BILL NUMBER: AB 1650 ENROLLED
BILL TEXT
PASSED THE SENATE AUGUST 31, 2010
PASSED THE ASSEMBLY AUGUST 31, 2010
AMENDED IN SENATE AUGUST 31, 2010
AMENDED IN SENATE AUGUST 4, 2010
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 Leno, 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, 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
that 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.
Pursuant to this authority, this bill would prohibit a person that
provides goods or services of $20,000,000 or more in the energy
sector of Iran, as identified on a list created by the Department of
General Services, or a financial institution that extends $20,000,000
or more in credit to such a person, from bidding on or entering into
or renewing a contract for goods or services of $1,000,000 or more
with a public entity, as specified.
This bill would, by June 1, 2011, require the Department of
General Services to, using credible information available to the
public, develop, or contract to develop, a list of persons it
determines provide goods or services of $20,000,000 or more in the
energy sector of Iran. This bill would, before a person is included
on the list, require the Department of General Services to provide 90
days' written notice of its intent to include the person on the list
and to inform the person that inclusion on the list would make the
person ineligible to bid on, submit a proposal for, or enter into or
renew, a contract for goods and services of $1,000,000 or more with a
public entity, and would require the department to provide the
person with an opportunity to comment in writing that it is not
engaged in investment activities in Iran.
This bill would require a prospective bidder for those contracts
to certify that it is not identified on a list created by the
Department of General Services, or a financial institution that
extends $20,000,000 or more in credit to such a person, as provided,
and would impose penalties, as specified, for a person that provides
a false certification. This bill would require a local public entity,
or the Department of General Services in the case of state
contracts, to provide a person with 90 days' written notice and an
opportunity to comment in writing before the penalties are imposed.
The bill would allow a public entity, under specified conditions, to
permit a person engaged in investment activities in Iran to be
eligible for, to bid on, submit a proposal for, or enter into or
renew, a contract for goods or services.
This bill would preempt any law, ordinance, rules, or regulation
of any local public entity involving contracts for goods or services
of $1,000,000 or more with a person engaged in investment activities
in Iran.
This bill would make legislative findings and declarations
regarding a statewide concern.
This bill would become inoperative upon the date that federal
authorization ceases.
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) On July 1, 2010, President Barack Obama signed into law H.R.
2194, the "Comprehensive Iran Sanctions, Accountability, and
Divestment Act of 2010" (Public Law 111-195), which expressly
authorizes states and local governments to prevent investment in,
including prohibiting entry into or renewing contracts with,
companies operating in Iran's energy sector with investments that
have the result of directly or indirectly supporting the efforts of
the Government of Iran to achieve 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 of Iran must be accomplished on a
statewide basis, and, therefore, the subject is a matter of statewide
concern rather than a municipal affair.
(r) It is the intent of the Legislature to implement the authority
granted under Section 202 of the Comprehensive Iran Sanctions,
Accountability, and Divestment Act of 2010 (Public Law 111-195).
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" of Iran means activities to develop petroleum
or natural gas resources or nuclear power in Iran.
(c) "Financial institution" means the term as used in Section 14
of the Iran Sanctions Act of 1996 (Public Law 104-172; 50 U.S.C. 1701
note).
(d) "Iran" includes the Government of Iran and 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 entity, or subsidiary of, or
any entity 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 Iran if any of the following is true:
(a) The person provides goods or services of twenty million
dollars ($20,000,000) or more in the energy sector of Iran, including
a person that 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 of Iran.
(b) 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 provide
goods or services in the energy sector in Iran and is identified on a
list created pursuant to subdivision (b) of Section 2203 as a person
engaging in investment activities in Iran as described in
subdivision (a).
2203. (a) (1) A person that, at the time of bid or proposal for a
new contract or renewal of an existing contract, is identified on a
list created pursuant to subdivision (b) as a person engaging in
investment activities in Iran as described in subdivision (a) of
Section 2202.5, is ineligible to, and shall not, bid on, submit a
proposal for, or enter into or renew, a contract with a public entity
for goods or services of one million dollars ($1,000,000) or more.
