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
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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
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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)
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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.