BILL ANALYSIS �
Bill No: AB
906
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2013-2014 Regular Session
Staff Analysis
AB 906 Author: Pan
As Amended: May 24, 2013
Hearing Date: June 25, 2013
Consultant: Paul Donahue
SUBJECT
Personal services contracts: independent contractors
DESCRIPTION
Limits the terms of certain state personal services
contracts to 2 years. Specifically, this bill:
1)Prohibits a state agency from entering into a contract
for work that meets the standards for emergency
appointments or for services that are of an urgent,
temporary, or occasional nature, as specified, from
having a term exceeding two years.
2)Prohibits a state agency from entering into a personal
services contract until the State Personnel Board has
contacted all of the organizations that represent state
employees who perform the type of work to be contracted.
EXISTING LAW
1)Establishes in the California Constitution a system of
civil service employment for state government. The civil
service includes every officer and employee of the state
except as otherwise provided in the Constitution.
(Const., art. VII, � 1(a)
2)Restricts, but does not prohibit, private contracting by
public agencies. Public agencies are authorized to engage
AB 906 (Pan) continued
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in private contracting in various instances, including:
a) When the "nature of the services" is such that the
services cannot be adequately rendered by an existing
agency of the public entity.<1>
b) If the state seeks to contract for private
assistance to perform "new functions" not previously
undertaken by the state or covered by an existing
department.<2>
c) When the state, under specified conditions
contracts with private contractors to achieve cost
savings.<3>
d) When the nature of the work is such that the
Government Code standards for emergency appointments
apply.
e) When the services are of such urgent, temporary, or
occasional nature that the delay incumbent in their
implementation under civil service would frustrate
their very purpose.
3)Requires a state agency proposing to enter into a
personal services contract with a private contractor to
notify the State Personnel Board (SPB), which shall
contact employee organizations and allow a reasonable
opportunity for comment on the proposed contract.
4)Provides that an employee may request that SPB review the
proposed contract for compliance with applicable
exceptions to the restrictions on contracting out, and
that SPB shall upon request conduct a review of the
contract for compliance with the standards.
5)Authorizes public agencies to contract out for
architectural and engineering services on public works
-------------------------
<1> State Compensation Ins. Fund v. Riley (1937) 9 Cal.2d
126
<2> Professional Engineers v. Department of Transportation
(1993) 13 Cal.App.4th 585
<3> Govt. Code � 19130; California State Employees' Assn.
v. State of California (1982) 199 Cal.App.3d 840
AB 906 (Pan) continued
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projects.<4>
BACKGROUND
1)Purpose : According to the sponsors, state agencies and
departments are undermining the Legislature's
appropriation authority and the state civil service
system by abusing their ability to enter into personal
services contracts. The Department of General Services
(DGS) is charged with reviewing and approving state
departments' requests to contract out personal services.
Unfortunately, DGS is failing to thoroughly review each
request to ensure the request makes good business sense
and the cost is reasonable.
The sponsors conclude that this bill is a first step in
ensuring that state agencies and departments are working
in conjunction with the Legislature to build and maintain
a strong civil service system, as envisioned in the State
Constitution.
2)Statements in support : Supporters state that a broad
variety of studies and analyses have found that the state
could save hundreds of millions annually by utilizing
civil service employees instead of unnecessary and
wasteful privatization contracts. Proponents say that
currently, there is very little oversight of the
magnitude of outsourcing performed by the hundreds of
state departments, boards and commissions. Supporters
also cite a 2009 study conducted by the SEUI Local 1000,
which found that the state could save about $350 million
annually by utilizing state employees instead of private
contractors.
3)Architectural and engineering contracts : In Professional
Engineers in California Government v. Kempton (2007) 40
Cal.4th 1016, the California Supreme Court held that
Proposition 35, passed by the electorate in 2000,
authorizes public agencies to contract out for
architectural and engineering services without
legislative restrictions.
