BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 906| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 906 Author: Pan (D) Amended: 9/3/13 in Senate Vote: 21 SENATE PUBLIC EMPLOYMENT & RETIREMENT COMM. : 3-1, 8/19/13 AYES: Beall, Block, Yee NOES: Walters NO VOTE RECORDED: Gaines SENATE GOVERNMENTAL ORGANIZATION COMMITTEE : 7-0, 8/20/13 AYES: Wright, Cannella, De León, Galgiani, Hernandez, Lieu, Padilla NO VOTE RECORDED: Berryhill, Calderon, Correa, Vacancy SENATE APPROPRIATIONS COMMITTEE : 5-2, 8/30/13 AYES: De León, Hill, Lara, Padilla, Steinberg NOES: Walters, Gaines ASSEMBLY FLOOR : 49-27, 5/29/13 - See last page for vote SUBJECT : Personal services contracts: independent contractors SOURCE : Author DIGEST : This bill authorizes state agencies to use personal services contracts when the services are of irregular, unpredictable, or occasional duration and are necessary to carry out instructional activities related to Peace Officer Standards CONTINUED AB 906 Page 2 and Training (POST). This bill limits the term of certain personal services contracts to two years, with exceptions, and specifies that the provisions applicable to personal services contracts do not apply to personal services contracts for architectural or engineering services, as defined. This bill prohibits a contracting agency from executing certain proposed personal services contracts until the State Personnel Board (SPB) has contacted all organizations that represent state employees who perform the type of work to be contracted. ANALYSIS : 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. 2. Restricts, but does not prohibit, private contracting by public agencies. Public agencies are authorized to engage 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. 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. C. When the state, under specified conditions contracts with private contractors to achieve cost savings. 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 CONTINUED AB 906 Page 3 services contract with a private contractor to notify the SPB, which shall contact employee organizations and allow a reasonable opportunity for comment on the proposed contract. 4. Authorizes an employee organization, within 10 days of receiving notice of a proposed contract, to request that SPB review the contract for compliance with the statutory standards. 5. Authorizes public agencies to contract out for architectural and engineering services on public works projects. 6. Requires state agency personal service contracts to be with a "firm" defined as a corporation, partnership, nonprofit organization, or sole proprietorship, but which does not include limited liability companies (LLCs). This bill: 1. Adds LLCs to the definition of a "firm," thereby authorizing LLCs to be authorized contracting parties to state personal services contracts. 2. Creates a specific category of permissible personal service contracts for services of an irregular, unpredictable, or occasional duration that are necessary to carry out instructional training by the Commission on POST. 3. Prohibits a personal services contract, when the nature of the work is such that the Government Code standards for emergency appointments apply or the services are of such an urgent, temporary, or occasional nature that the delay in their implementation would frustrate their very purpose, from having a term in excess of two years. 4. Exempts from this two-year limitation, the following personal services contracts: A. Those developed pursuant to rehabilitation programs as specified; B. Those developed by habilitation programs in accordance with the Welfare and Institutions Code, as defined; CONTINUED AB 906 Page 4 C. Those developed by a program vendored or contracted through a regional center or the Department of Developmental Services pursuant to the Lanterman Developmental Disabilities Services Act, as specified; and D. Those developed for architectural and engineering services, as defined. 5. Prohibits any state agency from entering into a personal service contract until the SPB has contacted all organizations that represent state employees who perform the type of work to be contracted. Prior/Related Legislation SB 335 (Yee, 2013-2014 Session) requires 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. 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. 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 SPB disapproves a state agency's contract for personal services, the agency shall immediately discontinue the contract unless otherwise ordered by the SPB. This bill was CONTINUED AB 906 Page 5 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 Web site that includes a listing of personal services and consulting services contracts that it entered into during the previous fiscal year. This bill was vetoed. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No According to the Senate Appropriations Committee, SPB indicates annual costs of $359,568 for 3 staff attorney positions (General). SUPPORT : (Unable to verify at time of writing) American Federation of State, County and Municipal Employees California Attorneys, Administrative Law Judges & Hearing Officers in State Employment California Correctional Peace Officers Association Professional Engineers in California Government Service Employees International Union, Local 1000 Union of American Physicians and Dentists OPPOSITION : (Unable to verify at time of writing) American Council of Engineering Companies California Chamber of Commerce ARGUMENTS 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, and that these contracts are often unnecessary in any event. 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. Sponsors state that this bill will "provide the CONTINUED AB 906 Page 6 increased transparency and oversight needed for those savings to be realized." ASSEMBLY FLOOR : 49-27, 5/29/13 AYES: Alejo, Ammiano, Atkins, Bloom, Blumenfield, Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian Calderon, Campos, Chau, Chesbro, Cooley, Daly, Dickinson, Eggman, Fong, Frazier, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gray, Hall, Roger Hernández, Jones-Sawyer, Lowenthal, Medina, Mitchell, Mullin, Nazarian, Pan, Perea, V. Manuel Pérez, Quirk, Rendon, Salas, Skinner, Stone, Ting, Weber, Wieckowski, Williams, Yamada, John A. Pérez NOES: Achadjian, Allen, Bigelow, Chávez, Conway, Dahle, Donnelly, Fox, Beth Gaines, Gorell, Grove, Hagman, Harkey, Jones, Levine, Logue, Maienschein, Mansoor, Melendez, Morrell, Nestande, Olsen, Patterson, Quirk-Silva, Wagner, Waldron, Wilk NO VOTE RECORDED: Holden, Linder, Muratsuchi, Vacancy JL:d:n 9/3/13 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED