BILL ANALYSIS                                                                                                                                                                                                    Ó






                                                                       AB 507


                                                                       Page A


          ASSEMBLY THIRD READING


          AB  
          507 (Olsen)


          As Amended  June 1, 2015


          Majority vote


           ------------------------------------------------------------------- 
          |Committee       |Votes |Ayes                 |Noes                 |
          |                |      |                     |                     |
          |                |      |                     |                     |
          |----------------+------+---------------------+---------------------|
          |Business &      |14-0  |Bonilla, Jones,      |                     |
          |Professions     |      |Baker, Bloom,        |                     |
          |                |      |Campos, Chang, Dodd, |                     |
          |                |      |Eggman, Gatto,       |                     |
          |                |      |Holden, Mullin,      |                     |
          |                |      |Ting, Wilk, Wood     |                     |
          |                |      |                     |                     |
          |----------------+------+---------------------+---------------------|
          |Appropriations  |17-0  |Gomez, Bigelow,      |                     |
          |                |      |Bonta, Calderon,     |                     |
          |                |      |Chang, Daly, Eggman, |                     |
          |                |      |Gallagher,           |                     |
          |                |      |                     |                     |
          |                |      |                     |                     |
          |                |      |Eduardo Garcia,      |                     |
          |                |      |Gordon, Holden,      |                     |
          |                |      |Jones, Quirk,        |                     |
          |                |      |Rendon, Wagner,      |                     |
          |                |      |Weber, Wood          |                     |
          |                |      |                     |                     |
          |                |      |                     |                     |











                                                                       AB 507


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          SUMMARY:  Requires the Department of Consumer Affairs (DCA) to  
          submit an annual report to the Legislature and the Department of  
          Finance that includes an implementation plan for phase three of  
          the "BreEZe" computer system.  Specifically, this bill: 


          1)Requires the DCA, on and after October 1, 2015, to submit an  
            annual report to the Legislature and the Department of Finance  
            that includes the following:


             a)   The DCA's plan for implementing the BreEZe system for the  
               regulatory entities in the third phase of the implementation  
               project, including a timeline for implementation;


             b)   The total estimated costs of implementation of the system  
               for the regulatory entities in the third phase of  
               implementation along with a cost-benefit analysis; and


             c)   A description of whether the BreEZe system will achieve  
               any operational efficiencies after being implemented by  
               boards and regulatory entities.


          2)Specifies that the report shall comply with Government Code  
            Section 9795.


          3)Lists the regulatory entities in the DCA's third phase of the  
            implementation project as follows:


             a)   Acupuncture Board.












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             b)   Board for Professional Engineers, Land Surveyors, and  
               Geologists.


             c)   Bureau of Automotive Repair.


             d)   Bureau of Electronic and Appliance Repair, Home  
               Furnishings, and Thermal Insulation.


             e)   Bureau for Private Postsecondary Education.


             f)   California Architects Board.


             g)   California Board of Accountancy.


             h)   California State Board of Pharmacy.


             i)   Cemetery and Funeral Bureau.


             j)   Contractors' State License Board.


             aa)  Court Reporters Board of California.


             bb)  Landscape Architects Technical Committee.


             cc)  Professional Fiduciaries Bureau.













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             dd)  Speech-Language Pathology and Audiology and Hearing Aid  
               Dispensers Board.


             ee)  State Athletic Commission.


             ff)  State Board of Chiropractic Examiners.


             gg)  State Board of Guide Dogs for the Blind.


             hh)  Structural Pest Control Board.


             ii)  Telephone Medical Advice Services Bureau.


          4)Adds an urgency clause.


          FISCAL EFFECT:  According to the Assembly Appropriations  
          Committee, this bill will result in minor and absorbable costs to  
          the DCA (General Fund) to complete the annual report.


          COMMENTS:


          Purpose.  This bill is sponsored by the author.  According to the  
          author, "In order to ensure that Californians can rely on the  
          services they depend on in a timely and efficient manner - even  
          after implementing new technology - the Legislature and DOF need  
          to keep a close eye on the negotiation, planning, development and  
          implementation processes for the boards that we entrust with  
          licensing professionals."













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          Background.  In 2009, The DCA proposed the BreEZe information  
          technology system and the California Department of Technology  
          (CalTech) approved the proposal.  BreEZe was envisioned to be an  
          answer to the DCA's out of date Legacy technology system and would  
          provide needed applicant tracking licensing, renewal, enforcement  
          monitoring and cashiering support for 37 of the 40 boards,  
          bureaus, committees and one commission housed within the DCA.  The  
          project began in 2011, and in 2013, BreEZe was launched for 10 of  
          the regulatory entities (release 1).  In March of 2016, BreEZe is  
          intended to be launched for another eight entities (release 2).  


          State Audit.  In the midst of BreEZe implementation for release 1  
          and 2 regulatory entities, the DCA's management of the project  
          came under public scrutiny from a variety of sources including  
          Assembly Member Olsen and a myriad nursing students and graduates.  
           The students and graduates were having difficulty getting their  
          applications for licensure and examination processed by the Board  
          of Registered Nursing - one of the regulatory boards housed within  
          the DCA.  In response, on May 20, 2014, Assembly Member Olsen  
          wrote a letter to the former Chairman of the Joint Legislative  
          Audit Committee, Assembly Member Adam Gray, requesting that the  
          Joint Legislative Audit Committee, "approve an audit of policies  
          and procedures on the planning, development and implementation of  
          [BreEZe] that was used by the Board of Registered Nursing."


