BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 734
                                                                  Page  1

          Date of Hearing:   August 17, 2011

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Felipe Fuentes, Chair

                    SB 734 (Price) - As Amended:  August 15, 2011 

          Policy Committee:                              
          TransportationVote:10-3
                        Jobs                                    4-2

          Urgency:     No                   State Mandated Local Program: 
          No     Reimbursable:               

           SUMMARY  

          This bill requires High-Speed Rail Authority (HSRA) contracting 
          to meet state small business participation goals and provides a 
          bid preference to microbusinesses on high-speed rail contracts. 
          Specifically, this bill:

          1)Adds the 2008 high-speed rail bond measure to the list of bond 
            measures for which the implementing department, in this case 
            the HSRA, must establish a 25% small business participation 
            goal on bond-funded contracts and perform associated 
            activities, including annually reporting on actual small 
            business participation.

          2)Requires the HSRA, with the assistance of the Department of 
            General Services (DGS), to prepare a small business, 
            microbusiness, and disabled veteran business outreach plan and 
            to adopt the plan by July 31, 2012.

          3)Requires the HSRA, at all bidders' conferences convened by the 
            authority, to present the plan and the state's small business 
            participation goals, and to request that a DGS representative 
            attend the bidders' conferences.

          4)Requires the HSRA to grant a 2.5% bid preference to qualified 
            state-certified microbusinesses, i.e. businesses located in 
            California with 25 or fewer employees and annual gross 
            receipts of $3.5 million or less.

          5)Requires the HSRA, in the business plan to be submitted in 
            2012, to include a strategy for ensuring contract 








                                                                  SB 734
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            participation by California-certified small businesses.

           FISCAL EFFECT  

          1)Project costs will increase to the extent contracts are 
            awarded to other than the lowest bidder, due to the 2.5% bid 
            preference provided to microbusinesses. These additional costs 
            are unknown, but given the massive scale of the high-speed 
            project, costs could be in the hundreds of thousands to a 
            millions of dollars annually.

            ÝVoters have authorized $9 billion in state general obligation 
            bonds and the federal government has allocated an additional 
            $3 billion to the state for the high-speed rail project. The 
            initial phase of the project-from Fresno to Bakersfield-was 
            estimated to cost $5.5 billion through 2017. The entire system 
            was estimated to cost around $43 billion, with funding 
            anticipated from the federal and local governments, as well as 
            the private sector. Recently, however, the estimated cost for 
            the first phase increased by several billion dollars.]

          2)Annual administrative costs of around $100,000 for the HSRA to 
            prepare and then implement the outreach plan and to report 
            annually on meeting the contracting goals. Costs to DGS will 
            be minor and absorbable.

           COMMENTS  

           1)Purpose  . According to the author, "SB 734 ensures that small 
            businesses get a slice of the multi-billion dollar High Speed 
            Rail Economic pie?SB 734 Ýalso] addresses the importance and 
            challenges of California microbusinesses and grants them an 
            additional contract preference of 2.5 percent. Although these 
            smaller businesses comprise over 80 percent of California's 
            certified small businesses, they are disadvantaged when 
            competing against their larger small-business counterparts.
          
            "Given the depressed economy, high unemployment rates and the 
            positive impact the High Speed Rail project will have 
            throughout the state, it is important that we ensure that the 
            Authority operates with a clearly defined program that will 
            provide opportunities for California small businesses, 
            including its microbusinesses. SB 734 accomplishes these 
            objectives."
                








                                                                 SB 734
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            2)Background  . The Small Business Procurement and Contract Act, 
            administered by DGS, provides for certification of small 
            businesses, microbusinesses, and disabled veteran business 
            enterprises.  The Act also establishes a small business 
            preference designed to increase small business participation 
            in state contracts. One incentive is a 5% bid preference for 
            small businesses or for contractors that commit 25% of the bid 
            price to eligible small business subcontractors.  Executive 
            Order (EO) S-02-06 establishes a goal of 25% small business 
            participation goal for all state contracts.

           3)Related Legislation  . 

             a)   AB 365 (Galgiani), which enacted penalties and sanctions 
               relative to the HSRA certification of businesses as a small 
               emerging business enterprise, microbusiness, or disabled 
               veteran business enterprise (DVBE), was held on this 
               committee's Suspense file.

             b)   AB 1206 (Galgiani), which directed the HSRA to adopt and 
               administer a small business enterprise program, was held on 
               this committee's Suspense file.


             c)   SB 733 (Price), which in part required the HSRA to work 
               with the Employment Development Department to develop a 
               strategy to ensure that at least 25% of the workforce on 
               any high-speed rail work site is from the local workforce, 
               was held on Suspense in Senate Appropriations.


           4)Prior Legislation  .  In 2010, SB 1108 (Price), which required 
            all state agencies and departments to establish and achieve a 
            25% small business participation rate for state contracts, was 
            held on Suspense in Senate Appropriations.
          Analysis Prepared by  :    Chuck Nicol / APPR. / (916) 319-2081