BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 633
                                                                  Page  1

          Date of Hearing:   March 22, 2011

              ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER 
                                     PROTECTION
                                 Mary Hayashi, Chair
                  AB 633 (Olsen) - As Introduced:  February 16, 2011
           
          SUBJECT  :   California State University: acquisition or 
          replacement of motor vehicles. 

           SUMMARY  :   Removes the California State University (CSU) from 
          the definition of "state agency" for the purposes of state fleet 
          purchasing requirements and oversight by the Department of 
          General Services (DGS).  

           EXISTING LAW  : 

          1)Defines "state agency" to include every state office, officer, 
            department, division, bureau, board, and commission.   

          2)Defines "state agency" to include each campus of the CSU, as 
            of July 1, 2012, and subjects CSU to DGS acquisition and 
            replacement of motor vehicles.

          3)Requires CSU, by June 30, 2008, and by June 30th of each year 
            thereafter until July 1, 2012, to report to the Legislature on 
            its motor vehicle procurement, including the following: 

             a)   An inventory of motor vehicles by campus and type, 
               consistent with the fleet report to DGS; 

             b)   The number of vehicles purchased during the prior fiscal 
               year (FY), by campus and type; 

             c)   The average time taken to complete procurement of each 
               motor vehicle purchased during the prior FY; 

             d)   Any changes in policies or procedures made during the 
               prior FY relative to motor vehicle procurement and 
               contracts, and the identification of any vehicles procured 
               pursuant to the new policy or procedure; and, 

             e)   The estimated cost savings associated with management by 
               CSU of motor vehicle procurement, including average time to 
               complete procurements, reduced administrative costs, 








                                                                  AB 633
                                                                  Page  2

               reduced charges paid to DGS, and competitive or reduced 
               market prices obtained for vehicles. 

          4)Provides that no surplus mobile equipment may be acquired from 
            any source by any state agency for program support until DGS 
            has investigated and established its need.

          5)Prohibits a state agency or department, including DGS, from 
            purchasing new vehicles without the approval of the Department 
            of Finance (DOF) and the secretary or director of the agency 
            or department requesting the purchase.

           FISCAL EFFECT  :   Unknown

           COMMENTS  :   

           Purpose of this bill  .  According to the author's office, "SB 
          1757 (Denham), Chapter 926, Statute of 2004, inadvertently 
          included CSU under a new and duplicative process for purchasing 
          vehicles.  For several years, this legislation cost CSU over 
          $240,000 per year to support the DGS Fleet Management Program 
          despite the fact that CSU is less than two percent of DGS's 
          total purchases statewide.  

          "In 2007, AB 262 (Coto), Chapter 679, Statutes of 2007, 
          suspended Ýprovisions of SB 1757 related to] DGS approval for 
          vehicle purchasing and required the CSU Board of Trustees to 
          report annually to the Legislature until June 30, 2012, certain 
          information regarding motor vehicle procurement.  

          "These reports show how CSU was able to procure their vehicles 
          in a more timely and cost-saving manner.  AB 633 will allow the 
          CSU to continue to procure vehicles cost effectively."

           Background  .  DGS serves as the state's motor vehicle fleet 
          manager.  While some state departments have delegated vehicle 
          purchasing authority, others must request vehicle purchases 
          through DGS.  This bill, AB 633, eliminates the requirement that 
          CSU obtain approval from DGS prior to purchasing vehicles and 
          excludes CSU from the requirements of Executive Order (EO) 
          B-2-11 by redefining "state agency" to exclude CSU for vehicle 
          purchases.  This bill takes a different direction than recent 
          legislation relating to CSU and the state fleet.  AB 262 (Coto), 
          Chapter 679, Statutes of 2007, required CSU to purchase cars 
          through DGS and be subject to DGS oversight as part of the state 








                                                                  AB 633
                                                                  Page  3

          fleet by redefining "state agency" to include each campus of the 
          CSU for vehicle purchases, as of July 1, 2012.  If this bill 
          passes, the statutory provision requiring DGS approval and 
          oversight of CSU for fleet purchases approved in AB 262 will not 
          take effect.

          In the past few years, due to the budget deficit, there have 
          been several pieces of legislation and executive orders seeking 
          to reduce the size of the state fleet.   In July 2009, Executive 
          Order (EO) S-14-09 was signed, prohibiting all state agencies 
          and departments from ordering or purchasing new vehicles for 
          non-emergency use.  Exemptions could still be approved by the 
          Director of DGS, subject to review by the Consumer Services 
          Agency Secretary, and only when the purchase was necessary to 
          protect public health and safety, provide critical services and 
          functions, utilize federal stimulus funding, or achieve cost 
          savings. 

          In October 2009, the DGS deputy director overseeing the state 
          fleet resigned over the controversy that DGS and the Department 
          of Transportation spent $5.5 million on new vehicles left idle 
          during a budget deficit.  In response, the Assembly Committee on 
          Accountability and Administrative Review held an oversight 
          hearing in February 2010 on state expenditures for vehicle 
          purchases.  As a result, AB 2031 (Evans), Chapter 247, Statutes 
          of 2010, prohibited a state agency or department, including DGS, 
          from purchasing new vehicles without the approval of DOF and the 
          secretary or director of the agency or department requesting the 
          purchase.

          On January 27, 2011, upon assuming office and facing a $25 
          billion budget deficit, Governor Jerry Brown issued EO B-2-11, 
          which requires agencies and departments to review home-storage 
          permits and fleet usage and submit a plan to DGS to withdraw 
          vehicles that are non-essential or cost-ineffective to be later 
          sold.  Like its predecessor, EO B-2-11 also prohibits the 
          purchase of non-emergency vehicles, unless the vehicle is 
          essential for health and safety purposes or realizes cost 
          savings.

