BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair SB 861 (Corbett) Hearing Date: 5/2/2011 Amended: 4/25/2011 Consultant: Bob Franzoia Policy Vote: G O 9-1 _________________________________________________________________ ____ BILL SUMMARY: SB 861 would prohibit a scrutinized company, as defined, from entering into a contract with a state agency for goods or services. _________________________________________________________________ ____ Fiscal Impact (in thousands) Major Provisions 2011-12 2012-13 2013-14 Fund State contract prohibition Unknown, potentially increased costs for General/ specific state goods and services. To the Special extent restrictions prohibit companies from bidding, costs may increase due to reduced competition State contract oversight Unknown costs ongoing to administer General/ a potentially more complex contracting Special process, including costs to determine if a bidder is a scrutinized company; increased protests and rebidding _________________________________________________________________ ____ STAFF COMMENTS: This bill may meet the criteria for referral to the Suspense File. Preliminary information indicates the Securities and Exchange Commission (SEC) will not issue implementing regulations before August-December, 2011. Absent a full understanding of the federal directive, state bidding and administrative costs are difficult to estimate. This bill defines a scrutinized company as a person that is required by federal law to disclose information relating to specific conflict minerals originating in the Democratic Republic of the Congo, or adjoining countries, and the company has either: (1) Filed an "unreliable determination" as defined by federal law; SB 861 (Corbett) Page 3 (2) Reported false information in its report required by federal law; (3) Failed to file a report as required by federal law; and (4) The SEC has taken civil action by filing a complaint with a US District Court, or has taken administrative action through the administrative proceeding process, or both, against a person for violations of the reporting requirements. It is unknown how many SEC regulated companies might be restricted from bidding on state contracts, whether any of those companies might be low bid awardees, how companies and the state will respond to the provisions of the bill and so forth. Implementing a potentially more complex bid process may result in new costs ongoing. To the extent the Department of General Services (DGS) is able to utilize actions taken by the SEC to identify a scrutinized company, the number of scrutinized companies and goods and services offered, administrative costs may be minor. Likely, DGS would determine a company is ineligible to bid if the company meets criteria in paragraphs (1), (2) and (3) of subdivision (b) of Public Contract Code 10490, as added by this bill. Costs of goods and services may increase to the extent a smaller bidding pool reduces competition. Also, this bill may render a company ineligible to bid on services if the company is a scrutinized company because of the goods it sells. In general, conflict minerals, and their uses, are: Tantalum (columbite-tantalite) Tin (cassiterite) Capacitors Tin cans Hearing aids Solder for pipes and joints, circuit boards Pace makers Biocides Airbags Fungicides GPS PVC Ignition systems High performance paints Anti-lock braking systems Laptops, mobile phones Tungsten (wolframite) Video game consults Electronic devices Video cameras Mobile phones, SB 861 (Corbett) Page 4 Digital cameras Metal wires Jet engines Electrodes Turbine blades Heating equipment Drill bits Welding applications End mills Gold Electronic communications components Semi-conductors Aerospace equipment Staff notes Chapter 272/2008 requires a company that bids or submits a proposal for a contract for goods and services with a state agency to self-certify that it is not a scrutinized company engaged in specified activities in Sudan. Additionally, Chapter 671/2007 requires CalPERS and CalSTRS to sell or transfer any investments in a company with business operations in Iran. Finally, Chapter 573/2010 prohibits persons engaging in investment activities in Iran's energy sector from bidding or entering into contracts with a public entity for goods or services.