BILL NUMBER: AB 1650	AMENDED
	BILL TEXT

	AMENDED IN SENATE  AUGUST 2, 2010
	AMENDED IN SENATE  JULY 1, 2010
	AMENDED IN SENATE  JUNE 23, 2010
	AMENDED IN ASSEMBLY  APRIL 27, 2010
	AMENDED IN ASSEMBLY  APRIL 13, 2010
	AMENDED IN ASSEMBLY  FEBRUARY 23, 2010

INTRODUCED BY   Assembly Members Feuer, Blumenfield, and Huffman
   (Coauthors: Assembly Members Anderson, Bass, Block, De Leon, Hill,
Jones, Lieu, Miller, John A. Perez, Portantino, Silva, and Tran)
   (Coauthors: Senators Padilla, Pavley, and Price)

                        JANUARY 13, 2010

   An act to add Chapter 2.7 (commencing with Section 2200) to Part 1
of Division 2 of the Public Contract Code, relating to public
contracts.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 1650, as amended, Feuer. Public contracts: state and local
contract eligibility: energy sector investment activities in Iran.
   Existing law sets forth the requirements for the solicitation and
evaluation of bids and the awarding of contracts by public entities.

   The federal Comprehensive Iran Sanctions, Accountability, and
Divestment Act of 2010, which became Public Law 111-195 on July 1,
2010, authorizes a state or local government to adopt and enforce
measures meeting certain requirements, to divest the assets of the
state or local government from, or prohibit the investment of those
assets in, any person that the state or local government, using
credible information available to the public, determines to be
engaged in investment activities in Iran. The federal act specifies
than an investment includes the entry into or renewal of a contract
for goods or services, and that such a measure is not preempted by
any federal law or regulation.  
   This 
    Pursuant to this authority, this  bill would prohibit a
person that is engaged in investment activities in the energy sector
in Iran, as described, from bidding on or entering into or renewing a
contract with a  state agency for goods and services or a
contract with a local  public entity for goods or services 
of $1,000,000 or more  . The bill would require a prospective
bidder for those contracts to certify  , after exercising due
diligence,  that it is not engaged in investment activities in
the energy sector in Iran and would impose penalties, as specified,
for a person that provides a false certification  and did not
exercise due diligence, as provided. This bill would require an
awarding body to give reasonable notice, and hearing if requested,
before the penalties are imposed. This bill would impose the
penalties on a person that provides a false certification but
exercised due diligence, unless the person has ceased or ceases its
engagement in investment activities in the energy sector in Iran, as
specified  .  This 
    This  bill would  , for a pending bid or contract
proposal, or for a contract for which no false certification was
made,  require the awarding body  of a public entity
 , if the awarding body determines  , using credible
information available to the public,  that a person is a person
that engages in investment activities in the energy sector in Iran,
to provide  90 days'  written notice of its intent not to
enter into or renew a contract for goods or services with the person
 . This bill   and  would require the
awarding body to provide a person that is alleged to be engaged in
investment activities in the energy sector in Iran with an
opportunity to  demonstrate   comment in writing
that  it is not engaged in those activities.
   This bill would make legislative findings and declarations
regarding a statewide concern.
   This bill  would become operative only if federal law
authorizes states to adopt and enforce contracting prohibitions of
the type provided for in this bill, and  would become
inoperative upon the date that federal authorization ceases.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Chapter 2.7 (commencing with Section 2200) is added to
Part 1 of Division 2 of the Public Contract Code, to read:
      CHAPTER 2.7.  IRAN CONTRACTING ACT OF 2010


