BILL NUMBER: AB 617 CHAPTERED 10/14/07 CHAPTER 736 FILED WITH SECRETARY OF STATE OCTOBER 14, 2007 APPROVED BY GOVERNOR OCTOBER 14, 2007 PASSED THE SENATE SEPTEMBER 10, 2007 PASSED THE ASSEMBLY SEPTEMBER 11, 2007 AMENDED IN SENATE SEPTEMBER 6, 2007 AMENDED IN SENATE AUGUST 31, 2007 AMENDED IN ASSEMBLY APRIL 30, 2007 INTRODUCED BY Assembly Member Torrico FEBRUARY 21, 2007 An act to amend, repeal, and add Section 12112 of the Public Contract Code, relating to public contracts. LEGISLATIVE COUNSEL'S DIGEST AB 617, Torrico. State contracts: information technology goods and services. Existing law authorizes the Department of General Services to provide for progress payments in any contract for information technology goods or services that are to be manufactured or performed by the contractor, exclusively for the state, at the contractor's shop or plant, provided that not less than 10% of the contract price be withheld until final delivery and acceptance of the goods or services, and that the contractor submit a faithful performance bond, in a specified sum. This bill would, until July 1, 2013, delete the performance bond requirement, and would require the department, in consultation with the Department of Finance, to develop and maintain criteria for the evaluation of risk to the state that results from the acquisition of information technology goods or services, and would require this risk analysis to determine the need for financial protection that is in the best interest of the state, as specified. This bill would also require the department to submit the criteria developed and maintained for the evaluation of risk to the state that results from the acquisition of information technology goods and services to the Joint Legislative Budget Committee and to the State Chief Information Officer, as specified. This bill would require the State Chief Information Officer to review all contracts approved pursuant to this provision, as specified, and to submit a report to the Legislature, as specified. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 12112 of the Public Contract Code is amended to read: 12112. (a) Any contract for information technology goods or services, to be manufactured or performed by the contractor especially for the state and not suitable for sale to others in the ordinary course of the contractor's business may provide, on the terms and conditions that the department deems necessary to protect the state's interests, for progress payments for work performed and costs incurred at the contractor's shop or plant, provided that not less than 10 percent of the contract price is required to be withheld until final delivery and acceptance of the goods or services. (b) The department, in consultation with the Department of Finance, shall develop and maintain criteria for the evaluation of risk to the state that results from the acquisition of information technology. This risk analysis shall determine the need for financial protection that is in the best interest of the state, including, but not limited to, any of the following: (1) An acceptable performance bond as described in Chapter 2 (commencing with Section 995.010) of Title 14 of Part 2 of the Code of Civil Procedure. (2) Any surety as defined in Section 2787 of the Civil Code. (3) A letter of credit as described in Division 5 (commencing with Section 5101) of the Commercial Code. (4) Protection in the form of contract terms. (5) Any other form of security or guaranty of performance in an amount sufficient to protect the state in the case of default by the contractor providing information technology, or any other breach or malfunction of the goods or services, or both. (c) The department shall, on or before June 1, 2008, submit the criteria developed and maintained pursuant to subdivision (b) to the Joint Legislative Budget Committee and to the State Chief Information Officer. (d) The State Chief Information Officer shall, on or before July 1, 2012, do both of the following: (1) Review and report to the Legislature on all contracts approved pursuant to this section on and after January 1, 2008. (2) Report to the Legislature any recommendations for changes to this section or changes to the criteria developed and maintained by the department pursuant to subdivision (b). (e) For purposes of this section, "information technology" means information technology goods or services, or both, as appropriate. (f) This section shall become inoperative on July 1, 2013, and shall be repealed on January 1, 2014. SEC. 2. Section 12112 is added to the Public Contract Code, to read: 12112. (a) Any contract for information technology goods or services, to be manufactured or performed by the contractor especially for the state and not suitable for sale to others in the ordinary course of the contractor's business may provide, on the terms and conditions that the department deems necessary to protect the state's interests, for progress payments for work performed and costs incurred at the contractor's shop or plant, provided that not less than 10 percent of the contract price is required to be withheld until final delivery and acceptance of the goods or services, and provided further, that the contractor is required to submit a faithful performance bond, acceptable to the department, in a sum not less than one-half of the total amount payable under the contract securing the faithful performance of the contract by the contractor. (b) This section shall become operative on July 1, 2013.