BILL ANALYSIS �
AB 1206
Page 1
Date of Hearing: April 26, 2011
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Mary Hayashi, Chair
AB 1206 (Galgiani) - As Amended: March 30, 2011
SUBJECT : High-speed rail: contracts: small businesses.
SUMMARY : Requires the High Speed Rail Authority (Authority) to
adopt a small business enterprise program (program) for
construction contracts. Specifically, this bill :
1)Requires the Authority to adopt a program for construction
contracts that:
a) Includes oversight of state and federal funds,
contractor compliance monitoring and enforcement efforts,
tracking and reporting mechanisms, and prompt payment,
reporting, and closeout provisions;
b) Is subject to the State Auditor's review of program
expenditures;
c) Requires the Authority to adopt an oversight and
accountability program relative to the program;
d) Requires the Authority to submit an annual report to the
Department of General Services (DGS) and the Legislature on
business enterprises' participation levels awarded under
the program, as specified, that shall also be posted on the
Authority's Internet Web site.
2)Creates the following definitions:
a) "Disabled veteran business enterprise" (DVBE) to mean a
business in which disabled veterans hold a majority
ownership, manage and control daily business operations,
and whose home office is in the United States;
b) "Microbusiness" to mean a small business which, together
with affiliates, has average annual gross receipts of $2.5
million or less over the previous three years, or is a
manufacturer with 25 or fewer employees; and,
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c) "Small business enterprise" to mean an independently
owned and operated business that is not dominant in its
field of operation, the principal office of which is
located in California, the officers are domiciled in
California, and which, together with affiliates, has 100 or
fewer employees and average annual gross receipts of $10
million or less over the previous three years, or which is
a manufacturer with 100 or fewer employees.
3)Makes legislative findings and declarations.
EXISTING LAW :
1)Requires DGS to administer the state Small Business Act,
including a small business certification process and a
streamlined procurement process for state contracts under
$100,000 that is exempt from advertising, bidding, and protest
provisions in the State Contract Act.
2)Declares that small businesses and microbusinesses receive a
fair portion of the total purchases and contracts or
subcontracts for state goods, services, information
technology, and construction.
3)Establishes a 25% small business participation goal for all
contracts financed with the proceeds of the
infrastructure-related bond acts of 2006.
4)Establishes bid preferences for certified small businesses and
microbusinesses for the award of state procurement contracts
of at least 5% of solicitations made either on the basis of
lowest responsible dollar bid or on the basis of highest
score, with a single bid preference limit of $50,000.
Non-small businesses that subcontract at least 25% of their
contracts with certified small businesses also qualify for the
small business bidders' preference.
5)Requires each state agency to consolidate its existing staff
functions that relate to contract opportunities for small
businesses into a single point of contact for small businesses
and designate a small business advocate as a liaison to small
business suppliers.
FISCAL EFFECT : Unknown
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COMMENTS :
Purpose of this bill . According to the author's office, "A
massive public works project like the High Speed Rail (HSR)
provides an unprecedented opportunity for the state to
strengthen the core of California's economy by expanding
business opportunities for small contractors. California's
dominance in many economic areas is based, in part, on the
significant role small businesses play in the state's $1.8
trillion economy. Businesses with less than 100 employees
comprise more than 98.3% of all businesses, and are responsible
for employing more than 57.9% of all workers in the state?
Although microbusinesses comprise over 80% of California's
certified small businesses, and while it was the state's intent
to afford microbusinesses the same opportunities as other small
businesses to compete for state contracts, many microbusiness
owners are disadvantaged when competing against their larger
small-business counterparts."
Background . The Small Business Act, administered through DGS,
was established 30 years ago to grant a small business
preference within the state's procurement process. In 1989, a
DVBE component was added to state procurement practices.
Current law requires DGS to report the participation levels of
DVBEs and small businesses that include the owner's race,
ethnicity, and gender information in statewide contracts.
Executive Order (EO) S-02-06 required all state agencies,
departments, boards and commissions to achieve a goal of 25%
small business participation in state procurements and
contracts. Since 2001, the Governor has issued several EOs
specifying a 25% participation goal for small businesses and a
3% DVBE participation goal in state procurement contracts,
including EO D-37-01 (2001), EO S-02-06 (2006), EO
D-43-01(2001), and EO S-11-06 (2006). Statutory advancements
were also made to strengthen the Small Business Act, including
SB 115 (Florez), Chapter 451, Statutes of 2005, which required
DGS to establish a DVBE incentive program for state contracts,
and AB 761 (Coto), Chapter 611, Statutes of 2007, which codified
the 25% small business participation goal for contracts related
to revenues expended from the 2006 infrastructure bonds.
The Authority is already reporting its small business
participation levels to DGS, and complying with the EOs
specifying small business and DVBE participation goals.
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The Authority is already working to develop a Small Business
Outreach Program, and will meet in May to discuss program
details. Currently, all Authority procurement must go through
DGS, including construction contracts approved by the High Speed
Rail Board. Since HSR construction will commence in Fall 2012
at the earliest, bidding will not begin until next year.
Related Legislation . AB 150 (Perea) of 2011 allows DGS to
direct minimum business participation goals for state contracts
and to monitor progress in meeting this goal, commencing July 1,
2012. This bill is pending in the Assembly Business,
Professions and Consumer Protection Committee.
SB 67 (Price) of 2011 authorizes DGS to direct all state
agencies to establish a 25% participation goal for California
certified small businesses in state procurement and contracts.
This bill is pending in the Senate Appropriations Committee.
SB 733 (Price) of 2011 requires the Authority to develop a
strategy in conjunction with the Employment Development
Department, to ensure that at least 25% of the construction
project workforce at each Authority worksite is from the local
workforce. This bill is pending in the Senate Transportation
and Housing Committee.
Previous Legislation . SB 967 (Correa) of 2010 would have
required a 5% bid preference to be provided on state contracts
for goods and services exceeding $1 million, including contracts
funded by the federal American Recovery and Reinvestment Act of
2009, to contractors who substantiate that 90% of their
employees performing work on the contract are California
residents. The Governor vetoed this bill, with the following
message: "While this bill seeks to create new jobs and
stimulate the economy, it would cost the state hundreds of
millions of dollars in bid preferences and administration at a
time when the state is in a fiscal crisis. Additionally,
reciprocity statutes, enacted by at least 36 other states, would
add a percentage to bids submitted by California businesses
bidding on contracts with those states, making it difficult for
California businesses to contract with other states."
AB 309 (Price) of 2009 was a similar bill that would have
required a 25% small business participation goal for state
contracts and would have required DGS to monitor progress in
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meeting this goal. This bill was held in the Assembly
Appropriations Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
None on file.
Analysis Prepared by : Joanna Gin / B.,P. & C.P. / (916)
319-3301