BILL ANALYSIS                                                                                                                                                                                                    



                                                                     AB 351


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          Date of Hearing:  May 13, 2015


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                                 Jimmy Gomez, Chair


          AB  
          351 (Jones-Sawyer) - As Introduced February 17, 2015


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          |Policy       |Jobs, Economic Development,    |Vote:|8 - 0        |
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          |             |Accountability and             |     |9 - 0        |
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          Urgency:  No  State Mandated Local Program:  NoReimbursable:  No


          SUMMARY:


          This bill requires all state agencies, departments, boards, and  
          commissions to establish and achieve an annual goal of 25% small  
          business participation in state procurements and contracts.  








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          Specifically, this bill:  


          1)Requires heads of agencies, departments, boards and  
            commissions to ensure the 25% annual goal is met and further  
            requires them report to the Department of General Services  
            (DGS) on their agency's progress.

          2)Requires agencies that fail to meet the 25% annual goal to  
            submit a corrective action plan to DGS within 45 days of the  
            close of the fiscal year.

          3)Requires DGS to regularly monitor agencies' progress in  
            meeting the 25% annual goal and regularly share related  
            information with the Office of the Small Business Advocate  
            (OSBA), including corrective action plans.  

          4)Directs DGS and the OSBA to assist agencies in implementing  
            their corrective action plans to the extent feasible.

          5)Requires all state agencies to apply the existing streamlined  
            small business state contracting option to contracts under  
            $100,000 and construction contracts under $120,000.  

          6)Requires DGS to collaborate with the OSBA to provide outreach  
            and actively promote small business certification.

          7)Clarifies that the requirements of this bill apply to the  
            University of California, the California State University, and  
            the California Community Colleges when contracting with state  
            funds.

          FISCAL EFFECT:


          1)Ongoing General Fund administrative costs to the DGS of  
            approximately $292,000 for program staff to train departments,  
            review reports and provide technical assistance plus  
            approximately $10,000 for printing materials and webcasting.  








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            The DGS currently receives approximately 180 reports from  
            state agencies, and would receive approximately 73 additional  
            reports with UC and community college districts reporting.   

          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 prepare 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, the cost impact of the bill  
            could be in the tens of millions of dollars each year. 

          COMMENTS:


          1)Purpose. Governors Arnold Schwarzenegger and Gray Davis issued  
            executive orders calling for all state agencies to pursue an  
            annual 25% small business participation level in state  
            contracting.  According to the author, codifying the executive  
            order reinforces the state's support in small businesses.  

            According to the consolidated annual report on procurement for  
            fiscal year (FY) 2013-14 by DGS, the state entered into nearly  
            $9 billion in contracts, with approximately 26% awarded to  
            small businesses.  The report also indicates statewide  
            departments achieved nearly 26% percent small business  
            participation in contracts.  However, in the last 15 report  
            periods, the state has met the 25% small business  
            participation goal five times.

            To provide more consistency in achieving the small business  
            procurement participation goal, this bill places the goal in  
            statute; charges DGS with regularly monitoring agencies'  








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            progress in meeting the goal; and, requires mitigation plans  
            from poor performing departments.  

          2)Prior legislation.  AB 1734 (Jones-Sawyer) of 2014, similar to  
            this bill, required each state agency to establish and achieve  
            a goal of 25 % small business (SB) participation and an annual  
            phased-in goal of 5 % disabled veteran business enterprises  
            (DVBE) participation in state contracting.  This bill was held  
            on Suspense in this committee. 
            
            AB 550 (Brown) of 2013, similar to this bill, codified the  
            executive order establishing the 25% small business  
            participation goal.  The bill also made changes to state  
            procurement procedures for small business, including  
            microbusiness and DVBE participation rates.  This bill was  
            held on Suspense in this committee.



          Analysis Prepared by:Misty Feusahrens / APPR. / (916)  
          319-2081