BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 740 (Blumenfield)
Hearing Date: 8/25/2011 Amended: As Introduced
Consultant: Bob Franzoia Policy Vote: G O 8-5
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BILL SUMMARY: AB 740 would require a state agency to immediately
discontinue a contract disapproved by the State Personnel Board
(board) unless ordered otherwise by the board. This bill would
prohibit the state agency from circumventing or disregarding the
board's action by entering into another contract for the same
service or to continue the services that were the subject of the
contract that was disapproved. This bill would require the
state agency to serve notice of the discontinuation of the
contract to the vendor within 15 days from the board's final
action, and to serve a copy of the notice on the board and the
employee organization that filed the contract challenge.
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
State Personnel Board Unknown, likely minor costs annually
toGeneral/
contract review processensure state agencies discontinue
con-Special
tracts pursuant to board directives
Contract disapprovals Unknown savings or short
term costs General/ resulting
from immediate terminations Special
of contracts
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STAFF COMMENTS: SUSPENSE FILE.
Government Code 19130 provides that personal service contracting
is permissible to achieve cost savings if the contracting agency
clearly demonstrates that the proposed contract will result in
actual overall cost savings to the state taking into
consideration several conditions.
AB 740 (Blumenfield)
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Government Code 19131 provides that any state agency proposing
to execute a contract shall notify the board. All organizations
that represent state employees who perform the type of work to
be contracted, and any person or organization which has filed
with the board, a request for notice, shall be contacted
immediately so they may be given a reasonable opportunity to
comment on the proposed contract. Any employee organization may
request, within ten days of notification, the board review any
contract proposed or executed pursuant to the Government Code
noted above.
A report by the Bureau of State Audits on the use of information
technology (IT) personal services and consulting contracts at
the Department of Health Care Services and the Department of
Public Health found that, over the preceding five years, the
board had disapproved 17 IT contracts because the departments,
upon formal challenge from a union, could not adequately justify
contracting under Government Code 19130. Although the union
prevailed in 17 of 23 contract challenges, many of the
board's decisions were moot because the contracts had already
expired before the board rendered its decision.
The report recommended that the Legislature specify that
contracts disapproved by the board be terminated and require
state agencies to provide documentation to the board and the
applicable unions demonstrate to the satisfaction of the board
the termination of the contracts. This bill implements that
recommendation.
Generally, immediately discontinuing a contract should result in
savings as it is an acknowledgement by the board that that the
contract violated Government Code 19130 and resulted in the
state contracting for work that civil service employees would
have performed at a lower cost. Immediately discontinuing a
contract could however, result in a job not being completed,
thus requiring a greater short term expenditure of funds.
Restricting limited term contracting may result in long term
personnel costs. How the board would enforce an action to
disapprove a contract is uncertain. The board could incur legal
costs when contract holders contest discontinuation orders.
It does not appear that the immediately discontinuing of a
contract would necessarily conflict with termination language in
a contract as the bill provides the board discretion such that
AB 740 (Blumenfield)
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in cases where a termination clause existed, the board could
honor that clause.
This bill is identical to AB 2494/2010 (Blumenfield) which was
vetoed by Governor Schwarzenegger with the following message:
The abrupt termination of contracts that may be providing
critical services could leave departments unable to meet their
programmatic responsibilities and cause unknown 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.
Ultimately, this bill makes the process of contracting for
personal and consulting services more complicated and will only
result in greater expense to the taxpayer.