BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 1125


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          Date of Hearing:  May 13, 2015


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                                 Jimmy Gomez, Chair


          AB  
          1125 (Weber) - As Amended May 4, 2015


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          Urgency:  No  State Mandated Local Program:  NoReimbursable:  No


          SUMMARY:


          This bill would increase the maximum dollar value that can be  
          applied using the 5 percent small business preference from  
          $50,000 to $100,000, and the total combined preferences that  
          include a small business preference from $100,000 to $150,000.   








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          This bill also slightly modifies how the 


          5 percent small bid preference is calculated, which is by basing  
          it on the bid of the lowest responsible non-small business  
          bidder rather than just the lowest responsible bidder.  



          FISCAL EFFECT:


          It is unknown how many bidders would win a contract based on the  
          new $100,000 maximum small business preference, or $150,000  
          maximum for combined preferences, provided under this bill,  
          although each occurrence could result in unknown additional  
          costs.  However, this expanded bid preference could translate to  
          General Fund and special fund costs in the hundreds of  
          thousands.  


          COMMENTS:


          1)Purpose. The Department of General Services (DGS) administers  
            the state Small Business Procurement and Contract Act (Small  
            Business Procurement Act), which includes certifying and  
            implementing targeted preference programs for certified small  
            businesses, microbusinesses, and disabled veteran owned  
            business enterprises.  For 2013-14 state departments spent  
            over $8.7 billion on contracts, of which over $2.2 billion and  
            102,480 contracts were awarded to small businesses.  The  
            majority of contracts awarded to small businesses are less  
            than $1 million.  
            


            The existing small business bid preference has been in place  
            since 1983. Under current law, qualifying certified small  








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            businesses receive a 5 percent bid preference, up to $50,000  
            on a single bid.  The $50,000 cap is reached at a $1 million  
            bid (5 percent x $1 million = $50,000).  





            This bill proposes to increase the bid preference cap amount  
            from $50,000 to $100,000, extending the bid preference cap to  
            bids up to $2 million (5 percent x $2 million = $100,000). 


            Below is an example of a contract that would fail to win under  
            current law using a small business preference with a cap of  
            $50,000, but would win using a preference with a cap of  
            $100,000 as proposed by this bill.






             ------------------------------------------------------------- 
            |Bidder   |Bid       |5 percent Bid   |Bid Amount   |Actual   |
            |         |Amount    |Preference      |for          |Contract |
            |         |          |                |Evaluation   |Award    |
            |         |          |                |Purposes     |(i.e.,   |
            |         |          |                |             |Bid      |
            |         |          |                |             |Amount   |
            |---------+----------+----------------+-------------+---------|
            |Bidder A |$3,080,000|$3,000,000 *    |$3,080,000 - |$3,035,00|
            |         |          |.05 = $150,000  |$100,000 =   |0        |
            |(small   |          |(the maximum    |$2,980,000   |         |
            |business)|          |bid preference  |             |         |
            |         |          |allowable       |             |         |
            |         |          |proposed under  |             |         |
            |         |          |this bill is    |             |         |
            |         |          |$100,000)       |             |         |








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            |---------+----------+----------------+-------------+---------|
            |Bidder B |$3,000,000|Ineligible for  |$3,000,000   |Did not  |
            |         |          |a small         |             |win      |
            |(large   |          |business bid    |             |         |
            |business)|          |preference      |             |         |
            |         |          |                |             |         |
             ------------------------------------------------------------- 



            In the example above, if Bidder A (the small business) had  
            been allowed to only apply a $50,000 bid preference, which is  
            the maximum under current law, Bidder A's bid amount for  
            evaluation purposes would have been $3,030,000, and it would  
            have lost.


            The Disabled Veteran Business Alliance and Small Business  
            California are sponsoring this bill in an effort to give  
            California small businesses increased opportunity to win  
            contracts up to $2 million.


          2)Prior Legislation. AB 2278 (Weber) of 2014 increased the  
            maximum amount of a bid preference for small business  
            preferences from $50,000 to $350,000 and increased the maximum  
            financial value of all combined preferences from $100,000 to  
            $400,000 for any bid that includes a small business  
            preference. This bill was held on Suspense in this committee.
          





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










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