BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2011-2012 Regular Session
SB 252 (Vargas)
As Amended April 14, 2011
Hearing Date: April 26, 2011
Fiscal: Yes
Urgency: No
TW
SUBJECT
Public Contracts: Personal Services
DESCRIPTION
This bill would require privatization contractors, as defined,
to file with the contracting agency, as defined, a copy of each
subcontract or amendment to a subcontract executed under the
privatization contract. This bill would require the contracting
agency to maintain the subcontract or amendment to the
subcontract as a public record pursuant to the California Public
Records Act. This bill would require privatization contracts,
as defined, to be subject to audit or review by the Bureau of
State Audits. This bill would require agencies entering into
privatization contracts to prepare and submit quarterly and
annual reports, as specified, to the Department of General
Services.
BACKGROUND
At times, state agencies utilize personal services contracts
with private parties in order to reduce costs to the state. The
Department of General Services (DGS) reported that in fiscal
year 2009-2010, California spent $35.4 billion on private
contracts. Before a state agency may enter into a personal
services contract, it must notify the State Personnel Board of
the agency's intention and receive approval from DGS to enter
into the contract. Because these personal services contracts
are entered into and maintained by state agencies, they are
subject to public disclosure pursuant to the California Public
Records Act. Once the personal services contract has been
executed, the state agency must electronically submit certain
(more)
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contract information to the State Contract and Procurement
Registration System maintained by DGS.
This bill, sponsored by the American Federation of State, County
and Municipal Employees, AFL-CIO, would establish the Government
Oversight and Fiscal Accountability Review Act of 2011, in order
to increase transparency over privatization contracts, as
defined, and subcontracts entered into thereunder. Under this
bill, privatization contractors, as defined, would be required
to submit subcontracts and subcontract amendments to the state
agency, and the state agency would be required to maintain these
subcontracts as public records pursuant to the California Public
Records Act. This bill also would require privatization
contracts to include language providing for public access to the
completed contract. This bill also would require agencies
entering into privatization contracts to provide a budget
addendum, as specified, and a quarterly report, as specified.
CHANGES TO EXISTING LAW
Existing law generally provides requirements and standards for
state agencies when utilizing the use of personal services
contracts. (Gov. Code Sec. 19130 et seq. and Pub. Contract Code
Sec. 10295 et seq.)
Existing law requires the contracting agency to clearly
demonstrate the cost savings of the personal services contract.
(Gov. Code Sec. 19130(a).)
Existing law provides that personal services contracts entered
into by state agencies with private parties in an amount of
$5,000 or more, unless exempt, are required to be submitted to
DGS for approval. (Pub. Contract Code Secs. 10295 and 10335.)
Existing law , Article I, Section 3 of the California
Constitution, declares the people's right to transparency in
government.
Existing law , the California Public Records Act, governs the
disclosure of information collected and maintained by public
agencies. (Gov. Code Sec. 6250 et seq.) Generally, all public
records are accessible to the public upon request, unless the
record requested is exempt from public disclosure. (Gov. Code
Sec. 6254.)
This bill would define "agency" to include any executive office,
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department, division, board, commission, or other office or
officer in the executive branch of government.
This bill would define a "privatization contract" to mean an
agreement or combination or series of agreements, including, but
not limited to, a personal services contract, by which a
privatization contractor agrees with a state agency to provide
services valued at $100,000 or more that are substantially
similar to and in lieu of services provided in whole or in part
by civil service employees of the agency.
This bill would define "privatization contractor" to mean any
contractor, consultant, subcontractor, independent contractor,
or private business owner that contracts with an agency to
perform services that are substantially similar to, and in lieu
of, services provided, in whole or in part, by civil service
employees of the agency.
This bill would require privatization contractors to file with
the contracting agency a copy of each subcontract or amendment
to a subcontract executed under the privatization contract.
This bill would require the contracting agency to maintain the
subcontract or amendment to the subcontract as a public record
pursuant to the California Public Records Act.
This bill would require each privatization contract to include
language providing for public access to the completed contract.
