BILL ANALYSIS Ó
AB 1125
Page 1
Date of Hearing: May 13, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB
1125 (Weber) - As Amended May 4, 2015
-----------------------------------------------------------------
|Policy |Jobs, Economic Development, |Vote:|8 - 0 |
|Committee: |and the Economy | | |
| | | | |
| | | | |
|-------------+-------------------------------+-----+-------------|
| | | | |
| | | | |
| | | | |
|-------------+-------------------------------+-----+-------------|
| | | | |
| | | | |
| | | | |
-----------------------------------------------------------------
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.
AB 1125
Page 2
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
AB 1125
Page 3
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) | | |
AB 1125
Page 4
|---------+----------+----------------+-------------+---------|
|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
AB 1125
Page 5