BILL ANALYSIS Ó
AB 1445
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Date of Hearing: May 13, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB
1445 (Brown) - As Introduced February 27, 2015
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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
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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
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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