BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 1122
                                                                  Page  1

          Date of Hearing:   June 15, 2010

              ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER  
                                     PROTECTION
                                 Mary Hayashi, Chair
                    SB 1122 (Wright) - As Amended:  March 22, 2010

           SENATE VOTE  :   33-0
           
          SUBJECT  :   Public contracts: University of California:  
          competitive bidding and employment. 

           SUMMARY  :   Increases the threshold above which the University of  
          California (UC) must let goods and services contracts to  
          $100,000, and exempts student employees holding multiple campus  
          positions from certain conflict of interest provisions.   
          Specifically,  this bill  :   

          1)Increases the annual expenditure threshold above which UC is  
            required to competitively bid contracts for materials, goods  
            and specified services from $50,000 to $100,000. 

          2)Exempts student UC employees from the prohibition on  
            concurrent employment sponsored or funded by UC, as specified,  
            for additional campus activities or engagements outside of the  
            scope of their primary university employment. 

           EXISTING LAW  : 

          1)Requires UC to let all contracts with expenditures of more  
            than $50,000 annually for goods and materials to the lowest  
            responsible bidder. 

          2)Requires UC to let contracts for services to be performed,  
            other than personal or professional, with expenditures of more  
            than $50,000 annually to the lowest responsible bidder. 

          3)Exempts officers or employees of the university with teaching  
            or research responsibilities from employment restrictions when  
            sponsored or funded by university departments or contracts  
            unrelated to the officer or employee's regular university  
            employment.
          
           FISCAL EFFECT  :   Unknown









                                                                  SB 1122
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           COMMENTS  :   

           Purpose of this bill  .  According to the author's office, "This  
          bill makes changes to the Public Contract Code (PCC) to provide  
          for increased efficiencies and cost savings for the UC.   
          Specifically, this bill would increase the UC's purchasing bid  
          threshold for goods and services from $50,000 to $100,000.  The  
          statutory purchasing bid threshold of $50,000 for goods and  
          services was put in place in 1985, while the cost of goods and  
          services has more than doubled since that time.  A formal bid  
          process on relatively small contracts adds significantly to  
          costs and the complexity can serve as a barrier to small  
          businesses." 

          On a separate provision, the author's office adds that "the PCC  
          contains a conflict of interest provision that creates an  
          administrative barrier for student employees that are employed  
          in a campus department to receive timely payment for other  
          campus activities (e.g., performing arts)."

           Background  .  Existing law establishes a competitive bid  
          threshold for goods and services purchase by UC of $50,000.    
          For purchases in excess of $50,000, UC must competitively bid  
          the goods and services.  According to UC, bids are managed by  
          the Procurement department, which is understaffed.  Increasing  
          the bid threshold to $100,000 before conducting a competitive  
          bid process creates greater efficiencies and reduces costs  
          because it takes anywhere from two to 12 months to run a bid  
          process depending upon the complexity, number or bids, and the  
          origin of the bid. 

          According to UC, the change in the bid threshold proposed by  
          this bill affects contracts for goods, materials and services  
          that can include items such as laboratory instruments and  
          supplies, chemical reagents, computer software licenses and  
          updates, janitorial supplies, commercial kitchen supplies,  
          furniture, consultant services, and equipment repair, among  
          other things.  This bill does not affect UC contracts for labor  
          and materials related to construction projects, which, under  
          current law, are subject to a $50,000 competitive bid threshold.

          Current law prohibits university employees, including student  
          employees from engaging in any employment, activity or  
          enterprise for compensation when that employment is sponsored or  
          funded by university departments or contracts unrelated to the  








                                                                  SB 1122
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          officer or employee's regular university employment.  According  
          to UC, these provisions continually raise issues for student  
          employees employed by campus departments but receiving payment  
          for other campus activities as well.  Though these students  
          eventually get paid, this requires issuance of an exception,  
          review and research by campus purchasing and human resource  
          directors, then manual keying of each check by staff processors,  
          resulting in delaying payment to students and increased  
          administrative costs.

           Support  .  According to the sponsor, UC, "Currently, if UC  
          anticipates that it will spend more than $50,000 with any one  
          supplier, it must run a competitive bid process?.  Formal bud  
          processes can be costly and the complexity of bid requests can  
          serve as a barrier to small business.  California small  
          businesses often do not have the resources to respond to UC bid  
          proposal requests and are challenged in meeting UC requirements  
          in the formal competitive bid process.  

          "Increasing the bid threshold would result in immediate cost  
          savings for UC by reducing the number of contracts that would be  
          subject to the bid process.  UC estimates that this proposal  
          would save $780,000 annually in administrative costs associated  
          with managing a competitive bid proposal.  Additionally,  
          increasing the limit would make the requirements for the  
          procurement of goods and services for UC more in line with those  
          of the California State University, which has a less rigorous  
          process for bids between $50,000 and $100,000. 

          "SB 1122 would exempt student employees from an existing  
          provision that prohibits university employees from being an  
          independent contractor with any university department to provide  
          services or goods.  The existing law, which includes an  
          exemption for employees in teaching and research positions,  
          raises issues for many of our student employees not covered by  
          this exemption.  Many student employees perform other activities  
          at UC to supplement their income, such as performing arts.   
          Because existing law does not provide a specific exemption for  
          student employees, UC must review payments to these students on  
          a case-by-case basis to determine if it is allowed by law.

          "This review process, which occurs approximately 475-500 times  
          per year, can result in delayed payments to students of up to  
          three weeks.  In addition to allowing more timely payment to  
          students, UC estimates that an exemption would result in  








                                                                  SB 1122
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          additional administrative cost savings for UC upwards of  
          $175,000 annually."

           Previous Legislation  .  AB 2037 (Portantino) of 2008 would have  
          increased: the expenditure threshold above which UC is required  
          to competitively bidding construction projects from $50,000 to  
          $100,000; the thresholds below which UC may use its own  
          employees rather than contract out for labor from $20,000 to  
          $100,000 for painting projects and from $50,000 to $100,000 for  
          all other projects; and, the threshold under which UC can use an  
          informal competitive bidding process from $100,000 to the  
          definition of minor capital outlay as determined by the  
          Department of General Services.  This bill was amended to  
          address an unrelated subject matter. 

          SB 1596 (Yee) of 2008 would have limited the terms of all  
          contracts for goods, materials, and services awarded by UC to no  
          more than three years and would have limited any contract  
          extensions to one year.  This bill was held in the Senate  
          Appropriations Committee. 

          SB 1467 (Bowen), Chapter 1122, Statutes of 2002, applies  
          standard PCC conflict of interest and penalty provisions to  
          procurement by UC. 

           Double-referred  .  This bill is double-referred to Assembly  
          Higher Education Committee.

           REGISTERED SUPPORT / OPPOSITION  :

           Support 
           
          University of California (sponsor) 
           
            Opposition 
           
          None on file. 

           Analysis Prepared by  :    Joanna Gin / B.,P. & C.P. / (916)  
          319-3301