BILL ANALYSIS                                                                                                                                                                                                    Ó


          |SENATE RULES COMMITTEE            |                   SB 861|
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                              UNFINISHED BUSINESS

          Bill No:  SB 861
          Author:   Corbett (D), et al.
          Amended:  8/31/11 
          Vote:     21

           SENATE GOVERNMENTAL ORG. COMMITTEE  :  9-1, 4/12/11
          AYES:  Wright, Anderson, Corbett, De León, Evans, 
            Hernandez, Strickland, Wyland, Yee
          NOES:  Berryhill
          NO VOTE RECORDED:  Calderon, Cannella, Padilla

           SENATE APPROPRIATIONS COMMITTEE  :  6-3, 5/26/11
          AYES:  Kehoe, Alquist, Lieu, Pavley, Price, Steinberg
          NOES:  Walters, Emmerson, Runner

           SENATE FLOOR  :  33-2, 6/1/11
          AYES:  Alquist, Anderson, Blakeslee, Calderon, Cannella, 
            Corbett, Correa, De León, DeSaulnier, Emmerson, Evans, 
            Gaines, Hancock, Harman, Hernandez, Huff, Kehoe, La 
            Malfa, Leno, Lieu, Liu, Lowenthal, Negrete McLeod, 
            Pavley, Price, Simitian, Steinberg, Strickland, Vargas, 
            Wolk, Wright, Wyland, Yee
          NOES:  Berryhill, Walters
          NO VOTE RECORDED:  Dutton, Fuller, Padilla, Rubio, Runner

           ASSEMBLY FLOOR  :  67-11, 0/0/11 - See last page for vote

           SUBJECT  :    Public contracts

           SOURCE  :     Enough!



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           DIGEST  :    This bill prohibits a scrutinized company, as 
          defined, using conflict minerals from the Democratic 
          Republic of Congo from bidding on a state goods or services 

           Assembly Amendments  adds language that this bill does not 
          become operative until the later of January 1, 2012, or the 
          date the United States Securities and Exchange Commission 
          issues the final rules and regulations on the 
          implementation of Section 1502 of Public Law 11-203, and 
          become inoperative upon a specified date; and (2) add 

           ANALYSIS  :    

           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 Democratic Republic of Congo (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 Securities Exchange Commission (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.

           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 



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             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. 

          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 

           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 SEC and the person has 
             not 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 



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             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 

           7. Makings legislative findings and declarations. 


           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 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.  

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes   
          Local:  No

          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, 



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          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 

           SUPPORT  :   (Verified  9/9/11)

          Enough! (source)
          Amnesty International
          Boston Common Asset Management
          California Province of the Society of Jesus
          Calvert Asset Management
          Catholic Health East
          Christian Brothers Investment Services
          Congregation of Sisters of St. Agnes, Fond du Lac, WI
          Dominican Sisters of San Rafael
          EarthRights International
          Global Witness
          Human Rights First
          Individual, Starr King School for Ministry
          Interfaith Center on Corporate Social Responsibility
          Investor Environmental Health Network
          Marianist Province of U.S.
          Midwest Coalition for Responsible Investment
          PaxWorld Management LLC
          Responsible Sourcing Network
          Sister of the Holy Family
          Sisters of St. Francis of Philadelphia
          Sisters of St. Joseph of Springfield, MA
          Social Responsibility Coordinator JOLT
          Spring Water Asset Management
          The International Corporate Accountability Roundtable
          The Social Equity Group
          The Sustainable Group at Loring, Wolcott & Coolidge
          Trillium Asset Management
          Tri-State Coalition for Responsible Investment
          US Social Investment Forum
          Zevin Asset Management, LLC  

           ARGUMENTS IN SUPPORT  :    The author's office notes that 



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          embedded in the financial reform measure that President 
          Obama signed was a truly historic regulatory provision 
          pertaining to the DRC.  In an effort to choke off funding 
          for the armed thugs and rebel militias who have killed more 
          than five million people and turned the Congo into the rape 
          capital of the world, federal law now requires publicly 
          traded companies to disclose whether their products contain 
          minerals from rebel-controlled mines in the Congo.  Greed 
          for the Congo's mineral wealth has been a prime cause of 
          the atrocities and conflict, and multiple armed groups use 
          mass rape as a strategy to intimidate and control 
          communities as they profit from the illicit trade of 
          conflict minerals.  Many of these same conflict minerals 
          end up in our electronic devices such as cell phones, 
          laptops, and digital cameras.

           ASSEMBLY FLOOR  :  67-11, 9/8/11
          AYES:  Achadjian, Alejo, Allen, Ammiano, Atkins, Beall, 
            Bill Berryhill, Block, Blumenfield, Bonilla, Bradford, 
            Brownley, Buchanan, Butler, Charles Calderon, Campos, 
            Carter, Cedillo, Chesbro, Conway, Cook, Davis, Dickinson, 
            Eng, Feuer, Fletcher, Fong, Fuentes, Furutani, Beth 
            Gaines, Galgiani, Gatto, Gordon, Halderman, Hall, 
            Hayashi, Roger Hernández, Hill, Huber, Hueso, Huffman, 
            Jeffries, Knight, Lara, Logue, Bonnie Lowenthal, Ma, 
            Mendoza, Miller, Mitchell, Monning, Nestande, Pan, Perea, 
            V. Manuel Pérez, Portantino, Skinner, Smyth, Solorio, 
            Swanson, Torres, Valadao, Wagner, Wieckowski, Williams, 
            Yamada, John A. Pérez
          NOES:  Donnelly, Garrick, Grove, Harkey, Jones, Mansoor, 
            Morrell, Nielsen, Norby, Olsen, Silva
          NO VOTE RECORDED:  Gorell, Hagman

          PQ:do  9/9/11   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

                                ****  END  ****



                                                                SB 861