          The sponsors of this bill, the CSU Board of Trustees, contend 
          that CSU previously was authorized to independently purchase 
          goods and services, and did so more efficiently than purchasing 
          through DGS.  AB 1191 (Aguiar), Chapter 1097, Statutes of 1997, 
          authorized the CSU Board of Trustees to lease any real property 








                                                                 AB 633
                                                                  Page  4

          for use by CSU and procure goods and services, including 
          telecommunications goods and services, without going through the 
          DGS approval process.  

          CSU's procurement of its own vehicles ended in 2005, with the 
          passage of SB 1757 (Denham), Chapter 926, Statutes of 2004, 
          which established requirements for the acquisition of motor 
          vehicles under the supervision of DGS.  SB 1757 authorized DGS 
          to collect a fee from CSU to offset the cost of services 
          provided.  CSU contends DGS charged CSU $80 per vehicle per year 
          for service costs.  AB 262 (Coto), Chapter 679, Statutes of 
          2007, afforded CSU the opportunity to purchase their own 
          vehicles under their own policies, and subject to annual 
          reporting requirements to both the Legislature and DGS, until 
          July 1, 2012.  CSU maintains that this sunset date was 
          negotiated to allow enough time for CSU to collect data and 
          prove that their vehicle procurement was more cost effective 
          than vehicle procurement through DGS.  

          CSU began reporting its vehicle procurements to the Legislature 
          in 2008 by providing two reports.  The first report was split 
          between the period July 1, 2007 to December 31, 2007 when DGS 
          was controlling CSU vehicle purchases and the second report was 
          split between the period January 1, 2008 to June 30, 2008, when 
          CSU was controlling its own vehicle purchases.  CSU writes that 
          it "was charged approximately $153,000 in DGS Fleet 
          Administration fees.  Although DGS was only servicing CSU for 
          the first six months of the fiscal year, CSU was refused 
          reimbursement for the last six months when DGS was not providing 
          services.   CSU also paid approximately $10,400 in DGS 
          procurement fees for the 22 vehicle 'approvals' from DGS.   CSU 
          still issued all purchase orders and made payment directly to 
          the vendors.
          
          "It is very difficult to associate any estimate to savings in 
          actual vehicle costs resulting from CSU processing vehicle 
          procurement without DGS involvement?  CSU experienced an average 
          DGS approval processing time for a 'passenger' vehicle of 63 
          days for 20 vehicles versus 13 days for the 37 vehicles 
          purchased directly by CSU without DGS involvement.  Due to the 
          nature of CSU campus vehicle fleets, when a campus requires a 
          vehicle, it is typically an immediate requirement where the 
          additional time to procure a vehicle means substantive loss of 
          program productivity."









                                                                  AB 633
                                                                  Page  5

          CSU claims that it has been fiscally responsible in managing its 
          fleet and was never intended to be captured under DGS vehicle 
          procurement in SB 1757.  CSU purchased 86 vehicles for 
          FY2007-08, 81 vehicles for FY 2008-09, and 43 vehicles for FY 
          2009-10.  The decline in purchase of vehicles has been 
          attributed to recent budget reductions, with a steady purchase 
          of vehicles for campus police.  CSU states that while recent 
          budget reductions have decreased its number of vehicle 
          purchases, CSU could still acquire vehicles at a cost savings of 
          approximately $500 per vehicle and 50 days earlier than if CSU 
          were to utilize DGS to procure its vehicles.  

          Staff notes that deleting CSU from the definition of state 
          agency would remove CSU from the requirements of EO B-2-11 and 
          would delete CSU's annual reporting requirements to the 
          Legislature and DGS.
           Support  .  According to the sponsor, CSU, AB 633 would "eliminate 
          duplicative administrative processes by making permanent ÝCSU's] 
          ability to purchase vehicles for academic programs and 
          personnel.  Since 1986, the CSU has had the authority to make 
          all procurements, including purchasing vehicles within state 
          law.  The CSU was awarded this authority after successfully 
          demonstrating Ýthe] ability to be more responsive to the unique 
          needs of Ýtheir] campuses and their faculty, staff, and 
          students.  ÝIt was] also demonstrated that the CSU can be more 
          efficient in the use of taxpayer dollars without unnecessary and 
          duplicative work by the DGS."
          
           Prior Legislation  .  AB 2031 (Evans), Chapter 247, Statutes of 
          2010, prohibited a state agency or department, including DGS, 
          from purchasing new vehicles without the approval of DOF and the 
          secretary or director of the agency or department requesting the 
          purchase.

          AB 262 (Coto), Chapter 679, Statutes of 2007, required CSU to 
          purchase cars through DGS and be subject to DGS oversight as 
          part of the state fleet by redefining "state agency" to include 
          each campus of the CSU for vehicle purchases, commencing January 
          1, 2012.  AB 262 also deleted mandatory annual fleet reporting 
          requirements and cost savings information from CSU to DGS. 

          SB 1757 (Denham), Chapter 926, Statute of 2004, established 
          requirements for the acquisition of motor vehicles under the 
          supervision of DGS, and encouraged the University of  California 
          to follow these requirements. 








                                                                  AB 633
                                                                  Page  6


          AB 1191 (Aguiar), Chapter 1097, Statutes of 1997, authorized the 
          CSU Board of Trustees to lease any real property for use by CSU, 
          and procure goods and services, including telecommunications 
          goods and services, without going through the DGS approval 
          process.

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          California State University (sponsor)

           Opposition 
           
          None on file. 
           
          Analysis Prepared by  :    Joanna Gin / B.,P. & C.P. / (916) 
          319-3301