BILL ANALYSIS                                                                                                                                                                                                    




                   Senate Appropriations Committee Fiscal Summary
                           Senator Christine Kehoe, Chair

                                           1650 (Feuer)
          
          Hearing Date:  8/12/2010        Amended: 8/4/2010
          Consultant:  Bob Franzoia       Policy Vote: G O 7-0
          _________________________________________________________________ 
          ____
          BILL SUMMARY: AB 1650 would, 90 days after its effective date,  
          prohibit a person that is engaged in investment activities 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 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, 90 days after its effective  
          date, 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 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 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  
          forGeneral/
          requirements and restrictions     state goods, services and  
          borrowing              Special

          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  
          contracts;    
                                           unknown, if any, penalty  
          revenue       
          _________________________________________________________________ 
          ____

          STAFF COMMENTS: 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  
          government from, or prohibit the investment of those assets, in  
          any person determined
          Page 2
          AB 1650 (Feuer)

          to be engaged in investment activities in Iran.  

          A person is engaged in investment activities 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, including in 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 in Iran.
          - 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.