BILL ANALYSIS Ó AB 173 Page 1 Date of Hearing: May 1, 2013 ASSEMBLY COMMITTEE ON ACCOUNTABILITY AND ADMINISTRATIVE REVIEW Jim Frazier, Chair AB 173 (Weber) - As Amended: April 24, 2013 SUBJECT : Postsecondary education: Small Business Procurement and Contract Act SUMMARY : Provides public postsecondary institutions an alternative to competitive bidding requirements when they contract with California Certified Small Businesses and Disabled Veteran Business Enterprises (DVBE). Specifically, this bill : 1)Allows the University of California (UC) to award contracts for the acquisition of goods, services, or information technology that have an estimated value of between $100,000 and less than $250,000 to a certified small business or a DVBE if UC obtains price quotations from two or more certified small businesses or two or more DVBEs. a) This shall only apply to UC if the Regents of the University of California make the provision applicable by appropriate resolution. 2)Allows the California State University (CSU) to award contracts for the acquisition of goods, services, or information technology that have an estimated value greater than $5,000 and less than $250,000 to a certified small business or a DVBE if CSU obtains price quotations from two or more certified small businesses or two or more DVBEs. 3)Allows the California Community Colleges (CCC) to award contracts for the acquisition of goods, services, or information technology that have an estimated value greater than $5,000 and less than $250,000 to a certified small business or a DVBE if CCC obtains price quotations from two or more certified small businesses or two or more DVBEs. EXISTING LAW Various sections of Education, Government, and Public Contract codes as well as the California Constitution set rules related to public postsecondary institutions' procurement. Additionally, policies adopted by these institutions impact purchasing practices. AB 173 Page 2 In general, laws and policies limit the contract amount before postsecondary institutions must enter into competitive bidding processes in which the bids are awarded to the lowest responsible bidder. For the UC system, that threshold is $100,000. For CSU, it is $50,000 and for CCC, it is $81,000. Some exceptions apply. Additionally, Government Code Section 14838.5 sets a small business and DVBE program by allowing state agencies to award contracts for the acquisition of goods, services, or information technology that has an estimated value of greater than $5,000, but less than $250,000 to a certified small business or to a DVBE, as long as the agency obtains price quotations from two or more certified small businesses, including microbusinesses, or from two or more disabled veterans business enterprises. It is not clear if this section applies to some or all of the state's public postsecondary institutions. FISCAL EFFECT : Unknown COMMENTS : This bill provides public postsecondary institutions an alternative to the competitive bidding process for contracts under $250,000 for goods, services, or information technology. Specifically, the institutions would be allowed to exempt themselves from low bid requirements by contracting with a small business or a disabled veteran business enterprise (DVBE). Under the bill, postsecondary institutions using this option would be required to obtain quotes from at least two small businesses or at least two DVBEs before entering into a contract. This bill would not require postsecondary institutions to enter into contracts under $250,000 by using this process. Instead, according to the author, the intent is to provide the educational institutions with flexibility in order to encourage contracting with small businesses and DVBEs. As noted in the existing law section, it is not clear if the Government Code section that specifies the small business and DVBE already applies to some postsecondary institutions or if these institutions already have the authority to establish such programs. For example, the CSU Policy Manual for Contracting & Procurement references the Government Code section when describing its small business/DVBE option. Under the policy, campuses are allowed to award contracts of more than $5,000 but less than $250,000 to a certified small business or a DVBE as AB 173 Page 3 long as the campus obtains quotes from at least two or more small businesses or DVBEs. Additionally, various code sections and the California Constitution provide postsecondary institutions with contracting parameters and requirements. The author explained that because of different interpretations and requirements that apply to different postsecondary institutions, the bill is meant to add clarification by amending sections of the Government and Public Contract codes to allow all of the state's postsecondary institutions to use the small business and DVBE contracting option. While the fiscal impact is unknown, this bill could lead to increased expenses since it allows postsecondary institutions to avoid competitive bidding for some contracts. REGISTERED SUPPORT / OPPOSITION : Support California Asian Pacific Chamber of Commerce California Association for Micro Enterprise Opportunity Opposition None on File Analysis Prepared by : Scott Herbstman / A. & A.R. / (916) 319-3600