed in a budgeted position; and

  (3) who has an employer-employee relationship with the State in which the State:

    (i) furnishes necessary tools and a place to work;

    (ii) has the right to control and direct the details, means, and results of the performance of the services; and

    (iii) has the right to discharge the individual from employment.

(b) "Contractual employee" does not include an individual who is employed as:

  (1) an employee in the:

    (i) skilled service;

    (ii) professional service;

    (iii) management service; or

    (iv) executive service; or

  (2) an emergency employee.

### Subtitle 2. Contractual Employees Generally

#### Section 13-201

(a) This subtitle applies to all units in the Executive Branch of State government, except a unit with an independent personnel system.

(b) The Secretary may exempt specific types of contractual employees from the certification and other requirements of this subtitle.

#### Section 13-202

(a) Except as otherwise authorized under Sec. 13-201(b) of this subtitle, a unit may not execute or renew a contract for the employment of a contractual employee unless the Secretary issues to the unit a certification that:

  (1) the employment of the contractual employee is for services that cannot be performed by assignment or hiring of any nontemporary employee;

  (2) the rate of pay for the contractual employee is comparable to the rate paid to employees in positions that involve comparable duties, responsibilities, experience, and authority; and

  (3) the services to be performed under the contract encompass functions that:

    (i) are infrequent;

    (ii) are needed for a limited time;

    (iii) are unusual; or

    (iv) need to be implemented quickly and for which there is no reasonable alternative.

(b) The Secretary may issue a certification for any effective period that does not exceed the period of the contract between the unit and the contractual employee.

#### Section 13-203

(a) The Secretary shall adopt guidelines for the recruitment and selection of contractual employees.

(b) These guidelines shall require a contracting unit:

  (1) to make a reasonable effort to publicly solicit applicants for contractual employment;

  (2) to make a reasonable effort to screen and select contractual employees by using methods and criteria that are uniformly applied to all applicants for a particular instance of contractual employment; and

  (3) to use criteria to select contractual employees that:

    (i) are based on the qualifications of the applicant; and

    (ii) conform to subsection (c) of this section.

(c)

  (1) All personnel actions concerning a contractual employee shall be made in accordance with Sec. 2-302 of this article.

  (2) An action may be taken with regard to age, sex, or disability to the extent that age, sex, or disability involves a bona fide occupational qualification.

(d) To the extent feasible, a unit shall conduct the recruitment and selection of contractual employees according to the guidelines adopted under this section.

#### Section 13-204

Except as authorized under Sec. 13-303 of this title, the Secretary may not continue certification for any contractual employee if the Secretary determines that the services performed under the contract:

(1) encompass permanent functions;

(2) have no specific expiration date; and

(3) regularly are performed on a basis that is at least equal to 50% of the work responsibility of a full-time permanent employee.

#### Section 13-205

(a) The Secretary periodically shall audit a sample of instances of contractual employment in the various units to determine whether:

  (1) justification exists in each instance to continue certification for the contractual employee; and

  (2) the guidelines adopted under Sec. 13-203 of this subtitle have been followed.

(b)

  (1) If, as a result of an audit, the Secretary determines that services performed by a contractual employee should be performed by a permanent employee, the Secretary shall:

    (i) refuse to renew the certification for the contractual employee; and

    (ii) recommend that a position for a permanent employee be established.

  (2) If, as a result of an audit, the Secretary determines that a unit has not complied with the guidelines adopted under Sec. 13-203 of this subtitle, the Secretary shall:

    (i) advise the unit of the nature of the noncompliance; and

    (ii) suggest alternate criteria or methods that would have complied with the guidelines.

### Subtitle 3. Transfers of Contractual Employees to Budgeted Positions

#### Section 13-301

This subtitle applies to all units in the Executive Branch of State government, except a unit with an independent personnel system.

#### Section 13-302

If a contractual position is replaced by a budgeted position, a contractual employee in the contractual position may transfer to the budgeted position, if:

(1) the employee meets the minimum qualifications for the budgeted position and has at least 6 continuous months of satisfactory service as of the date on which the replacement occurs;

(2) there is a continuing need for the function to be performed;

(3) the agency can document a competitive hiring process; and

(4) the budgeted position replacing the contractual position was not available at the time the contractual employee was hired.

#### Section 13-303

To enable a contractual employee to participate in any required examination for a budgeted position under this subtitle, the Secretary may certify the continuation of the employee's contract for a maximum period of 1 year after the date on which the budgeted position is created.

#### Section 13-304

(a) A contractual employee who transfers to a budgeted position under this subtitle or who is selected to fill a budgeted position in the State Personnel Management System, without a break in service, in the same principal unit that employs the contractual employee, shall be given credit for service in the contractual position for the purpose of establishing:

  (1) steps in the pay grade applicable to the budgeted position;

  (2) annual leave; and

  (3) seniority rights.

(b) A contractual employee who transfers to a budgeted position under this subtitle or who is selected to fill a budgeted position shall become a member of the Employees' Pension System of the State of Maryland.

