BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



           ------------------------------------------------------------ 
          |SENATE RULES COMMITTEE            |                  AB 2181|
          |Office of Senate Floor Analyses   |                         |
          |1020 N Street, Suite 524          |                         |
          |(916) 651-1520         Fax: (916) |                         |
          |327-4478                          |                         |
           ------------------------------------------------------------ 
           
                                         
                                 THIRD READING


          Bill No:  AB 2181
          Author:   Hagman (R)
          Amended:  5/10/10 in Assembly
          Vote:     21

           
           SENATE GOVERNMENTAL ORG. COMMITTEE  :  7-0, 6/22/10
          AYES:  Wright, Harman, Calderon, Florez, Padilla, Price,  
            Yee
          NO VOTE RECORDED:  Denham, Negrete McLeod, Oropeza, Wyland

           SENATE APPROPRIATIONS COMMITTEE  :  Senate Rule 28.8

           ASSEMBLY FLOOR  :  61-3, 5/17/10 - See last page for vote


           SUBJECT  :    State Contract Act: contracting by state  
          agencies

           SOURCE  :     California Department of Corrections and  
          Rehabilitation


           DIGEST  :    This bill increases the dollar limit for state  
          agency minor capital outlay projects from $400,000 to  
          $600,000.

           ANALYSIS  :    The State Contract Act governs contracting  
          between state agencies and private contractors, and sets  
          forth requirements for the bidding, awarding, and  
          overseeing of contracts for projects, which it defines to  
          include the construction or other improvement to a state  
          structure or building with a total cost threshold equal to  
                                                           CONTINUED





                                                               AB 2181
                                                                Page  
          2

          $250,000 for calendar year 2010, as adjusted upward or  
          downward every two years by the Director of Finance (DOF)  
          to reflect the percentage change in the annual California  
          Construction Index (CCI) as used by the Department of  
          General Services (DGS).

          Under the existing State Contract Act, where the nature of  
          the work in the opinion of the Department of Water  
          Resources (DWR), DGS, Department of Boating and Waterways  
          (DBW), California Department of Corrections and  
          Rehabilitation (CDCR), the Military Department or the  
          Department of Transportation (CalTrans) is such that its  
          services in connection with the work are not required, the  
          applicable department may authorize the carrying out of the  
          project directly by the state agency concerned if the  
          estimated cost does not exceed $400,000, except that this  
          limitation does not apply to a project of a district  
          agricultural association or the State Lands Commission.

          This bill:

          1. Increases the dollar limit of specified capital outlay  
             projects from $400,000 to $600,000 and allows state  
             agencies to budget those projects as a minor capital  
             outlay project and carry them out without DGS's  
             approval.

          2. Requires DOF to adjust the minor capital outlay budget  
             limit every two years to reflect the percentage change  
             in the annual California Construction Index (CCI) used  
             by DGS.

          3. Requires that whenever statute provides for any project  
             that does not fall under the jurisdiction of DWR,  
             Caltrans, DBW, CDCR, or the Military Department, the  
             project shall be under the sole charge and direct  
             control of DGS, instead of Caltrans.

           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  







                                                               AB 2181
                                                                Page  
          3

          item and in one or more phases (e.g., 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 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.  In  
          general, state departments can contract directly for minor  
          capital outlay projects without using the DGS's management  
          services.  The threshold was last raised in 2000 (from  
          $250,000 to $400,000).

           Prior/Related Legislation

           AB 31 (Price) Chapter 212, Statutes of 2009, Among other  
          things, establishes for the calendar year 2010 a cost  
          threshold of $250,000 for projects covered under the State  
          Contract Act that would be adjusted every two years to  
          reflect the percentage change in the annual California  
          Construction Index as used by DGS.

          AB 3020 (Salas) Chapter 106, Statutes of 2008, adds the  
          Military Department to the list of state departments  
          authorized to enter into contracts for public works  
          projects pursuant to the State Contract Act.

          AB 2369 (Keeley) Chapter 528, Statutes of 2000, among other  
          things, increases the minor capital outlay threshold from  
          $250,000 to $400,000 for which DGS may delegate public  
          works project management duties to agencies with  
          demonstrated competence.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  No

           SUPPORT  :   (Verified  8/2/10)

          California Department of Corrections and Rehabilitation  
          (source)
          Associated Builders and Contractors of California
          California Chapter of the American Fence Association
          California Fence Contractors' Association
          California Military Department







                                                               AB 2181
                                                                Page  
          4

          Engineering Contractors' Association
          Flasher/Barricade Association
          Marin Builders' Association

           OPPOSITION  :    (Verified  8/2/10)

          California Association of Professional Scientists

           ARGUMENTS IN SUPPORT  :    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 $600,000, and direct DOF to henceforth adjust the  
          limit biennially based on construction cost inflation.

           ARGUMENTS IN OPPOSITION  :    Writing in opposition, the  
          California Association of Professional Scientists argues  
          that, "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."  

           ASSEMBLY FLOOR  : 
          AYES:  Adams, Anderson, Arambula, Beall, Bill Berryhill,  
            Blakeslee, Block, Bradford, Buchanan, Carter, Conway,  
            Cook, Coto, Davis, De La Torre, De Leon, DeVore,  
            Emmerson, Eng, Feuer, Fletcher, Fuentes, Fuller, Gaines,  
            Galgiani, Garrick, Gilmore, Hagman, Hall, Harkey,  
            Hayashi, Hernandez, Hill, Huber, Huffman, Jeffries,  
            Knight, Lieu, Logue, Bonnie Lowenthal, Ma, Mendoza,  
            Miller, Nestande, Niello, Nielsen, Norby, V. Manuel  
            Perez, Portantino, Ruskin, Salas, Saldana, Skinner,  
            Smyth, Solorio, Audra Strickland, Torres, Torrico, Tran,  
            Villines, John A. Perez
          NOES:  Blumenfield, Chesbro, Swanson
          NO VOTE RECORDED:  Ammiano, Bass, Tom Berryhill, Brownley,  
            Caballero, Charles Calderon, Evans, Fong, Furutani,  
            Jones, Monning, Nava, Silva, Torlakson, Yamada, Vacancy









                                                               AB 2181
                                                                Page  
          5

          TSM:do  8/2/10   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

                                ****  END  ****