BILL ANALYSIS Ó
AB 1200
Page 1
Date of Hearing: April 29, 2015
ASSEMBLY COMMITTEE ON ELECTIONS AND REDISTRICTING
Sebastian Ridley-Thomas, Chair
AB 1200
(Gordon) - As Amended April 7, 2015
SUBJECT: Political Reform Act of 1974: lobbying: procurement
contracts.
SUMMARY: Provides that communicating with state governmental
officials in order to influence governmental procurement, as
defined, can result in a person being considered a "lobbyist"
under the Political Reform Act (PRA). Specifically, this bill:
1)Defines "governmental procurement," for the purposes of this
bill, as any of the following:
a) Preparing the terms, specifications, bid documents,
request for proposals, or evaluation criteria for a
procurement contract;
b) Soliciting for a procurement contract;
c) Evaluating a procurement contract;
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d) Awarding, approving, denying, or disapproving a
procurement contract; or,
e) Approving or denying an assignment, amendment, other
than an amendment authorized and payable under the terms of
a procurement contract as the procurement contract was
finally awarded or approved, renewal, or extension of a
procurement contract, or any other material change in a
procurement contract resulting in financial benefit to the
offeror.
2)Provides that the term "administrative action," for the
purposes of the PRA, includes governmental procurement, as
defined.
EXISTING LAW:
1)Creates the Fair Political Practices Commission (FPPC), and
makes it responsible for the impartial, effective
administration and implementation of the PRA.
2)Defines a "lobbyist" as an individual who receives $2,000 or
more in a calendar month or whose principal duties as an
employee are to communicate directly or through his or her
agents with an elective state official, agency official, or
legislative official for the purpose of influencing
legislative or administrative action.
3)Defines a "lobbying firm" as any business entity, except as
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specified, including an individual contract lobbyist, which
meets either of the following criteria:
a) The business entity receives or becomes entitled to
receive any compensation, other than reimbursement for
reasonable travel expenses, for the purpose of influencing
legislative or administrative action on behalf of any other
person, and any partner, owner, officer, or employee of the
business entity is a lobbyist; or,
b) The business entity receives or becomes entitled to
receive any compensation, other than reimbursement for
reasonable travel expenses, to communicate directly with
any elective state official, agency official, or
legislative official for the purpose of influencing
legislative or administrative action on behalf of any other
person, if a substantial or regular portion of the
activities for which the business entity receives
compensation is for the purpose of influencing legislative
or administrative action.
4)Defines a "lobbyist employer" as any person, other than a
lobbying firm, who:
a) Employs one or more lobbyists for economic
consideration, other than reimbursement for reasonable
travel expenses, for the purpose of influencing legislative
or administrative action; or
b) Contracts for the services of a lobbying firm for
economic consideration, other than reimbursement for
reasonable travel expenses, for the purpose of influencing
legislative or administrative action.
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5)Defines "legislative action," for the purposes of the PRA, as
either of the following:
a) The drafting, introduction, consideration, modification,
enactment or defeat of any bill, resolution, amendment,
report, nomination or other matter by the Legislature or by
either house or any committee, subcommittee, joint or
select committee thereof, or by a member or employee of the
Legislature acting in his official capacity; or,
b) The action of the Governor in approving or vetoing any
bill.
6)Defines "administrative action," for the purposes of the PRA,
as either of the following:
a) The proposal, drafting, development, consideration,
amendment, enactment, or defeat by any state agency of any
rule, regulation, or other action in any ratemaking
proceeding or a quasi-legislative proceeding, as specified;
or,
b) With regard only to placement agents, as defined, the
decision by any state agency to enter into a contract to
invest state public retirement system assets on behalf of a
state public retirement system.
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7)Defines "agency official," for the purposes of the PRA, as any
member, officer, employee or consultant of any state agency
who as part of his official responsibilities participates in
any administrative action in other than a purely clerical,
secretarial or ministerial capacity.
8)Requires an individual who is considered a lobbyist, as
defined, to register as a lobbyist and to comply with various
ethics and reporting rules.
9)Requires lobbyists to complete a biennial orientation course
on the relevant ethical issues and laws relating to lobbying.
10)Prohibits lobbyists from receiving any payment that is in any
way contingent upon defeat, enactment, or outcome of any
proposed legislative or administrative action.
11)Prohibits a lobbyist from making gifts aggregating more than
$10 in a calendar month to any state candidate, elected state
officer, legislative official, or an agency official of any
agency required to be listed on the registration statement of
the lobbying firm or the lobbyist employer of the lobbyist.
