(a) (1) In this section the following words have the meanings indicated.
(2) “Aggregator” means a person that:
(i) provides or contracts for environmental outcomes; or
(ii) provides or raises capital to finance delivery of environmental outcomes.
(3) “Environmental outcome” means a commodity that is modeled or directly measured as a single, quantifiable, and certified unit of improvement to the environment, including a nutrient or carbon benefit.
(4) “Environmental outcomes project” means a project designed to secure environmental outcomes.
(5) “Evaluator” means a person other than an aggregator that determines whether environmental outcomes have been achieved based on defined performance measures.
(6) “Outcome payment” means the money paid when a pay–for–success contract performance measure is met.
(7) “Quantification plan” means a plan in which an aggregator describes:
(i) the method that will be used to measure or model environmental outcomes and co–benefits under a pay–for–success contract;
(ii) the compliance monitoring that will occur to ensure that the actions proposed in the pay–for–success contract are taken and maintained over the life of the project;
(iii) verification steps that will be carried out by the State to confirm model results or accurate measurement of environmental outcomes; and
(iv) the timeline for proposed payments under the pay–for–success contract.
(b) The General Assembly finds and declares that:
(1) pay–for–success contracting shifts the risk of performance to the contractor because government payment is made only on achievement of outcomes;
(2) social and environmental impact investment is growing dramatically, and investors are seeking ways to finance and execute pay–for–success contracts in the State to expand the success of Chesapeake Bay restoration efforts and achieve other public outcomes; and
(3) it is in the best interest of the State to include pay–for–success contracting as a contracting option, particularly for units responsible for land conservation and environmental protection, enhancement, and restoration.
(c) A unit may enter into a pay–for–success contract only if the procurement officer of the unit determines that:
(1) the contract will produce estimated financial savings or other quantifiable public benefits for the State; and
(2) a substantial portion of the outcome payment due under the contract will be paid only after specific outcomes have been documented.
(d) (1) This subsection applies only to contracts by:
(i) the Department of Agriculture;
(ii) the Department of the Environment;
(iii) the Department of Natural Resources;
(iv) the Department of Transportation;
(v) the Maryland Environmental Service; and
(vi) the Department of General Services.
(2) This subsection does not apply to the purchase of nitrogen load reductions with funds from the Clean Water Commerce Account of the Bay Restoration Fund established under § 9–1605.2 of the Environment Article.
(3) (i) A unit specified in paragraph (1) of this subsection may enter into a pay–for–success contract with an aggregator to purchase:
1. delivery of an environmental outcomes project; or
2. already certified environmental outcomes.
(ii) Other State and local entities may participate in a pay–for–success contract under this subsection in accordance with an intergovernmental cooperative purchasing agreement under § 13–110 of this title.
(4) A pay–for–success contract executed under this subsection shall include:
(i) a quantification plan approved by the unit;
(ii) a statement of the environmental outcomes to be procured under the contract and a description of how defined performance measures will demonstrate progress in achieving these outcomes;
(iii) requirements regarding the content and frequency of progress reports regarding the achievement of environmental outcomes;
(iv) a methodology for calculating the amount and timing of outcome payments to an aggregator when the evaluator determines that the aggregator has achieved a defined performance measure;
(v) a statement that the basis of payment is the determination of achievement of environmental outcomes by the evaluator and that payments for those outcomes do not require itemized billing or cost documentation by the aggregator; and
(vi) terms addressing:
1. compliance with State law;
2. nondiscrimination in employment;
3. contractor indemnification;
4. termination for default; and
5. the unit’s right to inspect the environmental outcomes project.
(5) A pay–for–success contract executed under this subsection may include provisions regarding:
(i) long–term maintenance and monitoring of environmental services, including the establishment of a stewardship fund;
(ii) a requirement that the unit hold contract funds in a reserve account for outcome payments;
(iii) for agriculture services, payment for achievement of baseline water quality requirements for nitrogen, phosphorus, or sediment; or
(iv) terminations prior to the first payment under the contract for the purpose of selling environmental outcomes without penalty to another entity or for any other reason.
(e) (1) Beginning July 2025 and every 3 years thereafter, the Maryland Environmental Service shall review and evaluate the results of all pay–for–success contracts completed under this section for the previous 3 fiscal years.
(2) The review conducted under paragraph (1) of this subsection shall include:
(i) the cost of each project performed under a contract;
(ii) the length of time taken to complete the project, from the date of notice to proceed until completion;
(iii) the average cost and project duration for each project type; and
(iv) whether each project met the terms of its contract.
(3) Each unit that enters into a pay–for–success contract under this section shall execute an agreement with the Maryland Environmental Service to reimburse the Maryland Environmental Service for each of the unit’s completed contracts the Maryland Environmental Service reviews under this section.
(4) The Maryland Environmental Service shall provide copies of each review conducted under this subsection to:
(i) each unit for which the Maryland Environmental Service reviewed and evaluated a contract; and
(ii) in accordance with § 2–1257 of the State Government Article, the Senate Committee on Education, Energy, and the Environment, the Senate Budget and Taxation Committee, the House Environment and Transportation Committee, and the House Appropriations Committee.