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