This bill would require an agency, as part of the budgetary
process, to provide an addendum to its submitted budget that
includes information regarding the total cost of each
privatization contract for the prior year, the projected number
of privatization contracts and estimated costs for the current
and upcoming year, and the number of privatization contractor
employees and consultants, reflected as full-time equivalent
positions, and their hourly wage rates for the current and
previous fiscal years. This bill would provide that this
addendum shall be a public record.
This bill would require privatization contracts to be subject to
audit or review by the Bureau of State Audits.
This bill would require agencies entering into privatization
contracts to prepare and submit quarterly and annual reports, as
specified, to DGS containing information listing the name and
compensation of any person who performed legal, medical,
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accounting, engineering, or any other professional, technical,
or consultant service for the agency on a contractual basis
during the previous quarter.
This bill would require the agency entering into a privatization
contract to provide to DGS an annual report containing a copy of
each privatization contract for that year and a budget analysis
of each privatization contract, as specified.
This bill would require DGS to compile, publish, and make
available for public inspection all contracting reports received
pursuant to the provisions of this bill.
COMMENT
1. Stated need for the bill
The author writes:
Current law restricts but does not prohibit public agencies
from contracting out services to the private sector - public
agencies are prohibited from engaging in private contracting
when the services could be performed by state employees;
requires a state agency proposing to use a private contractor
to contact the State Personnel Board which will contact the
employee organizations and allow for a comment period on the
proposal; authorizes state agencies to contract out for
architectural and engineering services on public works
projects; requires the state agency using private contractors
to make the information available to the public.
SB 252 enacts the Government Oversight and Fiscal
Accountability Review Act. Specifically, this bill would: 1)
provide public access to all privatization contracts that cost
$100,000 or more; 2) allow the Bureau of State Audits to audit
or review the privatization contracts; 3) require a state
agency that enters into a privatization contract to report
that information to the Secretary of State; and 4) would
require the Secretary of State to compile, publish and make
the information available to the public.
The American Federation of State, County and Municipal
Employees, AFL-CIO (AFSCME), the sponsor of this bill, writes:
According to the Department of General Services, California
spent $35.4 billion on private contracts in Fiscal Year
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2009-2010. Much of this money went to services identical or
substantially similar to those provided by civil service
employees, and was therefore a waste of taxpayer dollars. A
2009 study by the Service Employees International Union Local
1000 found that the state could save $350 million annually by
using civil employees instead of wasteful privatization
contracts, but these savings are impossible without increased
transparency and government oversight.
Senate Bill 252 increases legislative oversight and public
transparency by requiring state agencies to report the cost
and duration of goods and services contracts. . . . The
oversight and transparency put in place by this bill are
crucial to the state's economic recovery, and the protection
of civil service jobs in California.
2. Providing additional transparency of privatization contracts
This bill would require privatization contracts to include
language providing for public access to the completed contract.
This bill also would provide that budget addendums regarding
privatization contract information prepared by state agencies as
required under the provisions of this bill would be public
records. This bill also would require DGS to compile, publish,
and make available for public inspection all quarterly and
annual contracting reports submitted by contracting agencies
pursuant to the provisions under this bill.
The California Constitution declares the people's right to
transparency in government. (Cal. Const., art. I, sec. 3.)
Further, existing law, the California Public Records Act (CPRA),
requires records maintained by state agencies to be open for
public disclosure unless the record is exempt. (Gov. Code Sec.
6250 et seq.) Accordingly, privatization contracts executed by
state agencies with privatization contractors are subject to
public disclosure under existing law. Consistent with the
Legislature's intent to provide transparency in government
through public disclosure of agency records, this bill would
require a privatization contract to include specific language
providing that the executed contract is a public record.
In 2003, DGS established an electronic reporting system, the
State Contract and Procurement Registration System (SCPRS )
through which state agencies submit privatization contract
information. SCPRS acts as the centralized database of
information on state contracts and purchases over $5,000. This
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bill also would require DGS to compile, publish, and make
available for public inspection all quarterly and annual
contracting reports submitted by contracting agencies pursuant
to the provisions under this bill.