          On February 12, 2015, the State Auditor released a report  
          reflecting the following key findings from the audit:


          1)"[DCA] did not adequately plan, staff and manage the project for  
            developing BreEZe;


          2)CalTech did not ensure oversight for BreEZe until more than one  
            year after the project's commencement, and despite being aware  
            of the significant problems with the project, continued to  
            approve additional funding and allowed the project to press  











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            forward without intervening to ensure [DCA] took corrective  
            action; and,


          3)The three contracts that [DCA] awarded and the Department of  
            General Services approved for the BreEZe project did not  
            adequately protect the State- the contracts' terms and  
            conditions transferred significant risk to the State, limited  
            DCA's ability to terminate the contracts, and reduced the  
            State's protections against intellectual property rights  
            violations."  


          The State Auditor also provided the following key  
          recommendations<1>:


          1)"The Legislature should require [DCA] to submit a report  
            annually that includes implementation plans for the project's  
            phase 3 regulatory entities, estimated costs through  
            implementation, and nay operation efficiencies that will result  
            from implementation by the regulatory entities;


          2)CalTech should ensure that [DCA] promptly responds to and  
            addresses concerns raised by independent oversight entities,  
            require [DCA] to analyze the costs and benefits of moving  
            forward with the project as planned versus suspending or  
            terminating the projects, and document reasons for approving any  
            future deviations from standard contract language; and, 


          ----------------------------
          <1>


           California State Auditor Fact Sheet, California Department of  
                          Consumer Affairs' BreEZe System, February 12, 2015












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          3)[DCA] should undertake all required oversight activities with  
            respect to BreEZe to prevent or identify and monitor any  
            problems that arise, complete a cost-benefit analysis of the  
            project and any required changes, and continue to work with the  
            phase 1 regulatory entities to ensure problems are promptly  
            resolved."


          The DCA responded to the State Auditor's audit in a letter dated  
          January 22, 2015.  In it, the Director of the DCA, Awet Kidane,  
          stated, "The Department appreciates your office's review of the  
          BreEZe system and agrees with its recommendations.  The Audit  
          findings reflect a number of areas of concern that the Department  
          has been in the process of correcting, and in many cases, has  
          already corrected."


          The CalTech also responded to the audit in a letter dated January  
          22, 2015, "While the recommendations made in the report are for  
          the most part appropriate and in line with actions and initiatives  
          that CalTech has already undertaken, we have general concerns with  
          the report? It is important to acknowledge that the BreEZe system  
          was successfully put into production in 2014.  BreEZe is currently  
          in daily use and is successfully processing licenses, collecting  
          fees and handling customer service request for the Boards and  
          Bureaus that were included in Release 1.  This is evidenced by the  
          following production metrics for the period of October 2013  
          through October 2014:


          1)Number of Registrations processed:  $444,000


          2)Initial Applications Processed:  $251,000


          3)Revenue Collected:  $137,000,000













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          4)Fifty thousand complaints filed [online]."


          Changes to the BreEZe Contract.  After negotiation with the BreEZe  
          vendor, Accenture, the DCA decided to end the "design and  
          development" contract at the conclusion of release 2 while  
          maintaining the "software licensing" and "maintenance and  
          operations" contracts for release 1 and 2 regulatory entities.   
          This amendment to the contract was estimated to increase project  
          costs by $17.5 million.  DCA indicated it would perform a  
          cost-benefit analysis and reassess the plan for providing IT  
          support to the remaining regulatory entities that had not launched  
          BreEZe yet.  


          On January 27, 2015, the Department of Finance notified the Joint  
          Legislative Budget Committee (JLBC) of a request from the DCA to  
          enter into the aforementioned contract amendment.  The response to  
          the request, from the Chair of JLBC, Senator Mark Leno, was as  
          follows, "I do not concur at this time?the request reflect a  
          significant change in project costs and scope?"  Instead, the  
          Chair of the JLBC requested additional information from the DCA  
          including:


          1)DCA's long term plan for the project.  "The legislature needs  
            the long-term plan for moving forward?including the anticipated  
            cost and timeline for providing IT solutions for the [boards]  
            and bureaus in Release 3;"


          2)Allocation of project costs.  "Information is also needed on how  
            project costs will be allocated across boards and bureaus and  
            how those costs will affect license fees for each entity;" and,


          3)Reassess request following oversight hearings.  "By not  
            concurring with the [request] at this time, it will provide  
            budget and policy committees with an opportunity to more fully  











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            evaluate the options for moving forward with the project."


          Legislative Committees' Response.  On March 12, 2015, the DCA,  
          CalTech and the State Auditor presented information about the  
          BreEZe project and the audit before the Senate Budget and Fiscal  
          Review Committee Subcommittee No. 4.  These parties presented  
          information again On March 23, 2015, before the Assembly Business  
          and Professions Committee and the Senate Business, Professions and  
          Economic Development Committee's Joint Sunset Review Oversight  
          Hearing. 


          On March 24, 2015, the JLBC Chair wrote a letter to the Department  
          of Finance indicating, "The hearings have provided [an]  
          opportunity for [a] fuller evaluation of BreEZe."  As a result,  
          the JLBC Chair noted in his letter, "DCA may proceed with the  
          contract amendment."  He also noted, "?it is my expectation that  
          DCA will provide the Legislature with more comprehensive and  
          timely information regarding the implementation of the BreEZe  
          project on an ongoing basis.  This should include:


          1)Any relevant project updates related to releases 1 and 2;


          2)A plan for release 3, including DCA's best current estimate of  
            anticipated project schedule and costs, as well as the expected  
            costs to each board and bureau and their licensees; and,


          3)Copies of DCA's mandated status reports to the State Auditor  
            regarding implementation of the Auditor's recommendations."




          Analysis Prepared by:                                               
                                          Le Ondra Clark Harvey, Ph.D. / B.  











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                          & P. / (916) 319-3301   FN: 0000867