BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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                                 UNFINISHED BUSINESS


          Bill No:  SB 335
          Author:   Yee (D)
          Amended:  9/6/13
          Vote:     21


           SENATE GOVERNMENTAL ORGANIZATION COMMITTEE  :  9-2, 4/9/13
          AYES:  Wright, Calderon, Cannella, Correa, De León, Galgiani,  
            Hernandez, Lieu, Padilla
          NOES:  Nielsen, Berryhill

           SENATE APPROPRIATIONS COMMITTEE  :  5-2, 5/23/13
          AYES:  De León, Hill, Lara, Padilla, Steinberg
          NOES:  Walters, Gaines

           SENATE FLOOR  :  28-10, 5/29/13
          AYES:  Beall, Block, Calderon, Cannella, Corbett, Correa, De  
            León, DeSaulnier, Evans, Galgiani, Hancock, Hernandez, Hill,  
            Hueso, Jackson, Lara, Leno, Lieu, Liu, Padilla, Pavley, Price,  
            Roth, Steinberg, Torres, Wolk, Wright, Yee
          NOES:  Anderson, Berryhill, Emmerson, Fuller, Gaines, Huff,  
            Knight, Nielsen, Walters, Wyland
          NO VOTE RECORDED:  Monning, Vacancy

           ASSEMBLY FLOOR  :  52-24, 9/10/13 - See last page for vote


           SUBJECT  :    Expenditures:  services contracts

           SOURCE  :     Author


           DIGEST  :    This bill requires, upon full implementation of the  
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          Financial Information System for California (FISCal) Project for  
          state departments and agencies that are utilizing the full  
          functionality of the FISCal system, specified information  
          regarding contracts for services in the amount of $5,001 or more  
          to be made available to the public on the FISCal Project  
          Internet Web site in a format that allows for searching and  
          sorting by specified categories.

           Assembly Amendments  add a requirement for the Governor to submit  
          to the Legislature an annual report on contracts for services of  
          over $5,001, delete the requirement for a searchable and  
          sortable report on the FISCal Project Internet Website, and make  
          clarifying an conforming changes to the requirements of the  
          reports.

           ANALYSIS  :    FISCal, the State's effort to modernize the State's  
          accounting and budgeting practices and install modern automation  
          tools is well underway.  This bill intends to set reporting  
          requirements upon the new system that are consistent with prior  
          legislative intent around the goals of the project to provide  
          accessible information on State expenditures.  In creating the  
          FISCal project, the Legislature set broad goals and priorities  
          for the information contained in the new system.  

          Currently, the State operates the State Contracting and  
          Procurement Reporting System (SCPRS), which provides information  
          on State contracts.  This data cannot be easily analyzed or  
          sorted, which makes it difficult to analyze and search.  The  
          data is also hard to aggregate because a single vendor name may  
          be coded inconsistently by different account clerks.  This  
          limitation has been recognized during Assembly budget oversight  
          hearings in the recent past, when information regarding State  
          contract expenditures were scrutinized.

          The FISCal system is intended to solve these problems with its  
          improvements to procurement.  The system has already developed a  
          single chart of accounts, which will be rolled out across 140  
          departments and a centralized vendor management file that will  
          improve the standardization of the data.  The system is designed  
          to produce reports that have sortable functionality similar to  
          the requirements of this bill.  When the system is fully  
          operational in 2016, the type of information required in this  
          bill will be available within the FISCal system.  


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          Not all State agencies will use the contract procurement  
          components of FISCal and thus the data requested in this bill  
          will not be provided for those departments.   In particular,  
          data for Lottery, Corrections, DMV, Caltrans, and Water  
          Resources will not have contract data available in FISCal.   
          However, these departments would technically "use the FISCal  
          system" for other functionality, like budgeting.  

          Currently the $616.8 million FISCal project is on schedule and  
          has met its significant project milestones.  The project has  
          implemented its "Pre-Wave" activities to develop the templates  
          and architecture of the system and then will begin rolling out  
          the project through four "Waves" of departments over the next  
          three years.  

          This bill stipulates that contract information for all contracts  
          in departments that use FISCal must be searchable and sortable  
          and contain the name of the contractor, a description of  
          services, the total projected costs of the contract, the amount  
          paid to the contractor in the current and prior years, the  
          effective date of the contract, and the procurement method.

