BILL ANALYSIS Ó
AB 740
Page 1
Date of Hearing: May 4, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 740 (Blumenfield) - As Introduced: February 17, 2011
Policy Committee: Business and
Professions Vote: 8-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill requires a state agency to immediately discontinue a
contract that has been disapproved by the State Personnel Board
(SPB). Specifically, this bill:
1)Requires a state agency to immediately discontinue a contract
that SPB or its delegate disapproves, unless otherwise ordered
by SPB or its delegate.
2)Prohibits the state agency from entering into another contract
for the same or similar services, or from continuing the
services that were the subject of the disapproved contract.
3)Requires a state agency ordered to discontinue a contract to
notify the vendor within 15 days from SPB's final action,
unless another time period is specified, and requires the
state agency to provide a copy of the notice to SPB and the
employee organization that filed the contract challenge.
4)Stipulates that failure to provide the required notices per
(3) may be grounds for rejection of future contracts for the
same or similar services as those discontinued.
FISCAL EFFECT
Other than minor administrative costs, there will be little net
fiscal impact, as the bill more explicitly implements the
requirements of current law per Government Code Section 19130.
The bill provides SPB with flexibility regarding the timing of
contract termination, so as not to conflict with the specific
terms of a contract. To the extent implementation of the bill
AB 740
Page 2
leads to a shift of state services from contracts to civil
servants, there could be costs or savings depending on the
circumstances.
For example, in its report on this subject, the State Auditor
estimated that the Department of Health Care Services saved more
than $1.7 million when it converted information technology (IT)
contracts to state IT positions.
COMMENTS
1)Background and Purpose . A September 2009 report by the state
auditor on the use of information technology (IT) personal
services and consulting contracts at the Department of Health
Care Services (DHCS) and the Department of Public Health (DPH)
found that, over the preceding five years, SPB had disapproved
17 IT contracts because the departments, upon formal
challenges from a union, could not adequately justify
contracting under Government Code Section 19130-the statute
providing conditions allowing for the use of contracting in
lieu of civil servants to perform state services. Although
the union prevailed in 17 of its 23 IT contract challenges,
many of SPB's decisions were moot because the contracts had
already expired before SPB rendered its decisions.
According to the auditor, because SPB lacks a mechanism for
determining whether state agencies comply with its decisions,
the departments experienced no repercussions for failing to
terminate these contracts. Although not prohibited by law from
doing so, the departments entered into numerous subsequent
contracts for the same services as those in the contracts
previously disapproved by SPB.
The auditor recommended that the Legislature specify that
contracts disapproved by SPB be terminated and require state
agencies to provide documentation to SPB and the applicable
unions to demonstrate to the satisfaction of SPB the
termination of these contracts. AB 740 implements this
recommendation.
2)Prior Legislation . In 2010, an almost identical bill (AB 2494,
Blumenfield) was vetoed by Governor Schwarzenegger, who argued
that "The abrupt termination of contracts that may be
providing critical services could leave departments unable to
meet their programmatic responsibilities and cause unknown
AB 740
Page 3
fiscal and operational problems. Furthermore, it is unclear
if the immediate discontinuation of a contract as a result of
this bill may conflict with the termination language in the
terms and conditions of that contract." It should be noted
that, like AB 2492, this bill allows the board to order other
than an immediate contract termination.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081