BILL ANALYSIS Ó
AB 740
Page 1
ASSEMBLY THIRD READING
AB 740 (Blumenfield)
As Introduced February 17, 2011
Majority vote
BUSINESS & PROFESSIONS 8-0 APPROPRIATIONS 12-5
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|Ayes:|Hayashi, Bill Berryhill, |Ayes:|Fuentes, Blumenfield, |
| |Allen, Butler, | |Bradford, Charles |
| |Eng, Hill, Ma, Nestande | |Calderon, Campos, Davis, |
| | | |Gatto, Hall, Hill, Lara, |
| | | |Mitchell, Solorio |
| | | | |
|-----+--------------------------+-----+--------------------------|
| | |Nays:|Harkey, Donnelly, |
| | | |Nielsen, Norby, Wagner |
| | | | |
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SUMMARY : Requires a state agency to immediately discontinue a
contract that has been disapproved by the State Personnel Board
(SPB), unless otherwise ordered. 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 contract disapproved by
SPB or its delegate.
3)Requires a state agency ordered to discontinue a contract to
serve notice to 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)Declares that failure of the state agency to provide notice to
the vendor, SPB, and employee organizations may be grounds for
rejection of future contracts for the same or similar services
that were discontinued.
5)Makes findings and declarations.
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EXISTING LAW :
1)Governs contracting between state agencies and private
contractors, and sets forth requirements for the procurement
of supplies, materials, equipment, and services by state
agencies.
2)Provides that contracting is permissible to achieve cost
savings when specified conditions are met, and all efforts are
made to use civil servants to provide services.
3)Provides that contracting is permissible, after all efforts
are made to use civil servants to provide services, and when
any of the following can be met:
a) The services are exempt as defined by the State
Constitution;
b) The services are for new state functions and the
Legislature has specifically authorized contracting for the
services;
c) The work is of a highly technical nature and the skills
needed cannot be provided by civil servants;
d) The services are incidental to the purchase of goods;
e) The services are contracted to avoid a conflict of
interest;
f) Emergency services are being provided;
g) Legal services are provided to avoid a conflict of
interest;
h) It is infeasible for the state to provide the services;
i) Service providers are training civil servants on an
interim basis; or,
j) Services provided are temporary, urgent, or of an
occasional nature.
AB 740
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FISCAL EFFECT : According to the Assembly Appropriations
Committee, 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 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
(Auditor) estimated that the Department of Health Care Services
(DHCS) saved more than $1.7 million when it converted
information technology (IT) contracts to state IT positions.
COMMENTS : According to the author's office, "The state in 2009
paid an estimated $34 billion for 13,600 personal services and
consulting contracts. A recent report by the Auditor cited
serious flaws in the process for personal services contracts
ordered terminated. AB 740 would implement key recommendations
by the Auditor to remedy the serious flaws. The Auditor
concluded that a serious problem was the lack of knowing whether
state agencies are complying with SPB's decision to disapprove a
contract. The Auditor also stated that under current law state
departments are able to enter into new contracts for
substantially the same services that had already been reviewed
and rejected."
On March 12, 2008, the Assembly Business and Professions
Committee along with the Assembly Public Employees, Retirement
and Social Security Committee, held a joint hearing entitled,
"Use of Personal Services Contracts for Informational Technology
Services in State Government." A memo provided by SPB outlines
the civil service mandate: "Government Code Section 19130
codifies the exceptions to the civil service mandate recognized
in various court decisions. The purpose of SPB's review of
contracts under Government Code Section 19130 is to determine
whether, consistent with Article VII and its implied civil
service mandate, state work may legally be contracted to private
entities or whether it must be performed by state employees."
In September 2009, the Auditor prepared an audit report on the
use of information technology personal services and consulting
AB 740
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contracts (IT contracts) at DHCS and Department of Public Health
(DPH), following a request by the Joint Legislative Audit
Committee. According to the Auditor, over the last five years,
SPB has disapproved 17 IT contracts because the departments,
upon formal challenges from a union, could not adequately
justify contracting under the Government Code Section 19130.
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.
Analysis Prepared by : Joanna Gin / B.,P. & C.P. / (916)
319-3301
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