BILL ANALYSIS Ó
SB 497
Page 1
Date of Hearing: June 28, 2011
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Mary Hayashi, Chair
SB 497 (Rubio) - As Amended: June 20, 2011
SENATE VOTE : 27-12
SUBJECT : Public contracts: state agencies: bid preferences.
SUMMARY : Requires that a 5% bid preference be given to a
California business in state goods contracts. Specifically,
this bill :
1)Requires a state agency putting a goods contract out to bid
provide a 5% bid preference to a California business, as
defined, and requires that the preference be provided as
follows:
a) For contract awards made to the lowest responsible
bidder meeting specifications, the preference to a
California business shall be 5% of the bid price;
b) For contracts awarded to the highest scoring bidder on
evaluation factors in addition to price, the preference
shall be 5% of the total score;
c) No preference shall be given to a noncompliant bidder;
d) Requires a California business submit documentation and
information to the state agency to be eligible for the 5%
bid preference;
e) Requires the Department of General Services (DGS) to
establish a process to verify that a California business
meets the 5% preference; and,
f) Defines "California business" to mean a sole
proprietorship, partnership, joint venture, limited
liability company, corporation, or other business entity,
that holds any required business license when bids for the
public contract were opened, that has its principal place
of business in California, that would directly provide the
goods for the public contract, and that certifies that at
SB 497
Page 2
least 90% of the business's employees performing work on
the contract are residents of this state.
2)Exempts from the definition of "goods," all electronic
technology systems and services, automated information
handling, system design and analysis, conversion of data,
computer programming, information storage and retrieval, and
business telecommunications systems and services.
3)Makes legislative findings and declarations.
EXISTING LAW :
1)Governs the solicitation, review and award of state contracts
and establishes various programs and preferences in public
contract law designed to serve a broad public purpose, such as
preference for small businesses, disabled veteran business
enterprises (DVBEs) and recycled products. Existing law
designates the DGS to administer the Small Business
Procurement and Contract Act (Small Business Act), including,
but not limited to, small business, microbusinesses and DVBE
certification processes.
2)Requires DGS and state agencies entering into contracts for
goods, services, information technology, and construction, to
establish small business participation goals, provide for
small business bid preferences, and provide assistance to
small businesses, under the Small Business Act.
3)Defines "goods" in the Public Contract Code to mean all types
of tangible personal property, including materials, supplies,
and equipment.
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of this bill . According to the author's office,
"California is currently facing one of the most severe economic
crises since the Great Depression, with an average of six
applicants for every one position available. Additionally in
the past decade, the manufacturing sector alone has lost 34% of
its overall jobs. This bill would create the incentive for
contractors who wish to bid on state contracts to hire
California workers and bring much needed job opportunities to
SB 497
Page 3
the state's workforce.
Background . Current law provides certain circumstances where
contractors bidding on a state contract can have the overall
cost of their bid discounted by 5% in order to make them more
competitive as a low bidder. Preferences can currently be given
for small businesses, businesses in economically distressed
areas, and DVBEs. The maximum amount provided for each
qualifying bid preference is $50,000.
Goods, as defined in the Public Contract Code, are all types of
tangible personal property. This bill does not apply to
services contracts.
Previous Legislation . SB 967 (Correa) of 2010, would have
requires a 5% bid preference 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, by July 1, 2011. This bill was vetoed.
Support . According to the American Federation of State, County
and Municipal Employees, "During a severe economic crisis such
as Ýthe one] that California faces, the creation of jobs is
paramount. SB 497 would create an incentive for contractors
bidding on state contractors to hire California workers and
bring employment opportunities to the state. This bill would
require a state agency that accepts bids or proposals for a
contract for supplies, materials, or equipment to provide a
preference of 5% to a California business that meets specified
requirements."
According to the California Small Business Association, "We feel
Californians must support and help California small businesses
in securing business so our economy can return to normal. This
5% preference will help provide a closer level-playing field.
As the job creators, small businesses by securing more for the
state purchasing can create more jobs and tax revenue for
California."
Opposition . According to the California Chamber of Commerce,
"Bidding preferences ultimately limit choice and drive up prices
for consumers and for the state. Protectionist legislation like
SB 497 also causes a net loss of jobs in related industries,
SB 497
Page 4
retaliation by our trading partners, and violates provisions of
the World Trade Organization and bilateral free trade
agreements.
"While we share the author's desire to spur job creation and
drive job retention in California, providing bid preferences for
employers based on their promise that 90% of the workers
performing on a contract will reside in California will not
create the desired outcome. Instead, by limiting the bidders,
competition will be reduced, resulting in less choice and higher
prices on the resulting contracts. Another potential result of
protectionism legislation is retaliation from our trade partners
- other states and international trade partners. To the extent
that California limits bidders, California companies could be
penalized in trade with other states and nations. This practice
creates a patchwork of reciprocity and retaliation that makes it
difficult for businesses to offer their goods and services in
states other than California. We believe that this will have a
negative effect on California-based businesses and their
employees."
REGISTERED SUPPORT / OPPOSITION :
Support
American Federation of State, County and Municipal Employees
California Conference Board of the Amalgamated Transit Union
California Conference of Machinists
California Small Business Association
California State Pipe Trades Council
California Teamsters Public Affairs Council
Coalition of California Utility Employees
Engineers and Scientists of California
International Brotherhood of Electrical Workers
International Longshore and Warehouse Union
International Union of Elevator Constructors
Professional and Technical Engineers, Local 21
UNITE HERE!
United Food and Commercial Workers, Western States Conference
Utility Workers Union of America
Utility Workers Union of America, Local 132
Western States Council of Sheet Metal Workers
Opposition
SB 497
Page 5
California Chamber of Commerce
Analysis Prepared by : Joanna Gin / B.,P. & C.P. / (916)
319-3301