BILL ANALYSIS Ó Bill No: AB 633 SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION Senator Roderick D. Wright, Chair 2011-2012 Regular Session Bill Analysis AB 633 Author: Olsen As Introduced: February 16, 2011 Hearing Date: June 14, 2011 Consultant: Paul Donahue SUBJECT : California State University; Acquisition of motor vehicles SUMMARY : Authorizes the California State University (CSU) to acquire motor vehicles and surplus mobile equipment without first having the Department of General Services (DGS) investigate and establish the necessity for the acquisition. Existing law : 1) Specifies that no state agency purchase order for the acquisition or replacement of motor vehicles shall be issued until DGS has investigated and established that the vehicle purchase is necessary. (Gov. Code § 13332.09) 2) Prohibits a state agency, 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. 3) Authorizes CSU to enter into contracts with any public or private entity for the furnishing of goods, services or equipment. 4) Defines "state agency" to include every state office, officer, department, division, bureau, board, and commission, and, effective July 1, 2012, would again include each campus of the CSU within the definition. (Gov. Code §§ 11000, 13332.09) AB 633 (Olsen) continued PageB 5) Requires CSU, by June 30th of each year 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 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, reduced charges paid to DGS, and competitive or reduced market prices obtained for vehicles. This bill : Effective July 1, 2012, eliminates each campus of the California State University from the definition of a "state agency," thus authorizing CSU to manage and approve its own acquisitions of motor vehicles and mobile equipment. COMMENTS : 1) Purpose of the bill : According to the author's office, in 2004, SB 1757 (Denham) 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. The author also notes that AB 262 (Coto) of 2007 suspended provisions related to DGS approval of vehicle purchasing and required the CSU Board of Trustees to report annually to the Legislature until June 30, 2012, certain information AB 633 (Olsen) continued PageC regarding motor vehicle procurement. The author states that these reports show how CSU was able to procure their vehicles in a more timely and cost-saving manner, and that this bill will allow CSU to continue to procure vehicles cost effectively under its long standing Education Code authority. 2) History : In 1994, the Legislature passed AB 1191 (Aguiar), which authorized the CSU to (1) lease any real property for use by CSU, and (2) procure goods and services, including telecommunications goods and services, without going through the State Department of General Services approval process. In 2004, however, the Legislature passed SB 1757 (Denham), which specifies that CSU must receive approval from DGS before acquiring motor vehicles or general use mobile equipment.<1> In response to this enactment, CSU sponsored AB 262 (Coto) in 2007, which suspended temporarily the requirement that DGS approve motor vehicle purchases made by CSU, instead requiring that CSU prepare an annual report to the Legislature on its motor vehicle inventory, purchases, estimated cost savings, and the like. On July 1, 2012, the reporting requirement expires, and DGS would also resume its oversight and approval of CSU motor vehicle purchases. If this bill passes, CSU motor vehicle purchasing activities would be exempt from DGS oversight and approval, and in addition, CSU would no longer be required to report to the Legislature on its motor vehicle purchases. 3) Should DGS exercise oversight of CSU motor vehicle purchases ? Insofar as CSU is concerned, SB 1757 (Denham) "inadvertently included CSU under a new and duplicative process for the purchasing of vehicles." In fact, there was no inadvertence, but a conscious decision of the Legislature. The provisions specifically requiring DGS approval of CSU motor vehicle purchases were included in the bill from very early on in the legislative process. ------------------------- <1> Gov. Code § 13332.09 (f) additionally states that the "University of California is requested and encouraged to have the ÝDGS] perform the tasks identified in this section with respect to the acquisition or replacement of motor vehicles by the University of California." AB 633 (Olsen) continued PageD Nevertheless, three years later, the Legislature suspended that law for 5 years. The 5-year suspension of the law requiring DGS to exercise oversight of CSU motor vehicle purchases expires on July 1, 2012. During the five-year suspension period CSU is required to annually report its motor vehicle purchases to the Legislature. Without