BILL ANALYSIS                                                                                                                                                                                                    

                   Senate Appropriations Committee Fiscal Summary
                           Senator Christine Kehoe, Chair

                                           1650 (Feuer)
          Hearing Date:  8/2/2010         Amended: 8/2/2010
          Consultant:  Bob Franzoia       Policy Vote: G O 7-0
          BILL SUMMARY: AB 1650 would prohibit a person that is engaged in  
          activities in the energy sector in Iran from bidding on,  
          entering into or renewing a contract with a state agency for  
          goods or services or a contract with a local public entity for  
          goods or services of $1 million 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 for a person that provides a false certification.   
          This bill would require the awarding body to give reasonable  
          notice, and hearing if requested before penalties are imposed.   
          This bill would impose the penalties on a person that provides a  
          false certification but exercised due diligence, unless the  
          person ceases engagement.  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, if the  
          awarding body determines that a person is a person that engages  
          in investment activities in the energy sector in Iran, to  
          provide 90 days notice of its intent not to enter into or renew  
          a contract for goods or services with that person.  This bill  
          would provide a person that is alleged to be engaged in  
          investment activities in the energy sector in Iran with an  
          opportunity to demonstrate it is not engaged in those  
          activities.  This bill would become inoperative upon the date  
          federal authorization in Public Law 111-195 ceases.
                            Fiscal Impact (in thousands)

           Major Provisions         2010-11      2011-12       2012-13     Fund
           New state contracting  Unknown potential increased costs  
          requirements and restrictions     state goods and  

          State contracts oversight          Unknown costs ongoing to  


          administer       General/
                                           a more complex contracting  
          process,         Special
                                           including costs to resolve  
          protests, delays
                                           in contracting and rebidding  
                                           unknown, if any, penalty  

          STAFF COMMENTS: This bill meets the criteria for referral to the  
          Suspense File.  

          It is unknown how many companies might be restricted from  
          bidding on state contracts, whether any of those companies might  
          be low bid awardees, and how companies and the state will  
          respond to the provisions of the bill.  Implementing a more  
          complex bid process likely will result in new costs ongoing.  

          The federal Comprehensive Iran Sanctions, Accountability, and  
          Divestment Act of 2010 (Public Law 111-195), authorizes a state  
          or local government to adopt and enforce measures meeting  
          certain requirements, to divest the assets of the state or local  

          Page 2
          AB 1650 (Feuer)

          government from, or prohibit the investment of those assets in,  
          any person determined to be engaged in investment activities in  

          A person is engaged in investment activities in the energy  
          sector in Iran if any of the following is true:
          - The person has an investment of $20 million or more in the  
          energy sector in Iran.
          - 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  
          - The person is a financial institution that extends $20 million  
          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.


          A person submitting a false certification would be subject to a  
          civil penalty, termination of an existing contract with the  
          awarding body at the option of the awarding body and  
          ineligibility to bid on a contract for a period of three years.   
          The bill provides for combinations of these penalties where a  
          person submitted false certification but exercised due  
          diligence.  The awarding body shall report to the Attorney  
          General the person determined to have submitted a false  
          certification and the Attorney General shall determine whether  
          to bring a civil action against the person to collect the  
          specified penalty in an amount that is equal to the greater of  
          $250,000 or twice the amount of the contract for which the false  
          certification was made.  Penalty revenue could be paid to the  
          state or to local governments.

          Staff notes AB 498 (Hernandez) Chapter 272/2008 requires a  
          company that bids or submits a proposal for a contract for goods  
          and services with a state agency to self- certify that it is not  
          a scrutinized company engaged in specified activities in Sudan.   
          Also, AB 221 (Anderson) Chapter 671/2007 requires CalPERS and  
          CalSTRS to sell or transfer any investments in a company with  
          business operations in Iran.