BILL ANALYSIS �
AB 172
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Date of Hearing: April 17, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 172 (Weber) - As Amended: April 1, 2013
Policy Committee: JEDE Vote:6-2
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill increases the microbusiness procurement preference
from 5% to 7% for state contracts to purchase goods, services,
information technology and to construct state facilities. The
preference may be awarded to either a microbusiness bidder or a
non-microbusiness bidder that uses a microbusiness
subcontractor.
FISCAL EFFECT
Given the thousands of state contracts awarded annually totaling
several billion dollars, the cost impact of the bill could be in
the tens of millions of dollars each year.
COMMENTS
1)Author's Purpose. According to the author, California has
made an effort to ensure that state contracting agencies meet
participation goals for small businesses, microbusinesses and
disabled veterans business enterprises (DVBEs). The author
explains microbusinesses consist of fewer than 25 employees,
have an average income of $3.5 million or less and are known
for bringing real diversity to local economies and the State.
Microbusiness owners are concerned they are not getting their
fair share of California contracts and are disadvantaged when
competing against their larger small business counterparts,
according to the author. The author point to statistics from
the Department of General Services (DGS) which report in
2010-2011, of the over 90,000 contracts issued,
microbusinesses received only 36,980 of the contracts awarded
by the state. The author concludes microbusinesses need extra
help to ensure they receive their fair share of contracts.
AB 172
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2)The Small Business Act. The Small Business Act, administered
through DGS, was implemented more than 30 years ago to
establish a small business preference within the state's
procurement process that would increase the number of
contracts between the state and small businesses. In 1998, a
DVBE component was added to state procurement practices.
The Small Business Act states that it is the policy of the
State of California that the state aid the interests of small
businesses in order to preserve free competitive enterprise
and to ensure that a fair portion of the total purchases and
contracts of the state be placed with these enterprises. The
statute further states that DVBE participation is strongly
encouraged to address the special needs of disabled veterans
seeking rehabilitation and training through entrepreneurship
and to recognize the sacrifices of Californians disabled
during military service.
The state's success in obtaining small business and DVBE
contract participation has been inconsistent. Since 2001,
when the first executive order set the 25% small business
participation target, the state has met its goal only four
times. In the most recent report on procurement, 2010-11, DGS
reported about 20% out of a total of almost $6 billion of all
state contracts are awarded to small and microbusinesses. For
DVBEs, the state achieved its 3% participation goal three
times during the same period.
3)Prior Legislation . Below are some of the most recent
legislative efforts in this area.
a) AB 150 (Perea) of 2011, would have allowed the
Department of General Services (DGS) to direct minimum
business participation goals for minority, women, and
disabled veteran-owned businesses and small businesses in
state contracts and to monitor progress in meeting this
goal. This bill was held on this committee's Suspense
File.
b) SB 67 (Price) of 2011 would have authorized DGS to
direct all state entities to establish an annual goal of
achieving no less than 25% small business participation in
state procurement contracts, as specified. This bill was
held on this committee's Suspense File.
AB 172
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c) AB 309 (Price) of 2010 required a 25% small business
participation goal for state contracts and would have
required DGS to monitor progress in meeting this goal.
This bill was held on this committee's Suspense File.
1)There is no registered opposition to this bill.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081