BILL ANALYSIS Ó
SB 741
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Date of Hearing: June 14, 2011
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Mary Hayashi, Chair
SB 741 (Dutton) - As Introduced: February 18, 2011
SENATE VOTE : 40-0
SUBJECT : Alternative Protest Pilot Project.
SUMMARY : Deletes the sunset date for the Alternative Protest
Process (APP), which is a alternative protest process used by
the Department of General Services (DGS) for state contracts
related to the acquisition of information technology (IT),
materials, supplies, equipment, and ancillary services, in order
to expedite a protest decision and utilize arbitration as a
resolution tool.
EXISTING LAW :
1)Establishes the APP, which provides for alternative protest
procedures for state contracts related to the acquisition of
IT materials, supplies, equipment, and ancillary services.
2)Sunsets the APP on December 31, 2011.
3)Requires a contracting department, in order to be eligible for
the APP, to agree to participate, and requires bid submissions
to be subject to the APP.
4)Requires any bid protest conduct under the APP to include one
or more of the following alternative procedures:
a) Prohibits the APP from preventing work from commencing
on a project for an awarded contract and permits a contract
to be entered into pending a final decision on the protest;
b) Requires DGS to review the protest within seven days of
the filing date to determine if the protest is frivolous.
If determined to be frivolous, the protest shall not
proceed until the bidder posts a protest bond in an amount
not less than 10% of the estimated contract value;
SB 741
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c) Requires DGS to issue a decision within 45 days from the
date the protest is filed; or,
d) Requires arbitration, as defined and established by DGS,
to be the resolution tool.
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of this bill . According to the author's office, "SB 741
seeks to remove the sunset date for the APP. The APP process
has been proven to effectively reduce the time and cost of the
appeals process - cases were resolved at least 40% faster for
all protests and 49% faster for protests that went to hearing.
Given its success, the sunset date should be removed and the
program should be made permanent."
"In addition, under the traditional protest process, the full
cost of a protest hearing is borne by the state. Conversely,
under the APP, a protestant is required to put up an arbitration
deposit ranging between $1,000 and $7,000, depending upon the
estimated contract value (California certified small businesses
submit a copy of their certification in lieu of the deposit)."
Background . The APP was established in 1998 as a pilot project,
and its sunset date was extended twice. The traditional protest
process provides that any unsuccessful bidder may appeal or
protest the proposed award of a contract for the acquisitions of
goods or IT services. If the issues cannot be resolved between
the state department and the unsuccessful bidder, the California
Victim Compensation and Government Claims Board decides the
protest. Under this process, a contract under protest cannot be
awarded until the protest is resolved and there is no statutory
or regulatory time limitation to resolve protests. This can
prove to be an expensive and time-consuming process and often
delays the progress of many state programs. For example, major
IT projects that are protested often take months to resolve.
Additionally, if a contractor holds an existing contract with a
state agency, but loses the subsequent award, the contractor
will often file a protest just to prolong the contract period.
Under the provisions of the APP, any unsuccessful bidder may
appeal or protest the proposed award of a contract for the
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acquisition of goods or IT, and the Office of Administrative
Hearings decides the protest. A contract may be awarded prior
to the resolution of the protest and an alternative protest must
be resolved within 45 days. At the discretion of the
Administrative Law Judge, the timeline may be extended for an
additional 15 calendar days. This allows state programs to plan
and avoid costly delays.
From July 1, 2000 to June 30, 2009, DGS approved 22% of all
solicitations for participation in the APP. Protests
administered under the APP were resolved, on average, in half
the time as protests filed under the traditional process, with
no significant subsequent challenges in the courts.
Previous Legislation . SB 837 (Dutton), Chapter 272, Statutes of
2005, extended the sunset date for the APP to December 31, 2011.
SB 951 (Committee on Governmental Organization), Chapter 610,
Statutes of 2001, extended the sunset date for the APP to
December 31, 2005.
AB 1159 (Bowen), Chapter 762, Statutes of 1997, established the
APP, with a sunset date of December 31, 1999.
Support . According to the sponsor, DGS, "The key to the APP
process is a fast and fair protest decision and DGS has found
the APP to be a very effective tool for resolution of protests
on contract awards. Under its provisions, DGS is required to
issue a protest decision within 45 days using arbitration and is
authorized to dismiss frivolous protests. Suppliers carefully
weigh the merits of filing a frivolous protest knowing that they
must post a bond at least 10% of the value of the contract.
"DGS has experienced considerable savings from the use of the
expedited protest process conducted under the APP. In fact, the
resolution period for protests resolved under the APP is
one-half the time of those resolved under the traditional
protest process. Making these alternative provisions permanent
in statute allows DGS to continue to utilize this streamlined
protest process, make government more efficient, and save
money."
REGISTERED SUPPORT / OPPOSITION :
Support
SB 741
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Department of General Services (sponsor)
Opposition
None on file.
Analysis Prepared by : Joanna Gin / B.,P. & C.P. / (916)
319-3301