BILL ANALYSIS                                                                                                                                                                                                    




                   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
          
















































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          ____
          BILL SUMMARY: SB 861 would prohibit a scrutinized company, as 
          defined, from entering into a contract with a state agency for 
          goods or services.
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          ____
                            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;







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          (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, 







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          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.