   2200.  This chapter shall be known and may be cited as the Iran
Contracting Act of 2010.
   2201.  The Legislature hereby finds and declares all of the
following:
   (a) In imposing United States sanctions on Iran, Congress and the
President have determined that the illicit nuclear activities of the
Government of Iran, combined with its development of unconventional
weapons and ballistic missiles, and its support of international
terrorism, represent a serious threat to the security of the United
States, Israel, and other United States allies in Europe, the Middle
East, and around the world.
   (b) On September 9, 2009, it was reported that American
intelligence agencies have concluded that Iran has already created
enough nuclear fuel to develop a nuclear weapon, and United States
Ambassador to the International Atomic Energy Agency Glyn Davies
declared that Iran had achieved "possible breakout capacity."
   (c) On September 21, 2009, Iran sent a letter to the International
Atomic Energy Agency acknowledging that it is considering a
previously undeclared "new pilot fuel enrichment plan."
   (d) On Sept. 25, 2009, President Barack H. Obama, joined by Prime
Minister Gordon Brown of Britain and President Nicolas Sarkozy of
France, stated that the secret plant "represents a direct challenge
to the basic foundation of the nonproliferation regime" and "deepens
a growing concern that Iran is refusing to live up to those
international responsibilities, including specifically revealing all
nuclear-related activities. As the international community knows,
this is not the first time that Iran has concealed information about
its nuclear program."
   (e) The International Atomic Energy Agency has repeatedly called
attention to Iran's unlawful nuclear activities, and, as a result,
the United Nations Security Council has adopted a range of sanctions
designed to encourage the Government of Iran to cease those
activities and comply with its obligations under the Treaty on the
Non-Proliferation of Nuclear Weapons (commonly known as the "Nuclear
Non-Proliferation Treaty").
   (f) It is anticipated that Congress will declare its intent that
state and local governments be able to direct divestiture from,
prevent investment in, and prohibit entry into or renewal of
contracts with, companies operating in Iran's energy sector. Under
bipartisan federal legislation advancing in the 111th Congress and
cosponsored by more than one-third of the members of the United
States Senate and more than half of the members of the House of
Representatives, state and local governments would be expressly
authorized to divest and otherwise disassociate themselves from
companies with investments that have the result of directly or
indirectly supporting the efforts of the Government of Iran to
achieve a nuclear weapons capability.
   (g) On October 7, 2008, then-Senator Obama stated, "Iran right now
imports gasoline, even though it's an oil producer, because its oil
infrastructure has broken down. If we can prevent them from importing
the gasoline that they need and the refined petroleum products, that
starts changing their cost-benefit analysis. That starts putting the
squeeze on them."
   (h) The serious and urgent nature of the threat from Iran demands
that states, local governments, educational institutions, and private
institutions work together with the federal government and American
allies to do everything possible diplomatically, politically, and
economically to prevent Iran from acquiring a nuclear weapons
capability.
   (i) There are moral and reputational reasons for this state and
local governments to not engage in business with foreign companies
that have business activities benefiting foreign states, such as
Iran, that commit egregious violations of human rights, proliferate
nuclear weapons capabilities, and support terrorism.
   (j) It is the responsibility of the state to decide how, where,
and by whom its financial resources should be invested. It also is
the prerogative of the state to not invest in, or do business with,
companies whose investments with Iran place those companies at risk
from the impact of economic sanctions imposed upon the Government of
Iran for sponsoring terrorism, committing egregious violations of
human rights, and engaging in illicit nuclear weapons development.
   (k) The human rights situation in Iran has steadily deteriorated
in 2009, as punctuated by transparently fraudulent elections and the
brutal repression and murder, arbitrary arrests, and show trials of
peaceful dissidents.
   (l) During the postelection protests in June 2009, the Iranian
government imposed widespread and unjustifiable restrictions on
telecommunications services, denying the citizens of Iran their
rights and liberties to free speech.
   (m) On October 14, 2007, Governor Arnold Schwarzenegger stated his
intention to support "efforts to further prevent terrorism" when
signing Assembly Bill 221, which prohibits the state's pension funds
from investing in companies with active business in Iran.
   (n) This state currently honors contracts with foreign companies
that may be at financial risk due to business ties with foreign
states, such as Iran, that are involved in the proliferation of
weapons of mass destruction, commit human rights violations, and
support terrorism.
   (o) The concerns of the State of California regarding Iran are
strictly the result of the actions of the Government of Iran.
   (p) The people of the State of California declare all of the
following:
   (1) We have feelings of friendship for the people of Iran.
   (2) We regret that developments in recent decades have created
impediments to that friendship.
   (3) We hold the people of Iran, their culture, and their ancient
and rich history in the highest esteem.
   (q) In order to effectively address the need for the governments
of this state to respond to the policies of Iran in a uniform
fashion, prohibiting contracts with persons engaged in investment
activities in the energy sector in Iran must be accomplished on a
statewide basis, and, therefore, the subject is a matter of statewide
concern rather than a municipal affair.
   2202.  As used in this chapter, the following definitions apply:
   (a) "Awarding body" means a department, board, agency, authority,
or officer, agent, or other authorized representative of the public
entity awarding a contract for goods or services.
   (b) "Energy sector" means activities to develop petroleum or
natural gas resources or nuclear power.
   (c) "Financial institution" means the term as used in Section 14
(5) of the Iran Sanctions Act of 1996 (Public Law 104-172; 50 U.S.C.
1701 note).
   (d) "Iran" includes any agency or instrumentality of Iran.
   (e) "Person" means any of the following:
   (1) A natural person, corporation, company, limited liability
company, business association, partnership, society, trust, or any
other nongovernmental entity, organization, or group.
   (2) Any governmental entity or instrumentality of a government,
including a multilateral development institution, as defined in
Section 1701(c)(3) of the International Financial Institutions Act
(22 U.S.C. 262r(c)(3)).
   (3) Any successor, subunit, parent company, or subsidiary of, or
company under common ownership or control with, any entity described
in paragraph (1) or (2).
   2202.5.  For purposes of this chapter, a person engages in
investment activities in the energy sector in Iran if any of the
following is true:
   (a) The person has an investment of twenty million dollars
($20,000,000) or more in the energy sector in Iran.
   (b) The person provides oil or liquefied natural gas tankers, or
products used to construct or maintain pipelines used to transport
oil or liquefied natural gas, for the energy sector in Iran.
   (c) The person is a financial institution that extends twenty
million dollars ($20,000,000) or more in credit to another person,
for 45 days or more, if that person will use the credit to invest in
the energy sector in Iran.
   2203.  A person that engages in investment activities in the
energy sector in Iran is ineligible to, and shall not, bid on, submit
a proposal for, or enter into or renew, a contract with a 
public entity   state agency  for goods or services
 or a contract with a local public entity for goods and services
of one million dollars ($1,000,000) or more  .
   2204.   A   (a)     A state
agency or local  public entity shall require a person that
submits a bid or proposal to, or otherwise proposes to enter into or
renew a contract with, a  state agency or local  public
entity with respect to a contract for goods or services  to
certify   described in Section 2203 to certify, after
  exercising due diligence,  that the person does not
engage in investment activities in the energy sector in Iran.

