BILL ANALYSIS Ó AB 1445 Page 1 Date of Hearing: May 13, 2015 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair AB 1445 (Brown) - As Introduced February 27, 2015 ----------------------------------------------------------------- |Policy |Accountability and |Vote:|9 - 0 | |Committee: |Administrative Review | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: NoReimbursable: No SUMMARY: This bill increases, from $250,000 to $500,000, the maximum amount for which a state agency can directly contract for goods and services with a certified small business (SB) or a disabled veteran business enterprise (DVBE). AB 1445 Page 2 FISCAL EFFECT: In general, the state's contract costs for goods, services, and information technology would increase to some extent due to reduced competition for contracts between $250,000 and $500,000, as state agencies solicit only two SBs or two DVBEs, rather than allowing all potential vendors, including non-small businesses, to bid competitively for the contracts. Because this type of contracting is optional, the fiscal impact depends on the extent to which departments utilize the expanded authority. DGS notes, however, that some state agencies, including DGS, have an internal "SB/DVBE First" policy which requires the agency to award contracts within the SB/DVBE Option dollar range to be awarded to small businesses and DVBEs whenever possible. According to DGS, over the last three calendar years, an average of 1,150 contracts, valued at $416 million, have been awarded having a cost between $250,000 and $500,000. If the less competitive nature of this process resulted in 5% higher costs on 20% of the contract awards, the additional costs would exceed $4 million [General Fund and numerous special funds]. Partially offsetting the above costs would be reduced administrative costs associated with streamlined bidding, advertising, and contract awarding procedures. COMMENTS: AB 1445 Page 3 1)Purpose. Under current law, certain state contracts with SBs and DVBEs for goods, services, or information technology can bypass formal competitive bidding requirements. Specifically, state agencies are allowed to contract directly with a SB or DVBE after obtaining price quotes from at least two firms before awarding the contract. Contracts offered under this streamlined SB/DVBE option are currently limited to between $5,000 and $250,000 in value. (AB 31 (Price), Chapter 212, Statutes of 2009, in part increased the maximum threshold for such contracts from $100,000 to the current $250,000 limit.) This bill increases the maximum amount to $500,000. The author argues this bill will encourage more of SBs/DVBEs to compete because the informal bidding process is less costly. 2)Prior Legislation. SB 276 (Roth) of 2013, which was identical to this bill, was held on Suspense in Senate Appropriations. Analysis Prepared by:Chuck Nicol / APPR. / (916) 319-2081