BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 2181
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          Date of Hearing:   May 5, 2010

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Felipe Fuentes, Chair

                    AB 2181 (Hagman) - As Amended:  April 12, 2010

          Policy Committee:                              Business and  
          Professions  Vote:                            9-2

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              

           SUMMARY  

          This bill:

          1)Increases the dollar limit for state agency minor capital  
            outlay projects from $400,000 to $800,000.

          2)Requires the Department of Finance (DOF) to adjust the minor  
            capital outlay limit every two years based on the change in  
            the California Construction Cost Index (CCCI) over that time  
            period.

           FISCAL EFFECT  

          Negligible fiscal impact, as the bill only impacts the budgeting  
          and administration of state capital outlay projects.

           COMMENTS  

           1)Background  .  State capital outlay projects are budgeted as  
            either major or minor projects.  Major capital outlay projects  
            are those with a total cost exceeding $400,000. Each major  
            capital outlay project is budgeted to an agency as a separate  
            line item and in one or more phases-i.e. land acquisition,  
            preliminary plans, working drawings, construction, and  
            equipment.  With the exception of some state agencies that  
            have delegated authority, major capital outlay projects are  
            administered by the Department of General Services (DGS) on  
            behalf of the various state agencies.  Minor capital outlay  
            projects are those with total costs of $400,000 or less, and  
            are typically budgeted in a lump sum appropriation to the  
            state agency.  For example, in the 2009-10 Budget Act, the  








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            California Department of Corrections and Rehabilitation (CDCR)  
            minor capital outlay appropriation totaled $3.9 million.  In  
            general, state departments can contract directly for minor  
            capital outlay projects without using the DGS's management  
            services.  The $400,000 limit for minor capital outlay was  
            established in statute in 2001.

           2)Purpose  .  This bill is sponsored by CDCR.  According to a CDCR  
            analysis, due to the rising costs of construction materials  
            and projects at correctional facilities, construction costs  
            for many projects exceed the current minor capital outlay  
            limit. In 2008-09, approximately 28 proposals considered for  
            minor capital outlay projects exceeded the existing limit due  
            to the added costs associated with correctional facility  
            construction.  This bill increases the minor capital outlay  
            limit to $800,000, and directs DOF to henceforth adjust the  
            limit biennially based on construction cost inflation.

           3)Recommended Amendment  .  Staff recommends the bill be amended  
            to make the new minor capital outlay limit $600,000 rather  
            than $800,000.  CDCR indicates that, adjusting for  
            construction cost inflation alone would bring the limit to  
            $750,000.  However, the CCCI has actually increased by only  
            38% since January 2001, thus adjusting the current limit for  
            this increase yields $560,000.  Therefore, a $600,000 limit  
            seems reasonable.  Per the bill, this limit would henceforth  
            be increased biennially according to changes in the CCCI.

           4)Opposition  .  According to the California Association of  
            Professional Scientists, "Increasing these cost limits at a  
            time when the state needs to scrutinize every contract entered  
            into to save as much money as possible is, in our opinion,  
            irresponsible."

            This opposition does not appear to be on point, however, as  
            the bill only affects the budgeting and administration of  
            capital outlay (public works) projects, the construction of  
            which are advertised for bid and awarded to the lowest  
            responsible bidder.

           Analysis Prepared by  :    Chuck Nicol / APPR. / (916) 319-2081 












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