           Comments
           
          According to the author's office, currently, lawmakers and the  
          public cannot easily access information to determine how much  
          the state spends on contracting out services or what services  
          are received for the money spent.  The author's office contends  
          that such information is lumped together with "Other Operating  
          Expenses" in the annual budget report.  Information on state  
          employees (position and salary), however, is clearly outlined  
          under "Salary and Wage Supplement."  The contracting of services  
          is often promoted as a way to cut costs, especially during  
          fiscally strained times, yet public officials and taxpayers  
          rarely know how much is being spent on contracts, and thus,  
          unable to determine if such contracted services are being  
          provided at a lower cost to the state.  The author's office  
          states that when budget dollars remain scarce and insufficient  
          to meet California's pressing needs, it becomes vital that  
          information on all spending including spending on service  
          contracts, be made transparent.

          The author's office notes that the State Contracting and  
          Procurement and Registration System (SCPRS) already collects  

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          contract information, as the Governor pointed out in his veto  
          message of AB 172 (Eng, 2011).  However, the author's office  
          believes that the SCPRS suffers significant shortcomings which  
          make it inadequate to inform decision-makers.  Specific examples  
          include (1) expenditure data cannot be computed by fiscal year;  
          (2) the names of agencies and contractor names are not recorded  
          uniformly throughout the database, making calculations of  
          contract spending by agency or vendor impossible; and (3) key  
          data such as contact identification numbers are often missing.

          The author's office emphasizes that this bill remedies the  
          current information gap by requiring a service contract  
          expenditure report, as outlined above. 

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  No

          According to the Senate Appropriations Committee:

           Unknown contract costs, estimated in the hundreds of  
            thousands, to build requirements into the FISCal Project to  
            ensure the system has capacity to report specified information  
            on contracting (General/Special Funds).

           Likely minor costs to various state agencies to compile and  
            report specified information to the Governor's Office,  
            assuming the FISCal Project has the built in capacity to  
            report contracting information upon implementation  
            (General/Special Funds).

           Unknown costs to the Department of Finance (DOF) to develop  
            and establish new accounting rules governing the reporting of  
            service contract information (General).

           One-time costs of approximately $50,000 to the Department of  
            General Services (DGS) to develop and publish revisions to the  
            State Contracting Manual (General).

           Ongoing costs to DGS of $100,000 to $200,000 annually to  
            provide training and assistance to buyers and  
            budgeting/accounting personnel for state agencies (General).

           SUPPORT  :   (Verified  9/10/13)


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          AFSCME

           ARGUMENTS IN SUPPORT  :    The proponent stresses the importance  
          of gaining control over spending on service contracts, temporary  
          employees and consultants - such contracts to outsource work  
          totals in the billions of dollars.  They argue that this bill  
          simply requires the Administration to provide relevant and  
          usable information on spending decisions involving services  
          contracts. 

          Further, they claim that in 2009, the State of California had  
          13,600 personal service and consultant contracts in effect that  
          cost the state $34.7 billion ($28.7 million a day).  This breaks  
          down to 748 Architectural and Engineering contracts (cost $2.4  
          billion); 2,345 Information Technology (IT) contracts (cost $4.1  
          billion); and 10,507 non-IT contracts (cost $28.2 billion).   
          Proponents estimate that California could save millions annually  
          by utilizing state workers to cut unnecessary and wasteful  
          outsourcing.  They believe the public has the right to hold  
          state officials responsible for how the state spends taxpayer  
          dollars and that access to the information outlined in this bill  
          is absolutely essential.


           ASSEMBLY FLOOR  :  52-24, 9/10/13
          AYES:  Alejo, Ammiano, Atkins, Bloom, Bocanegra, Bonilla, Bonta,  
            Bradford, Brown, Buchanan, Ian Calderon, Campos, Chau,  
            Chesbro, Cooley, Daly, Dickinson, Fong, Fox, Frazier, Garcia,  
            Gatto, Gomez, Gonzalez, Gordon, Gray, Hall, Roger Hernández,  
            Holden, Jones-Sawyer, Levine, Lowenthal, Medina, Mitchell,  
            Mullin, Muratsuchi, Nazarian, Pan, Perea, V. Manuel Pérez,  
            Quirk, Quirk-Silva, Rendon, Salas, Skinner, Stone, Ting,  
            Weber, Wieckowski, Williams, Yamada, John A. Pérez
          NOES:  Achadjian, Allen, Bigelow, Chávez, Conway, Dahle,  
            Donnelly, Beth Gaines, Grove, Hagman, Harkey, Jones, Linder,  
            Logue, Maienschein, Mansoor, Melendez, Morrell, Nestande,  
            Olsen, Patterson, Wagner, Waldron, Wilk
          NO VOTE RECORDED:  Eggman, Gorell, Vacancy, Vacancy


          MW:ej:d  9/11/13   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE


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