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) 






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          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 





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          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."





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          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.





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          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 





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          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



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