12)Prohibits a lobbyist from doing anything with the purpose of
placing any elected state officer, legislative official,
agency official, or state candidate under personal obligation
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to the lobbyist or the lobbyist's employer.
13)Prohibits a lobbyist from deceiving or attempting to deceive
any elected state officer, legislative official, agency
official, or state candidate with regard to any material fact
pertinent to any pending administrative action.
14)Prohibits a lobbyist from making a contribution to an elected
state officer or candidate for elected state office if the
lobbyist is registered to lobby the governmental agency for
which the candidate is seeking election or the governmental
agency of the elected state officer.
15)Requires lobbying firms and lobbyist employers to register
with the Secretary of State (SOS) and to file periodic
disclosure reports that contain information about the firms'
and employers' lobbying interests and agencies lobbied.
16)Makes violations of the PRA subject to administrative, civil,
and criminal penalties.
FISCAL EFFECT: Unknown. State-mandated local program; contains
a crimes and infractions disclaimer.
COMMENTS:
1)Purpose of the Bill: According to the author:
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The State of California authorized over $11 billion in
procurement contracts in 2014. In light of this
substantial spending, the public should have the
ability to see who, if anyone is attempting to
influence the procurement process and expenditure of
taxpayer dollars. California voters enacted the
Political Reform Act, in part, to ensure that state
and local government 'serve the needs and respond to
the wishes of all citizens equally' and 'perform their
duties in an impartial manner.' To serve these goals,
the Political Reform Act requires lobbying firms and
parties employing lobbying firms to report their
legislative and regulatory activities. Lobbying of
procurement contracts does not fall under the purview
of the Political Reform Act. For the same reasons that
the state currently imposes registration and reporting
requirements on legislative and regulatory lobbying,
and in light of the amount of taxpayer money spent on
procurement, this bill would impose necessary
reporting requirements on procurement lobbying.
2)Lobbying Regulation & Contracts: Under existing law,
individuals and entities that make or receive specified levels
of payments for the purpose of influencing legislative or
administrative actions may be required to comply with the
state's lobbying rules, including requirements to register
with the SOS and to file periodic reports. As detailed above,
the term "administrative action" is defined primarily to
include rule- and rate-making, the adoption of regulations,
and quasi-legislative proceedings. Contracting decisions by
state agencies are not included within the definition of the
term "administrative action," so individuals and entities that
attempt to influence state contracting decisions are not
required to comply with lobbying rules as a result of their
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efforts with respect to contracting decisions. For example,
in its Lobbying Information Disclosure Manual, the FPPC states
that an entity bidding on a contract with the Department of
Housing and Community Development (Department) to provide low
and moderate-income housing units would not be engaged in
lobbying as a result of submitting a bid, because although the
Department is an administrative agency, the awarding of a
contract is not considered an administrative action.
By adding governmental procurement to the definition of
"administrative action," this bill brings contracting within
the types of governmental decisions that are covered by the
state's lobbying rules. For individuals and entities that
frequently attempt to influence state agency contracting
decisions, but that do not regularly attempt to influence
other actions by state agencies, this bill could require those
individuals and entities to comply with the state's lobbying
rules, including registering with the SOS and filing periodic
disclosure reports.
Many individuals and entities that attempt to influence
contracting decisions, however, may already be registered as
lobbyists, lobbying firms, or lobbyist employers because those
individuals and entities are involved in attempting to
influence other actions by the Legislature or state agencies.
For those entities and individuals, this bill will require
them to disclose details about their procurement lobbying on
the periodic disclosure reports that they already file.
Broadening the types of decisions that are covered by the
state's lobbying rules will also broaden the application of
certain restrictions that apply to lobbyists, lobbyist
employers, and lobbying firms. For example, existing law
prohibits a lobbyist or lobbying firm from accepting any
payment that is contingent upon the outcome of any
administrative action. As a result, if procurement decisions
are included within the types of decisions that constitute
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"administrative action," then this bill could prohibit
individuals or firms from being paid in exchange for
successfully securing contracts with state agencies. Other
restrictions that apply to lobbyists and lobbying firms that
could be broadened in application if this bill is enacted
include restrictions on campaign contributions, limits on
gifts to public officials, restrictions on placing public
officials under personal obligation, and restrictions on
deceiving or attempting to deceive public officials.
