BILL ANALYSIS �
AB 550
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Date of Hearing: May 1, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 550 (Brown) - As Amended: April 16, 2013
Policy Committee: JEDE Vote:6-1
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill establishes procedures and accounting to ensure all
state agencies and departments achieve a 25% small business
participation rate for state contracts. Specifically, this
bill:
1)Requires a state agency to actively pursue an annual 25% small
business participation level in state contracting, and
mandates state agencies ensure an agency's contracting program
is administered in a manner that promotes small business
participation.
2)Directs any state agency not achieving the 25% target to report
to DGS, the Office of the Small Business Advocate, and the
Legislature within 60 days of the close of the calendar year,
and submit a plan for improving contracting opportunities for
small businesses.
3)Requires an agency to develop a plan for increasing small
business participation levels with 60 days when participation
levels are low.
4)Requires DGS and the Office of Small Business Advocate to serve
as a resource for state agencies.
5)Encourages the California State University, the University of
California, and the California Community Colleges and other
independent state agencies to comply with the intent of the
act.
FISCAL EFFECT
AB 550
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1)GF costs for DGS to implement the new program, monitor progress,
develop corrective action plans, and report on department
progress would be in the range of $700,000 per year.
2)Unknown GF and SF costs, in excess of $500,000, for the workload
associated with departments, including the California State
University system, the University of California system, and
community colleges, to the extent they participate, preparing
annual reports that include statistics regarding small
business participation and preparing the required corrective
action and implementation plans.
3)To the extent the 25% small business requirement increases the
number of state contracts awarded to other than the low
bidder, state contracting costs will increase. Given the
thousands of state contracts totaling billions of dollars, the
cost impact of the bill could be in the tens of millions of
dollars each year.
4)Although the bill merely codifies the existing 25% small business
requirement, it gives the requirement force of law and limits
the state flexibility to change the proportion should
circumstances dictate.
COMMENTS
1)Purpose . The author notes Governors Arnold Schwarzenegger and
Gray Davis issued executive orders calling for California to
lead the nation in creating an optimum environment that
affords all business equal access to state agency contracting
opportunities. The author states these executive orders
required all state agencies to aggressively pursue an annual
25% small business participation level in state contracting,
helped spur a state commitment to the success of small
businesses, and acknowledged that enhancing opportunities for
these entities to participate in the state contracting process
was good business for California. According to the author, AB
550 seeks to solidify the state's commitment to small
businesses by codifying both of the executive orders.
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. The Small
AB 550
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Business Act states it is the policy of the State of
California that the state aid small businesses 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 state's success in obtaining small business 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.
3)Prior Legislation. A few of the more recent bills on this
subject.
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.
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