BILL ANALYSIS                                                                                                                                                                                                    



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          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