3)Lobbying Laws in Other States and at the Federal Level: The
lobbying laws in at least 18 states regulate lobbying on
procurement issues, though the details of those laws vary
considerably, and at least some of the states that regulate
lobbying on procurement have rules for procurement lobbying
that differ considerably from the rules that apply to lobbying
on other issues. Additionally, federal lobbying laws apply to
communications related to the negotiation, award, or
administration of federal contracts.
4)Logistical/Technical Issues: Although California's lobbying
rules apply only with respect to communications with state
officials and state agencies, the provisions of this bill are
not clearly limited to contracts awarded or entered into by
state government, and this bill could be construed to regulate
communications between a person and a state official regarding
local procurement decisions. The author and the committee may
wish to clarify that this bill applies only to state
procurement.
As currently drafted, this bill applies to all governmental
procurement, regardless of the value of the contract. In the
case of smaller contracts, any potential for undue influence
in governmental contracting decisions is substantially
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reduced, so making such decisions subject to the state's
lobbying laws may be excessive. On the other hand, in order
to qualify as a lobbyist in the first place, an individual
must receive compensation of at least $2,000 in a calendar
month for the purposes of, or must spend at least one-third of
his or her compensated time, engaging in direct communication
with public officials. As a result, a person who communicates
with state officials regarding small value contracts will only
be considered a lobbyist if he or she is communicating on a
large number of contracts, or is engaging in direct
communications with public officials on other issues.
Nevertheless, if the goal of this bill is to provide
transparency over major procurement decisions, it may be
appropriate to make this bill applicable only to large state
contracts.
As noted above, existing law prohibits a lobbyist or lobbying
firm from accepting any payment that is contingent upon the
outcome of any administrative action. Salespeople-who could be
considered lobbyists under the provisions of this bill under
certain circumstances-often are paid commissions based on
their sales. If the state's lobbying rules are going to be
extended to apply to contracting decisions, it may be
advisable to consider whether it is reasonable or appropriate
to have the contingency fee ban be applicable to those types
of decisions.
5)Arguments in Support: The idea for this bill was developed,
in part, by three students in the Legislative and Public
Policy Clinic of the University of Pacific, McGeorge School of
Law. In support of this bill, those students write:
In 2014, California spent over $11 billion on
procurement contracts. Yet, despite multiple
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prominent Sacramento-based lobbying firms openly
advertising procurement lobbying services, lobbyists
are not required to report which procurement contracts
they lobby, how much they are paid by each client to
lobby those contracts, or who pays them to influence
the content of the contracts, which may offer lobbyist
employers more direct benefits than legislative or
regulatory lobbying.
Disclosure requirements help the [FPPC] identify
patterns of activity that trigger a need for
investigation. Because there are no procurement
lobbying disclosure requirements, the State is without
an important tool to ensure that procurement contracts
are awarded fairly.
AB 1200 would also help small and diverse businesses
compete on a level playing field with their
competitors by increasing the transparency of the
procurement process and reducing the advantage of
large businesses that employ well-connected lobbyists.
6)Previous Legislation: AB 13 (Florez) of the 2001-02
Legislative Session, would have required lobbyists, lobbying
firms, and lobbyist employers to disclose information on
services relating to the solicitation, proposal, negotiation,
drafting, amendment, awarding, or rescission of a
nonrestrictive contract for goods or services, as specified.
These provisions of AB 13 were added to the bill in the
Senate, and were never considered by the Assembly. AB 13 was
never heard by a policy committee.
AB 707 (Hancock) of the 2005-06 Legislative Session, would have
required contractors and their agents and consultants, as
specified, who entered into specified contracts with state
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agencies to publicly disclose to the SOS certain
communications with the state agency during the oneyear period
preceding the award of the contract. These provisions of AB
707 were added to the bill in the Senate, and were never
considered by the Assembly. AB 707 subsequently was
gutted-and-amended and used for another purpose, and the
version of the 7)bill dealing with state contracts was never
heard by a policy committee.
8)Political Reform Act of 1974: California voters passed an
initiative, Proposition 9, in 1974 that created the FPPC and
codified significant restrictions and prohibitions on
candidates, officeholders and lobbyists. That initiative is
commonly known as the PRA. Amendments to the PRA that are not
submitted to the voters, such as those contained in this bill,
must further the purposes of the initiative and require a
two-thirds vote of both houses of the Legislature.
REGISTERED SUPPORT / OPPOSITION:
Support
3 individuals
Opposition
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None on file.
Analysis Prepared by:Ethan Jones / E. & R. / (916) 319-2094