BILL ANALYSIS                                                                                                                                                                                                    Ó

                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de León, Chair

          AB 1650 (Jones-Sawyer) - Public Contracts: Hiring: Priority  
          Amended: May 28, 2014           Policy Vote: GO 7-1   Judiciary  
          Urgency: No                     Mandate: No
          Hearing Date: August 4, 2014                            
          Consultant: Robert Ingenito     
          This bill meets the criteria for referral to the Suspense File.

          Bill Summary: AB 1650 would require people bidding on certain  
          state contracts to certify that they do not ask job applicants  
          to disclose information concerning their conviction history. 

          Fiscal Impact: 
                 The bill would potentially dissuade noncompliant  
               contractors from bidding on certain state public works  
               contracts. To the extent this occurs, competition would be  
               reduced, resulting in potentially higher contract costs  
               than would have occurred otherwise. The amount of the  
               increase is unknown, but given the volume at state public  
               works contracts, could exceed $150,000 annually.

                 The State may incur investigation-related costs  
               associated with information that a bidder was not in  
               compliance with the bill's requirements. The number of such  
               cases is unknown, but could result in significant  
               investigative and legal costs. 

                 If a state contractor was later found to have been in  
               violation of the bill's requirements, there could be  
               additional costs to void the contract and rebid the  

          Background:  The State Contract Act regulates contracting  
          between state agencies and private contractors, and outlines  
          requirements for bidding and awarding of contracts for projects.  
          Current law defines projects to include the construction or  
          other improvement to a state structure, building, road or other  


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          state improvement of any kind that will exceed a total cost of  
          $250,000 for the 2010 calendar year, as adjusted every two  
          years. The current threshold is $281,000

          Current law prohibits employers from asking applicants for  
          employment to disclose information concerning convictions that  
          have been sealed, expunged, or statutorily eradicated, and  
          certain marijuana-related convictions if the convictions are  
          more than two years old. Additionally, current law prohibits a  
          state or local agency from asking an applicant to disclose  
          information regarding a criminal conviction, except as  
          specified, until the agency has determined the applicant meets  
          the minimum employment qualifications, as stated in any notice  
          issued for the position

          Proposed Law: This bill would do the following:

                 Require any person submitting a bid to the state on a  
               contract involving onsite construction-related services to  
               certify that the person does not ask an applicant for  
               onsite construction-related employment to disclose orally  
               or in writing information concerning the applicant's  
               conviction history.

                 Does not require this certification if the bidder or  
               state agency is otherwise required by state or federal law  
               to conduct a conviction history background check, or in any  
               contract position with a "criminal justice agency."  

                 Does not require this certification when the person  
               submitting the bid obtains workers from a hiring hall  
               pursuant to a bona fide collective bargaining agreement. 

          Related Legislation: AB 218 (Dickinson), Chapter 699, Statutes  
          of 2013, prohibits state and local agencies from inquiring about  
          conviction history in their initial employment applications. AB  
          218 provides a similar exemption to this requirement regarding  
          applications for positions required by law to include a  
          conviction history background check and for positions in  
          criminal justice agencies.

          In 2013, AB 970 (Jones-Sawyer) applied the same prohibition as  


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          AB 1650, but to all state contracts. The bill was held under  
          submission by the Assembly Appropriations Committee.

          Staff Comments: To the extent that private employers engage in  
          the practice this bill addresses, there could be a substantial  
          number of bidders whose bids would be excluded from  
          consideration unless they change their hiring practices. 
          Generally speaking, a law that requires the state to exclude  
          certain firms' bids from consideration will tend to increase  
          costs by:
          (1)  Requiring the state to reject otherwise compliant low bids.
          (2)  Discouraging firms in the excluded group from bidding.
          (3)  Potentially increasing the cost of acquisition and/or  
          resulting in delays in acquiring needed products and services.   
          This occurs to the extent that additional staff time is expended  
          on inquiries, research, or analysis to determine whether a  
          bidder is in the excluded group, and/or investigations into  
          allegations against particular contractors.
          Because the bill requires a firm to stop engaging in the  
          targeted practice for all construction projects, public and  
          private, before it submits its bid to the state, it invites  
          construction firms to weigh whether continuing to bid to the  
          state is worth changing hiring practices throughout the company.  
           Notably, the bill requires the company to make changes before  
          it submits its bid, and thus before it knows whether it will win  
          the contract. 
          Although the bill does not explicitly require the state to  
          investigate allegations that a bidder engages in the targeted  
          practice, in practice the state would likely be expected to do  
          so if presented with information that created a reasonable  
          suspicion that a bidder had given a false certification.  This  
          could be challenging for the state agency contracting officer,  
          who is typically not trained or experience in conducting  
          investigations into private businesses' hiring practices.  Such  
          an investigation could require the assistance of legal counsel,  
          internal audit staff, or investigative personnel.
          If a current contractor were found to have falsely certified  
          that it did not engage in the targeted practice, the state  
          agency might conclude that the contract was void as a result of  
          having been awarded in violation of law.  If so, project  


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          completion would be delayed, and the state agency would incur  
          additional costs associated with rebidding the contract.   
          Depending on the circumstances, there could also be significant  
          costs associated with changing contractors.  
          DGS regularly awards contracts that would be subject to the  
          provisions of this bill.  Between calendar year 2003 and  
          calendar year 2013, DGS awarded 497 public works contracts over  
          $281,000 with a total value of more than $2 billion.  In  
          calendar year 2013, DGS awarded 23 public works contracts over  
          $281,000 with a total value of $125.9 million.  Other  
          departments that award large public works contracts include  
          Caltrans, Water Resources, and CDCR.
          By discouraging some companies from bidding on public works  
          contracts, this bill may result in higher contract costs for  
          public works projects.  These costs are difficult to estimate,  
          inasmuch as they depend heavily on the individual choices of  
          private contractors.  To the extent that state agencies  
          investigate allegations that a contractor gave a false  
          certification and/or void contracts as a result of such  
          investigations, this would result in additional cost.