BILL ANALYSIS                                                                                                                                                                                                    Ó



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          SENATE THIRD READING
          SB 861 (Corbett)
          As Amended  August 31, 2011
          Majority vote

           SENATE VOTE  :33-2  
           
           BUSINESS & PROFESSIONS     8-0  ECONOMIC DEVELOPMENT     6-0    
           
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          |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 








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            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)Prohibits this bill from becoming operative until the later 
            date of January 1, 2012, or the date the SEC promulgates final 
            regulations on the reporting of conflict minerals and whether 
            they originated in the DRC.

          7)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, 








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            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 
            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 








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          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 
          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 


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