   2205. (a) If the awarding body determines that a person has
submitted a false certification under Section 2204, the person shall
be subject to all of the following:  
   (b) For purposes of this section and Section 2205, a person shall
be deemed to have not exercised due diligence if the person knows or
should have known that the person is engaged in investment activities
in the energy sector in Iran after having made an affirmative,
reasonable inquiry as to the facts and circumstances surrounding the
person's investments, or if the person fails to make that
affirmative, reasonable inquiry. 
    2205.   (a)  (1)  If the awarding body determines,
using credible information available to the public and after
providing reasonable notice, and a hearing if requested, that a
person has submitted a false certification under Section 2204 without
exercising due diligence as described in that section, the following
shall apply:  
   (1) 
    (A)  Pursuant to an action under subdivision (b), a
civil penalty in an amount that is equal to the greater of two
hundred fifty thousand dollars ($250,000) or twice the amount of the
contract for which the false certification was made. 
   (2) 
    (B)  Termination of an existing contract with the
awarding body at the option of the awarding body. 
   (3) 
    (C)  Ineligibility to bid on a contract for a period of
three years from the date of the determination that the person
submitted the false certification. 
   (2) (A) If the awarding body determines, using credible
information available to the public and after providing reasonable
notice, and a hearing if requested, that a person has submitted a
false certification under Section 2204 but determines the person has
exercised due diligence as described in that section, the awarding
body shall provide written notice of its intent to not enter into or
renew a contract for goods or services with the person and that the
person is subject to the penalties described in subparagraphs (B) and
(C) of paragraph (1), unless the person has ceased or ceases its
engagement in investment activities in the energy sector in Iran
within 90 days. The person may still be subject to subparagraph (C)
of paragraph (1) due to a false certification made on another
contract. 
   (B) If a person described in subparagraph (A) that ceased its
engagement in investment activities in the energy sector in Iran is
awarded the contract or contract renewal for which the false
certification was made, and the awarding body later determines, using
credible information available to the public and after providing
reasonable notice, and a hearing if requested, that the person is
engaged in investment activities in the energy sector in Iran during
the term of that contract, the person shall be subject to the
penalties described in subparagraphs (B) and (C) of paragraph (1).

