BILL ANALYSIS                                                                                                                                                                                                    



                                                                    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