additional legislation, CSU will be subject to DGS oversight and approval of its vehicle purchases on and after July 1, 2012. The policy question is whether the Legislature considers it appropriate or desirable for DGS to exercise oversight of CSU motor vehicle purchases. Regardless of the answer to that question, the debate raises an issue regarding allocation of fees among state agencies to pay for control agency services and oversight. Several years ago, DGS became a fee for service agency. For each service or oversight function provided by DGS, the client agency is billed. It is probably an understatement to say that this has caused friction between DGS and some of the agencies and departments it serves. It is relevant in this discussion because a chief complaint of CSU is that DGS overcharged for services rendered during the 3 years it was subject to direct DGS oversight. For example, CSU states that it was charged approximately $153,000 in DGS Fleet Administration fees during each of the 3 years. DGS does not dispute this charge. It states that it charges $81 per vehicle, and that CSU owns 4456 motor vehicles. DGS states that the per-vehicle fee is a FAMS<2> data management fee that is charged to all state agencies. DGS states that FAMS is used to manage various data that are required to be reported to state and federal entities, and that analysis of FAMS data has been useful in reducing the number of state vehicles in the state fleet. DGS states that the instant availability of FAMS data has enabled DGS to reduce statewide fleet numbers and drive the state toward more efficient use of vehicle assets. ------------------------- <2> FAMS is the Fleet Asset Management System that was fully implemented at DGS in 2009 to manage and control the state vehicle fleet. AB 633 (Olsen) continued PageE CSU submits data to DGS for use in FAMS, but DGS does not charge and CSU does not pay any per vehicle fees, which has been the case since enactment of AB 262 (Coto) in 2007, which enacted the 5-year suspension of DGS oversight of CSU vehicle purchases. The fees that would otherwise be charged to CSU are spread out among other state agencies. CSU states in support of this bill that it also paid approximately $10,400 in DGS procurement fees for the 22 vehicles for which CSU obtained approval from DGS during the 3-year period of DGS oversight. DGS reports that it routinely charges 1.29% of the purchase price of the motor vehicle to any state or local entity that purchases a vehicle using the blanket DGS contract. DGS contends that this fee is more than offset by the savings that accrue to those who utilize the contract, because DGS is able to command a steeply discounted cost for vehicles by virtue of the size of the contract. 4) Gubernatorial Executive Orders on fleet-related issues : Executive Order S-14-09, issued in July 2009, prohibits all state agencies and departments from ordering or purchasing new vehicles for non-emergency use. The Director of DGS could still approve a purchase, subject to review by the Consumer Services Agency Secretary, but 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. On January 27, 2011, Governor Brown issued Executive Order 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 provisions of this bill that delete CSU from the definition of state agency, would remove CSU from the requirements of EO B-2-11, and would also delete its reporting requirements to the Legislature. 5) Related legislation : AB 2031 (Evans), Stats. 2010, ch. 247 prohibits a state AB 633 (Olsen) continued PageF agency or department, including DGS, from purchasing new vehicles without the approval of the Department of Finance and the secretary or director of the agency or department requesting the purchase. AB 262 (Coto) Stats. 2007, ch. 679 requires 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, starting in 2012. AB 262 also deleted mandatory annual fleet reporting requirements from CSU to DGS. AB 236 (Lieu) Stats. 2007, ch. 593 changed state policies regarding the purchase of vehicles for state vehicle fleets in order to increase fuel efficiency and the use of alternative fuels, and expanded the nature and extent of information on which DGS is required to report to the Governor and the Legislature. SB 1757 (Denham) Stats. 2004, ch. 926 establishes requirements for CSU for the acquisition of motor vehicles under the supervision of DGS, and encouraged the University of California to follow these requirements. AB 1191 (Aguiar) Stats. 1994, ch. 1097 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. SUPPORT: California State University (source) OPPOSE: None on file FISCAL COMMITTEE: Senate Appropriations Committee ********** AB 633 (Olsen) continued PageG