AFSCME argues that public disclosure of privatization contracts
is necessary to make certain that state money is not spent on
private services that could have been provided by civil service
employees. The California Labor Federation and the California
Nurses Association, supporters of this bill, argue that "Ýa]t a
time of deep budget cuts to all state agencies, it is
particularly important to evaluate the way that state services
are contracted out. Contracting out does not only mean layoffs
of longtime employees, but it also results in reduced oversight
and accountability. In addition, contracting out often results
in duplicative and overlapping services, which wastes taxpayer
dollars."
3. Providing transparency of subcontracts and subcontract
amendments relating to privatization contracts
This bill would require a privatization contractor to file with
the contracting agency a copy of each subcontract or amendment
thereto executed under a privatization contract. Further, this
bill would require the contracting agency entering into the
privatization contract to maintain the submitted subcontracts
and amendments thereto as public records pursuant to the
California Public Records Act (CPRA). As discussed in Comment
2, the CPRA requires records maintained by state agencies to be
open for public disclosure unless the record is exempt. (Gov.
Code Sec. 6250 et seq.) Although privatization contracts are
required to be submitted to DGS and are subject to public
disclosure under existing law, there is no such specific
requirement for the subcontracts and subcontract amendments
executed in connection with the privatization contracts.
A state agency enters into a privatization contract with a
general contractor. However, the state agency may not be privy
to subsequent subcontracts executed by the general contractor
with subcontractors hired to perform the personal services
described in the initial privatization contract. This bill
would require the state agency to maintain the subcontracts and
subcontract amendments, which would bring these documents under
the control and maintenance of the state agency. As such, these
documents would be subject to public disclosure under the CPRA.
This bill would only apply to subcontracts and subcontract
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amendments of $100,000 or more. Proponents of this bill argue
that this bill would provide transparency of these personal
services contracts, which are crucial to the state's economic
recovery and protection of civil service jobs in California.
Support : California Labor Federation; California Nurses
Association; Professional Engineers in California Government;
Services Employees International Union Local 1000
Opposition : None Known
HISTORY
Source : American Federation of State, County and Municipal
Employees, AFL-CIO
Related Pending Legislation :
SB 484 (Rubio) would authorize the Legislative Analyst's Office
(LAO) and members of the Legislature to inspect executed health
care service contracts or amendments entered into by the
Department of Corrections and Rehabilitation or the California
Medical Assistance Commission with private parties. This bill
passed out of this Committee and is awaiting hearing in the
Senate Public Safety Committee.
AB 172 (Eng), among other things, would require state agencies
to provide a link to a centrally located and accessible
state-run Internet website maintained by DGS that includes a
listing of the personal services contracts and consulting
services contracts that it entered into during the fiscal year.
This bill is in the Assembly Appropriations Committee.
Prior Legislation :
AB 1899 (Eng, 2010) would have required DGS and the Office of
the State Chief Information Officer to post specified audits and
contracts to the state's Reporting Transparency in Government
Internet website. This bill also would have required the
Governor to post every statement of economic interest and travel
expense claim for its staff and department heads and officials.
This bill was vetoed.
AB 756 (Eng, 2009), which was substantially similar to AB 172,
was vetoed.
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SB 1596 (Yee, 2008) would have required the Regents of the
University of California to establish a contractor
responsibility program and a centralized contract information
data warehouse. This bill was held in the Senate Appropriations
Committee.
SB 1331 (Oropeza, 2008) would have required the Governor to
submit personal services contracts information as part of the
state budget. This bill was held in the Senate Rules Committee.
AB 2603 (Eng, 2008) would have required state agencies to
prepare and submit an annual report to the Department of Finance
listing personal services contracts entered into during the
previous year. This bill was vetoed.
AB 239 (Jerome Horton, 2005), which was substantially similar to
SB 1331, was vetoed.
Prior Vote : Senate Committee on Governmental Organization (Ayes
7, Noes 4)
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