-------------------------
<4> Cal. Const., art. XXII; Govt. Code � 4529.10 et seq.;
enacted by Proposition 35 in 2000. See also Professional
Engineers in California Government v. Kempton (2007) 40
Cal.4th 1016
AB 906 (Pan) continued
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The Court stated that the initiative represents a
comprehensive regulation of the entire subject of private
contracting for those services, that it prevails over
conflicting acts of the Legislature, and also that it
must be construed liberally to achieve its goal of
encouraging and authorizing private contracting of
architectural and engineering services. The Court also
held that, while authorizing the Legislature to amend the
initiative by statute, the initiative restricts that
power to such amendments as will "further its purposes."
In a later case,<5> the California Supreme Court held
that a provision of a memorandum of understanding (MOU)
between the state and a state employee union that
restricts the use of private contractors for
architectural and engineering services by public agencies
fatally conflicts with Proposition 35. Among other
things, the Court rejected attempts by the state employee
union to characterize the purpose of the MOU as "merely
an innocuous mechanism for gathering and analyzing data
on private contracting."
In light of the above, opponents to the bill, the
American Council of Engineering Companies, are seeking an
amendment excluding application of the bill to contracts
for architectural and engineering services. The author
and the committee may wish to consider an amendment to
the bill that would expressly exclude contracts for
architectural and engineering services from its
provisions.
4)Disability services contracts : The California Disability
Services Association contends that this bill would have
negative consequences on adults with developmental
disabilities who today have employment through member
agencies' contracts with state agencies. They note that
in some cases, the same individuals have successfully
performed services under contracts with the state for
many years. They would urge the author or the committee
to adopt an amendment that exempts employment of persons
-------------------------
<5> Consulting Engineers & Land Surveyors of California,
Inc. v. Professional Engineers in California Government
(2007) 42 Cal.4th 578
AB 906 (Pan) continued
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with disabilities.
PRIOR/RELATED LEGISLATION
SB 335 (Yee), 2013-2014 Session. Would require the
Governor, upon implementation of the Financial Information
System for California (FI$Cal), to submit an annual report
to the Legislature detailing specific information on
current and proposed contracts for services awarded by the
state that are valued at $5,000 or more. (Pending in
Assembly)
SB 252 (Vargas), 2011-2012 Session. Would have required the
Department of General Services to compile and publish
reports detailing all "privatization contracts" let by
state agencies. Furthermore, the bill specifies that all
contracts and related subcontracts are public documents
subject California Public Records Act. (Held in Assembly)
AB 740 (Blumenfield), Chapter 685 Statutes of 2011.
Provides that if the SPB disapproves a state agency's
contract for personal services, the agency shall
immediately discontinue the contract unless otherwise
ordered by the SPB. It prohibits the state agency from
circumventing or disregarding the board's action by
entering into another contract for the same services, for
similar services, or to continue the services provided
under the disapproved contract.
AB 2494 (Blumenfield), 2009-2010 Session. Would have
specified that if the State Personnel Board disapproves a
state agency's contract for personal services, the agency
shall immediately discontinue the contract unless otherwise
ordered by the SPB. (Vetoed)
AB 756 (Eng), 2009-2010 Session. Would have required every
state agency to provide a link to a centrally located and
accessible state-run Internet website that includes a
listing of personal services and consulting services
contracts that it entered into during the previous fiscal
year. (Vetoed)
SUPPORT:
American Federation of State, County and Municipal
Employees (AFSCME)
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California Attorneys, Administrative Law Judges & Hearing
Officers in State Employment
California Correctional Peace Officers Association
Professional Engineers in California Government
Service Employees International Union (SEIU) Local 1000
Union of American Physicians and Dentists
OPPOSE:
American Council of Engineering Companies of California
California Chamber of Commerce
California Disability Services
The Arc / United Cerebral Palsy California Collaboration
FISCAL COMMITTEE: Senate Appropriations Committee
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