(2) A person that, at the time of bid or proposal for a new
contract or renewal of an existing contract, engages in investment
activities in Iran as described in subdivision (b) of Section 2202.5,
is ineligible to, and shall not, bid on, submit a proposal for, or
enter into or renew, a contract with a public entity for goods or
services of one million dollars ($1,000,000) or more.
(b) (1) By June 1, 2011, the Department of General Services shall,
using credible information available to the public, develop, or
contract to develop, a list of persons it determines engage in
investment activities in Iran as described in subdivision (a) of
Section 2202.5.
(2) The Department of General Services shall update the list every
180 days.
(3) Before finalizing an initial list pursuant to paragraph (1) or
on updated list pursuant to paragraph (2), the Department of General
Services shall do all of the following before a person is included
on the list:
(A) Provide 90 days' written notice of its intent to include the
person on the list. The notice shall inform the person that inclusion
on the list would make the person ineligible to bid on, submit a
proposal for, or enter into or renew, a contract for goods or
services of one million dollars ($1,000,000) or more with a public
entity. The notice shall specify that the person, if it ceases its
engagement in investment activities in Iran as described in
subdivision (a) of Section 2202.5, may become eligible for a future
contract, or contract renewal, for goods or services of one million
dollars ($1,000,000) or more with a public entity upon removal from
the list.
(B) The Department of General Services shall provide a person with
an opportunity to comment in writing to the Department of General
Services that it is not engaged in investment activities in Iran. If
the person demonstrates to the Department of General Services that
the person is not engaged in investment activities in Iran as
described in subdivision (a) of Section 2202.5, the person shall not
be included on the list, and shall be eligible to enter into or renew
a contract for goods or services of one million dollars ($1,000,000)
or more with a public entity, unless the person is otherwise
ineligible to bid on a contract as described in paragraph (3) of
subdivision (a) of Section 2205.
(4) The Department of General Services shall make every effort to
avoid erroneously including a person on the list.
(5) The Department of General Services may assess a fee upon
persons that use this list to comply with the provisions of this act,
in order to pay for the necessary, actual costs of creating and
maintaining this list. The Department of General Services shall
provide the list free of charge to any public entity and to the
Legislature, upon request.
(6) A person that has a contract with CalPERS or CalSTRS, or both,
shall not be deemed a person that engages in investment activities
in Iran on the basis of those investments with CalPERS or CalSTRS.
(c) Notwithstanding subdivision (a), a public entity may permit a
person engaged in investment activities in Iran, on a case-by-case
basis, to be eligible for, or to bid on, submit a proposal for, or
enter into or renew, a contract for goods or services of one million
dollars ($1,000,000) or more with a public entity if either of the
following are true:
(1) All of the following occur:
(A) The investment activities in Iran were made before July 1,
2010.
(B) The investment activities in Iran have not been expanded or
renewed after July 1, 2010.
(C) The awarding body determines that it is in the best interest
of the state or local public entity to contract with the person. For
purposes of state contracts for goods or services of one million
dollars ($1,000,000) or more, "awarding body" means the Department of
General Services. For purposes of local contracts for goods or
services of one million dollars ($1,000,000) or more, "awarding body"
means the representative of the local public entity awarding the
contract, as described in subdivision (a) of Section 2202.
(D) The person has adopted, publicized, and is implementing a
formal plan to cease the investment activities in Iran and to refrain
from engaging in any new investments in Iran.
(2) One of the following occurs:
(A) For a contract for goods or services of one million dollars
($1,000,000) or more with a local public entity, the local public
entity makes a public finding that, absent such an exemption, the
local public entity would be unable to obtain the goods or services
for which the contract is offered.
(B) For a contract for goods or services of one million dollars
($1,000,000) or more with a state agency, other than the office of a
state constitutional officer, the Governor makes a public finding
that absent such an exemption, the state agency would be unable to
obtain the goods or services for which the contract is offered.
