BILL ANALYSIS Ó SB 861 Page 1 SENATE THIRD READING SB 861 (Corbett) As Amended July 13, 2011 Majority vote SENATE VOTE :33-2 BUSINESS & PROFESSIONS 8-0 ECONOMIC DEVELOPMENT 6-0 ----------------------------------------------------------------- |Ayes:|Hayashi, Bill Berryhill, |Ayes:|V. Manuel Pérez, Grove, | | |Allen, Butler, | |Beall, Block, | | |Eng, Hill, Ma, Smyth | |Hueso, Morrell | |-----+--------------------------+-----+--------------------------| | | | | | ----------------------------------------------------------------- APPROPRIATIONS 12-5 ----------------------------------------------------------------- |Ayes:|Fuentes, Blumenfield, | | | | |Bradford, Charles | | | | |Calderon, Campos, Davis, | | | | |Gatto, Hall, Hill, Lara, | | | | |Mitchell, Solorio | | | | | | | | |-----+--------------------------+-----+--------------------------| |Nays:|Harkey, Donnelly, | | | | |Nielsen, Norby, Wagner | | | | | | | | ----------------------------------------------------------------- SUMMARY : Prohibits a scrutinized company, as defined, using conflict minerals from the Democratic Republic of Congo (DRC) from bidding on a state goods or services contract. Specifically, this bill : 1)Prohibits a scrutinized company from bidding on a state goods or services contract if it must comply with the disclosures relating to conflict minerals originating in the DRC, as specified in the Securities Exchange Act of 1934 (Act). 2)Defines "scrutinized company" to mean a person found to be in violation of Section 13(p) of the Act by final judgment or settlement entered in a civil or administrative action brought by Securities Exchange Commission (SEC) and the person has not SB 861 Page 2 remedied or cured the violation in a manner accepted by the SEC on or before final judgment or settlement. 3)Deems that a person is no longer regarded as a scrutinized company when the person no longer in violation of the Act, an amended or correct filing is made with the SEC, or three years from the date of final judgment or settlement, whichever is earlier. 4)Requires the Department of General Services (DGS) to establish policies and procedures for state entities to implement the provisions of this bill in the State Administrative Manual or the State Contracting Manual. 5)Defines "goods or services" to include types of tangible personal property, including materials, supplies, and equipment, and information technology and telecommunication goods and services, as specified. 6)Makings legislative findings and declarations. EXISTING LAW : 1)Authorizes contracting between state agencies and private contractors and sets forth the requirements for the procurement of goods and services and for the solicitation and evaluation of bids and the awarding of contracts by public entities. 2)Prohibits persons engaging in investment activities in Iran's energy sector, as specified, from bidding or entering into contracts with a public entity for goods or services. 3)Prohibits companies involved in specified business activities in Sudan from entering into a state goods and services contract. EXISTING FEDERAL LAW : 1)Establishes the 2006 Democratic Republic of Congo Relief, Security, and Democracy Promotion Act (DRCRSDP Act). The DRCRSDP Act stated that it is the policy of the United States (U.S.) to work for peace and security throughout the DRC by supporting efforts to protect civilians, disarm illegal armed SB 861 Page 3 groups, and hold accountable individuals and entities working to destabilize the country. 2)Establishes the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), pertaining to the trade of minerals associated with the DRC conflict. The Dodd-Frank Act was signed into law adding, amongst other things, Section 13(p) to the Act, and directing the SEC to publish new disclosure rules by April 17, 2011, for publically traded companies reporting to the SEC for whom "conflict minerals" are necessary to the functionality or production of a product manufactured by such persons. FISCAL EFFECT : According to the Assembly Appropriations Committee: 1)To the extent this bill reduces the number of prospective bidders on some state contracts, due to a company or companies being found in violation of the DRC-related provisions of the Dodd-Frank Act, there will be less competition for those contracts, which tends to increase state costs. The overall impact of this bill is unknown, and would depend on the number of companies unable to submit bids, but given the multi-billion volume of state contracting, costs could exceed $150,000 in any fiscal year. Because the bill is narrowly drawn, however, particularly when compared to recent similar legislation, the annual cost would likely not be significant. 2)DGS will incur minor one-time costs to establish the relevant policies and procedures and minor ongoing costs to monitor SEC rulings regarding violations of Dodd-Frank and to inform state agencies about companies ineligible to submit bids and when these companies regain eligibility to submit bids. COMMENTS : The Legislature has recently heard legislation prohibiting specified "scrutinized companies" from bidding on public contracts on humanitarian grounds and in conjunction with federal efforts. The DRC is Africa's third largest nation, and it is the eastern portion, Kivu, that has been the site of conflict. Illegally armed militia groups have been responsible for human rights abuses, sexual exploitation, acts of violence, and other atrocities in order to mine the mineral-rich Kivu. The Act SB 861 Page 4 defines "conflict materials" as columbite-tantalite (coltan), cassiterite, gold, wolframite, or their derivatives. These materials, in turn, are used to produce tungsten, tin, steel, or some other component that results in the manufacture of light bulb filaments, electrical components, computer chips and processors, cell phones, and other technology products. In addition, other conflict materials mentioned in the Dodd-Frank Act, such as gold, are manufactured into jewelry and sold in the U.S. Analysis Prepared by : Joanna Gin / B.,P. & C.P. / (916) 319-3301 FN: 0002219