#### Section 13-305

This subtitle does not preclude the General Assembly from prohibiting the creation of a budgeted position or the replacement of a contractual position with a budgeted position in the State budget.

### Subtitle 4. Service Contracts

#### Section 13-401

(a) In this subtitle the following words have the meanings indicated.

(b) "Service contract" means a procurement contract for services that:

  (1) will be provided to a unit in the Executive Branch of State government;

  (2) will be performed within a State-operated facility; and

  (3) in the estimation of the procurement officer, will exceed an annual cost of $100,000.

(c)

  (1) Except as provided in paragraph (2) of this subsection, "services" has the meaning stated in Sec. 11-101 of the State Finance and Procurement Article.

  (2) "Services" does not include information technology services and cybersecurity.

(d) "Unit" has the meaning stated in Sec. 11-101 of the State Finance and Procurement Article.

#### Section 13-402

The policy of this State is to use State employees to perform all State functions in State-operated facilities in preference to contracting with the private sector to perform those functions.

#### Section 13-403

(a) A service contract may be entered into only as approved by the Board of Public Works in accordance with this subtitle.

(b) Except as provided in subsection (c) of this section, the Board of Public Works may approve a service contract for a unit only if the Board receives a certification from the Department that:

  (1) the service contract is exempt under Sec. 13-404(b) of this subtitle; or

  (2) the unit has complied with the requirements of Sec. 13-404(c) of this subtitle.

(c) If the General Assembly authorizes or requires that certain services be performed by an independent contractor, the Board of Public Works may approve a service contract for those services without the certification required by subsection (b) of this section.

#### Section 13-404

(a) The Department may certify a service contract to the Board of Public Works as provided in this section.

(b) The Department may certify a service contract as being exempt from the preference stated in Sec. 13-402 of this subtitle if:

  (1) State employees are not available to perform the services;

  (2) a conflict of interest would result if a State employee were to perform the services;

  (3) the nature of the services meets the standards set by the Department for emergency appointments;

  (4) the services are incidental to the purchase or lease of personal property or real property, such as a service agreement that is part of the purchase or rental of computers or office equipment; or

  (5) a clear need exists to obtain an unbiased finding or opinion, such as an expert witness in litigation.

(c) The Department may certify a service contract that is not exempt under subsection (b) of this section only if:

  (1) the unit that seeks to enter into the service contract has complied with Sec. 13-405 of this subtitle; and

  (2) the Department finds that:

    (i) the potential economic advantage of entering into the service contract is not outweighed by the preference stated in Sec. 13-402 of this subtitle;

    (ii) the service contract does not adversely affect the affirmative action efforts of this State;

    (iii) the service contract includes adequate control mechanisms to ensure that the services will be performed in accordance with the service contract; and

    (iv) the service contract complies with all of the requirements of Division II of the State Finance and Procurement Article.

#### Section 13-405

(a) A unit that seeks to enter into a service contract that is not exempt under Sec. 13-403(c) or Sec. 13-404(b) of this subtitle shall submit to the Department the information required by this section.

(b) The unit shall submit a demonstration that the unit has taken formal and positive steps to consider alternatives to the service contract, including reorganization, reevaluation of service, and reevaluation of performance.

(c)

  (1) The unit shall submit calculations that:

    (i) compare the cost of the service contract with the cost of using State employees; and

    (ii) show savings to this State, over the duration of the service contract, of 20% of the contract or $200,000, whichever is less.

  (2) In calculating the cost comparison required by this subsection, a unit shall include:

    (i) direct costs, including fringe benefits;

    (ii) indirect overhead costs, including the proportional share of existing administrative salaries and benefits, rent, equipment costs, utilities, and materials, but only to the extent that those costs are attributed solely to the service in question and would not exist if the service were not performed by State employees;

    (iii) any continuing or transitional costs that would be directly associated with contracting for the services, including unemployment compensation and the cost of transitional services; and

    (iv) additional costs of performance of the services by State employees, including salaries and benefits of additional staff and the cost of additional space, equipment, and materials needed to perform the services.

(d)

  (1) The unit shall submit a formal plan of assistance for all State employees who will be adversely affected by the service contract.

  (2) The plan of assistance shall include:

    (i) efforts to place affected employees in vacant positions in the unit or in another unit;

    (ii) provisions in the service contract, if feasible, for the hiring by the contractor of displaced employees; and

    (iii) prior notification to affected employees in accordance with Sec. 13-218.1 of the State Finance and Procurement Article.

(e)

  (1) A service contract that is not exempt under Sec. 13-403(c) or Sec. 13-404(b) of this subtitle shall be subject to a legislative audit to determine compliance with projected cost savings under subsection (c) of this section.

  (2) Audit findings from an audit conducted under paragraph (1) of this subsection shall be made available to the public.

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Md. Code Ann., State Pers. & Pens. (as displayed at mgaleg.maryland.gov, October 16, 2026)