   (b) The awarding body shall report to the Attorney General the
name of the person that the awarding body determines has submitted a
false certification under Section 2204, together with its information
as to the false certification, and the Attorney General shall
determine whether to bring a civil action against the person to
collect the penalty described in  subparagraph (A) of 
paragraph (1) of subdivision (a). The awarding body of a local public
entity may also report to the city attorney, county counsel, or
district attorney the name of the person that the awarding body
determines has submitted a false certification under Section 2204,
together with its information as to the false certification, and the
city attorney, county counsel, or district attorney may determine
whether to bring a civil action against the person to collect the
penalty described in  subparagraph (A) of  paragraph (1) of
subdivision (a). If it is determined in that action that the person
submitted a false certification, the person shall pay all reasonable
costs and fees incurred in a civil action, including costs incurred
by the awarding body for investigations that led to the finding of
the false certification and all reasonable costs and fees incurred by
the Attorney General, city attorney, county counsel, or district
attorney.  Only one civil action against the person to collect
the penalty described in subparagraph (A) of paragraph (1) of
subdivision (a) may be brought for a false certification on a
contract. 
   2206.  (a) If the awarding body, using credible information
available to the public, determines that a person that has an
existing contract with the awarding body  that is not subject to
Section 2205  , or has submitted a pending bid or contract
proposal to, or otherwise proposes to enter into a contract with, the
awarding body, engages in investment activities in the energy sector
in Iran, the awarding body shall provide 90 days' written notice of
its intent to not enter into or renew a contract for goods or
services with the person. The notice shall specify that the person,
if it ceases its engagement in investment activities in the energy
sector in Iran, may become eligible for a future contract, or
contract renewal, for goods or services with the awarding body.
   (b) The awarding body shall provide a person with an opportunity
to  demonstrate   comment in wr   iting
 to the awarding body that it is not engaged in investment
activities in the energy sector in Iran. If the  awarding
body determines   person demonstrates to the awarding
body  that the person is not engaged in investment activities in
the energy sector in Iran, the person shall be eligible to enter
into or renew a contract for goods or services  with the
awarding body. 
    (c)     This section
shall not apply in the case of a person subject to Section 2205.
  with the awarding body, unless the person is otherwise
ineligible to bid on a contract as described in subparagraph (C) of
paragraph (1) of subdivision (a) of Section 2205.  
   (d) 
    (c)  This section shall apply to contracts  for
goods and services with a state agency and contracts for goods and
services of one million dollars ($1,000,000) or more with a local
public entity  entered into, or renewed, on and after the date
that is 90 days after the operative date of this chapter.
   2207.  The Legislature shall submit to the Attorney General of the
United States a written notice describing this chapter within 30
days after the operative date of this chapter.
   2208.  (a) If any one or more provisions, sections, subdivisions,
sentences, clauses, phrases, or words of this act or the application
thereof to any person or circumstance is found to be invalid,
illegal, unenforceable, or unconstitutional, the same is hereby
declared to be severable and the balance of this act shall remain
effective and functional notwithstanding such invalidity, illegality,
unenforceability, or unconstitutionality.
   (b) The Legislature hereby declares that it would have passed this
act, and each provision, section, subdivision, sentence, clause,
phrase, or word thereof, irrespective of the fact that any one or
more provisions, sections, subdivisions, sentences, clauses, phrases,
or words are declared invalid, illegal, unenforceable, or
unconstitutional.
  SEC. 2.  (a) Section 1 of this act shall become operative only if
federal legislation authorizing states to adopt and enforce
contracting prohibitions of the type provided for in that section is
enacted and, in that event, shall become operative on the later of
January 1, 2011, or the operative date of the authorizing federal
legislation.
   (b) Section 1 of this act shall become inoperative upon the date
that federal law ceases to authorize the states to adopt and enforce
the contracting prohibitions of the type provided for in that
section.