(C) For a contract for goods or services of one million dollars
($1,000,000) or more with an office of a state constitutional
officer, if the state constitutional officer makes a public finding
that, absent such an exemption, his or her office would be unable to
obtain the goods or services for which the contract is offered.
(d) Notwithstanding subdivision (a), a public entity shall permit
a financial institution described in subdivision (b) of Section
2202.5 to be eligible for, or to bid on, submit a proposal for, or
enter into or renew, a contract for goods or services of one million
dollars ($1,000,000) or more with a public entity if the person using
the credit to provide goods or services in the energy sector of Iran
is a person permitted to submit a bid or proposal to the public
entity pursuant to subdivision (c).
(e) The prohibition described in paragraph (1) of subdivision (a)
applies on and after June 1, 2011. The prohibition described in
paragraph (2) of subdivision (a) applies on and after July 1, 2011.
2204. (a) A 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 public entity with respect to a contract for goods
or services of one million dollars ($1,000,000) or more to certify,
at the time the bid is submitted or the contract is renewed, that the
person is not identified on a list created pursuant to subdivision
(b) of Section 2203 as a person engaging in investment activities in
Iran described in subdivision (a) of Section 2202.5, or as a person
described in subdivision (b) of Section 2202.5, as applicable. A
state agency shall submit the certification information to the
Department of General Services.
(b) A public entity shall not require a person that submits a bid
or proposal to, or otherwise proposes to enter into a contract with,
the public entity with respect to a contract for goods or services of
one million dollars ($1,000,000) or more to certify that the person
is not identified on a list created pursuant to subdivision (b) of
Section 2203 as a person engaging in investment activities in Iran
described in subdivision (a) of Section 2202.5, or as a person
described in subdivision (b) of Section 2202.5, as applicable, if the
person has been permitted to submit a bid or proposal to the public
entity pursuant to subdivision (c) or (d) of Section 2203.
(c) (1) Subject to paragraph (2), the certification requirement
described in subdivision (a) applies on and after June 1, 2011.
(2) A person that is a financial institution shall not be required
to certify as provided in subdivision (a) until July 1, 2011. For
any subsequent list created pursuant to subdivision (b) of Section
2203, a person that is a financial institution shall not be required
to certify with respect to that subsequent list until 30 days after
that list becomes available, but shall certify with respect to the
immediately prior list for those 30 days.
2205. (a) If the local public entity, or the Department of
General Services in the case of state contracts, determines, using
credible information available to the public and after providing 90
days written notice and an opportunity to comment in writing for the
person to demonstrate that it is not engaged in investment activities
in Iran, that the person has submitted a false certification under
Section 2204, and the person fails to demonstrate to the local public
entity or the Department of General Services that the person has
ceased its engagement in the investment activities in Iran within 90
days after the determination of a false certification, the following
shall apply:
(1) 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. Only one civil penalty may be
imposed with respect to one or more certifications made to any
public entity that are false as a result of a particular investment.
(2) Termination of an existing contract with the awarding body at
the option of the awarding body or the Department of General
Services.
(3) 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.
(b) The local public entity, or the Department of General Services
in the case of state contracts, shall report to the Attorney General
the name of the person that the local public entity, or the
Department of General Services in the case of state contracts,
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 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
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 paragraph (1) of
subdivision (a) may be brought for a false certification on a
contract.
(c) A civil action to collect the penalties described in paragraph
(1) of subdivision (a) must commence within three years from the
date the certification is made.
(d) An unsuccessful bidder, or any other person other than the
awarding body, shall have no right to protest the award of a contract
or contract renewal on the basis of a false certification.
(e) This act does not create, nor authorize, a private right of
action or enforcement of the penalties provided for in this act.
2206. This act shall occupy the field with regard to all public
contracts for goods or services with a person engaged in investment
activities in Iran and shall preempt any law, ordinance, rule, or
regulation of any local public entity involving public contracts for
goods or services with a person engaged in investment activities in
Iran.
2207. The Legislature shall submit to the Attorney General of the
United States a written notice describing this chapter within 30
days after the effective date of this act.
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. 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.