BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 740|
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THIRD READING
Bill No: AB 740
Author: Blumenfield (D)
Amended: As introduced
Vote: 21
SENATE GOVERNMENTAL ORGANIZATION COMM. : 8-5, 6/28/11
AYES: Wright, Calderon, Corbett, De León, Evans,
Hernandez, Padilla, Yee
NOES: Anderson, Berryhill, Cannella, Strickland, Wyland
SENATE APPROPRIATIONS COMMITTEE : 6-3, 8/25/11
AYES: Kehoe, Alquist, Lieu, Pavley, Price, Steinberg
NOES: Walters, Emmerson, Runner
ASSEMBLY FLOOR : 54-19, 5/19/11 - See last page for vote
SUBJECT : Personal services contracts
SOURCE : Author
DIGEST : This bill (1) requires a state agency to
immediately discontinue a contract that State Personnel
Board (SPB) or its delegate disapproves, unless otherwise
ordered by SPB or its delegate, (2) prohibits the state
agency from circumventing or disregarding the SPB's action
by entering into another contract for the same or similar
services or to continue the services that were the subject
of the contract that was disapproved, (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
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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, and (5) makes a
statement of related findings and declarations.
ANALYSIS :
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 the
state makes every effort to use civil servants to
provide services, when any of the following can be met:
A. The services are exempt as defined by the
California Constitution (Article VII).
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.
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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.
J. Services provided are temporary, urgent, or of an
occasional nature.
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 circumventing or
disregarding the SPB's action by entering into another
contract for the same or similar services or to continue
the services that were the subject of the contract that
was disapproved.
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 a statement of related findings and declarations.
Comments
SPB review of contracts . Government Code Section 19130
codifies the exceptions to the civil service mandate
recognized in various court decisions. The purpose of
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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.
A state agency seeking to enter into a personal services
contract on a cost savings basis must submit the contract
to the SPB for review and approval prior to the contract
becoming effective. Upon receipt of the request for
contact review, SPB will forward the contract to the
affected employee organization. The employee organization
can file a challenge to the contract within 10 days of
receipt of the notification by the SPB. If the employee
organization challenges the contract, SPB's Executive
Officer, after review, issues a decision that approves or
disapproves the contract.
State Auditor report . In September 2009, the State Auditor
prepared an audit report on the use of information
technology personal services and consulting contracts (IT
contracts) at the Department of Health Care Services (DHCS)
and the Department of Public Health (DPH), following a
request by the Joint Legislative Audit Committee. The
State Auditor's report discloses that SPB disapproved 17 IT
contracts over the last five years because the departments
did not justify contracting for these services under the
conditions set forth in Government Code Section 19130. The
union prevailed in 17 of its 23 IT contract challenges, but
many of SPB's decisions were moot because the contracts had
already expired before SPB had ruled on the validity of the
contract.
According to the State 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.
The State Auditor recommended that the Legislature specify
that contracts disapproved by SPB be terminated and state
agencies be required to provide documentation to SPB and
the applicable bargaining unit representatives indicating
that the contracts have in fact been terminated. The State
Auditor also recommended that the Legislature clarify the
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circumstances under which state agencies must terminate
contracts disapproved by SPB, when payments to the
contractors must cease, and for what periods of service the
contractors are entitled to receive payments.
Prior Legislation
AB 2494 (Blumenfield), 2009-10 Session, would have required
a state agency to immediately discontinue a contract that
has been disapproved by SPB, unless otherwise ordered. The
bill was vetoed by Governor Schwarzenegger, whose veto
message read: "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."
AB 756 (Eng), 2009-10 Session, would have required a state
agency to provide a link to a centrally located and
accessible state Internet website that includes a list of
the personal services and consulting services entered into
by the agency. The bill was vetoed by Governor
Schwarzenegger.
SB 1596 (Yee), 2007-08 Session, would have required the
Regents of the University of California to establish a
contractor responsibility program and to establish a
centralized contract information data warehouse and would
have required contractors to file a questionnaire with the
Regents regarding such information with civil penalties for
filing incorrect information. The bill was held on the
Senate Appropriations Committee Suspense File.
SB 1331 (Oropeza), 2007-08 Session, would have required the
Governor, as part of the state budget, to submit to the
Legislature information regarding current and proposed
service contracts with a value of $5,000 or more. The bill
was held in Senate Rules Committee.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
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SUPPORT : (Verified 8/25/11)
American Federation of State, County and Municipal
Employees
California Labor Federation, AFL-CIO
Professional Engineers in State Government
Service Employees International Union, Local 1000
ARGUMENTS IN SUPPORT : 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 State Auditor cited serious flaws in the
process for personal services contracts ordered terminated.
This bill implements key recommendations by the State
Auditor to remedy the serious flaws. The State 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 State 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.
ASSEMBLY FLOOR : 54-19, 5/19/11
AYES: Allen, Ammiano, Atkins, Beall, Block, Blumenfield,
Bonilla, Bradford, Brownley, Buchanan, Butler, Charles
Calderon, Campos, Carter, Cedillo, Chesbro, Davis,
Dickinson, Eng, Feuer, Fletcher, Fong, Fuentes, Furutani,
Galgiani, Gatto, Gordon, Hall, Hayashi, Roger Hernández,
Hill, Huber, Hueso, Huffman, Jones, Lara, Bonnie
Lowenthal, Mendoza, Mitchell, Monning, Nestande, Pan,
Perea, V. Manuel Pérez, Portantino, Skinner, Smyth,
Solorio, Swanson, Torres, Wieckowski, Williams, Yamada,
John A. Pérez
NOES: Achadjian, Conway, Cook, Donnelly, Beth Gaines,
Garrick, Grove, Halderman, Harkey, Jeffries, Knight,
Mansoor, Miller, Morrell, Nielsen, Norby, Silva, Valadao,
Wagner
NO VOTE RECORDED: Alejo, Bill Berryhill, Gorell, Hagman,
Logue, Ma, Olsen
PQ:mw 8/26/11 Senate Floor Analyses
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SUPPORT/OPPOSITION: SEE ABOVE
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