BILL ANALYSIS Ó
SB 224
Page 1
SENATE THIRD READING
SB 224 (Pavley)
As Amended September 1, 2011
Majority vote
SENATE VOTE :37-0
BUSINESS & PROFESSIONS 9-0 APPROPRIATIONS 16-0
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|Ayes:|Hayashi, Bill Berryhill, |Ayes:|Fuentes, Harkey, |
| |Allen, Butler, | |Blumenfield, |
| |Eng, Hagman, Hill, Ma, | |Bradford, Charles |
| |Smyth | |Calderon, Campos, |
| | | |Donnelly, Gatto, Hall, |
| | | |Hill, Lara, |
| | | |Mitchell, Nielsen, Norby, |
| | | |Solorio, |
| | | |Wagner |
|-----+--------------------------+-----+--------------------------|
| | | | |
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SUMMARY : Exempts specified Department of Water Resources (DWR)
contracts from competitive bidding requirements and Department
of General Services (DGS) approval. Specifically, this bill :
1)Exempts DWR contracts over $25,000 for the acquisition of
specialized equipment for State Water Resources Development
System (SWRDS) facilities from competitive bidding
requirements.
2)Requires DWR to collaborate with DGS to establish conditions
where competitive bidding exemptions apply in order to
expedite operations and maintenance work to reduce the risk of
the loss of water or power to the SWRDS.
3)Exempts from approval by DGS, contracts for the acquisition,
sale, or transmission of power, or for services to facilitate
such activities under the Central Valley Project (CVP) or the
California Resources Development Bond Act.
4)Exempts service contracts for the operation, maintenance,
repair, or replacement of specialized equipment at SWRDS
facilities under the CVP or California Water Plan from
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competitive bidding requirements and DGS approval.
5)Makes technical and clarifying changes.
EXISTING LAW :
1)Provides that state goods and services contracts are void
until approved by DGS, and exempts specified contracts entered
into by the following entities:
a) The California State University, the California
Community Colleges, or a department under the State
Contract Act or the California State University Contract
Law;
b) The California Department of Transportation (CalTrans),
including contracts funded by federal and local taxes;
c) The Department of Personnel Administration;
d) The Legislature; or,
e) The State Compensation Insurance Fund.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, minor administrative cost savings to DGS and DWR, and
potential contract cost savings.
COMMENTS : According to the author, "Each year, DWR enters into
hundreds of contracts, often valued in the millions. Despite
having an extensive contracting operation staffed by dozens of
experienced attorneys and contract specialists, DWR must still
have many of its contracts reviewed and approved by DGS. This
additional level of review delays the execution of contracts and
adds unnecessary costs to each contract. SB 224 will provide
DWR the same exception to DGS's contract review that has been
given to CalTrans. In doing so, SB 224 will eliminate costly
contract delays and unnecessary bureaucratic review."
DGS's Procurement Division is the central purchasing authority
for all state departments and agencies. DGS also has the
statutory authority to delegate its purchasing authority to
departments that meet specific requirements. DWR has an
information technology (IT) purchasing authority limit of $1
million, and a non-IT purchasing authority limit of 100,000,
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similar to Caltrans. There are only a few state agencies with
higher purchasing authority limits.
According to the State Contracting Manual, each state agency is
responsible for making sure that its contracts comply with
applicable legal requirements and is based on sound business
practices. DGS provides the final approval if required by law.
Contract approval by DGS serves to assist state agencies by
ensuring effective compliance with applicable laws and policies,
conserving the fiscal interests of the state and preventing
improvident acts, and applying contract knowledge and legal
expertise prior to final approval.
DGS reviews state procurement contracts, and charges state
agencies a fee of 1.6% of the overall contract value. This bill
would eliminate DGS review of DWR contracts, which annually
amount to billions of dollars. DWR's powers, duties,
responsibilities in relation to water and dams are authorized by
the Water Code. This bill would eliminate DGS review of a broad
range of DWR goods and services contracts that include, but are
not limited to, maintenance, construction, energy, levee
inspections, management of wildlife areas, legal services, and
auditing services. In Fiscal Year 2009-10, the top 30 non-IT
service contracts had a value between $2 million to $770
million.
The proponents of this bill, the majority of which are water
districts and agencies, contend that time delays in purchasing
energy can result in increased prices due to the fluctuating
prices of the energy market coupled with the high volume of
energy that water districts and agencies purchase. In addition,
any construction or maintenance to the State Water Project (SWP)
is paid for by the users, or the water districts and agencies.
Previous legislation has attempted to exempt DWR from state
contracting requirements for energy purchases. SB 1506
(Margett) of 2006, would have waived provisions of state
contracting requirements for DWR to buy and sell electricity and
natural gas, and engage in other financial instruments for the
operation of the SWP. This bill was held in the Assembly Water,
Parks, and Wildlife Committee. The committee analysis for SB
1506 noted that during the 2001 energy crisis, DWR was granted
authority to purchase energy for public utilities, including
waivers from Government Code and Public Contract Code
contracting provisions. Subsequent questions arose over DWR's
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contracting performance, and many of the energy contracts were
renegotiated.
Analysis Prepared by : Joanna Gin / B.,P. & C.P. / (916)
319-3301
FN: 0002526