BILL ANALYSIS Ó
AB 1651
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Date of Hearing: March 30, 2016
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Mike Gatto, Chair
AB 1651
(Obernolte) - As Amended March 17, 2016
SUBJECT: Public Utilities Commission: contracts
SUMMARY: Requires the California Public Utilities Commission
(CPUC) to post information related to contracts and audits on
its Internet web site. Specifically, this bill:
1)Requires the CPUC, no less frequently than once a month, to
post the following documents and information on its Internet
Web site:
a) A copy of each contract that the CPUC enters into;
b) The names, addresses, and points of contact of parties
to the contract;
c) The goods and services requested, as applicable;
d) The contract value; and
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e) Applies these provisions, beginning July 1, 2017, to
contracts entered into at the direction of the CPUC,
whether or not the CPUC is a party to the contract.
2)Requires the CPUC to post on its Internet web site, audits
conducted by the Department of General Services (DGS) of the
CPUC's contracting practices.
EXISTING LAW:
1)Requires public contracts to be awarded by competitive
bidding, subject to certain exceptions, as specified. (Public
Contract Code Section 10295 et seq.)
2)Authorizes any state agency that receives delegated authority
to acquire goods to and make certain types of acquisitions, as
specified. (Public Contract Code Section 10332)
3)Requires DGS to conduct an audit of each state agency to which
purchasing authority has been delegated at least once in each
three-year period to ensure compliance with statutory
requirements related to specific contracting procedures.
(Public Contract Code Section 10333)
4)Prohibit certain consultants from participating in decisions
or participating in making contracts if they have a financial
interest. (Government Code Section 1090 et seq.)
5)Requires the CPUC to publish any data it collects for its
clearinghouse minority and women business data base that it
deems to be non-confidential, as specified. (Public Utilities
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Code Section 324.5)
FISCAL EFFECT: Unknown.
COMMENTS:
1) Author's Statement: "One of the CPUC's core functions is to
foster a fair contracting process that ensures public
utilities are providing ratepayers with reliable service at
reasonable rates. Given the concerns that have been raised, my
hope is that AB 1651 will shine a light on these contracting
practices and provide the public with the tools needed to keep
the CPUC accountable."
2)Background: DGS has the statutory authority for the
competitive and non-competitive procurement of information
technology goods and services for the state. Principally,
state agencies rely on the State Contracting Manual when
soliciting and/or entering into a contract to provide
services. Under current law, DGS has the authority to
delegate authority to any state agency to acquire certain
types of acquisitions. DGS has delegated authority to the
CPUC to approve its own justification of contracts awarded
without competitive bidding if the amount of the contract does
not exceed $25,000 for information and non-information
technology goods.
3)2000 State Auditors Report: In 2000, the State Auditor
published a report on the CPUC's contracting process and found
that the CPUC "does not always adequately develop and manage
its contracts ? It also does not always review its
consultants' invoice to ensure that all charges are
appropriate and sufficiently supported. As a result, the
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[CPUC] has paid hundreds of thousands of dollars on invoices
that include improper charges or lacked sufficient detail."
In response to the issues raised in the report, the CPUC
stated that it would require contract mangers to use
competitive bid process for contracts and will use the State's
contracting process for all contracts it develops or manages,
including contracts for consumer education programs. However,
since then, it is still unclear whether or not the CPUC is
consistently using the state contracting process for the
awarding of contracts.
4)CPUC Contracting Practices: Unless the work is of a highly
specialized nature, state agencies typically issue a request
for bids from qualified contractors and awards a contract
based on the bid that demonstrates knowledge, skills, and
abilities to perform the work at the least cost. In carrying
out its duties, the CPUC will render decisions and/or
resolutions, or delegate a matter to the Executive Director
that may include directing electric and gas utilities to
expend ratepayer monies. For the most part, the CPUC directs
the utilities to administer programs and then directs the
utilities on how it expects the program to be administered.
However, it is difficult to obtain documents indicating if the
CPUC-directed regulated entities to enter into a contract
because for the most part, such contracts are either
confidential or heavily redacted. This makes it difficult for
the public to determine whether the award was made in the best
interest of ratepayers and the state.
5)DGS Office of Audit Services: DGS's Office of Audit Services
provides a variety of audits, including audits required by
Public Contract Code Section10333, of each state agency that
has been delegated purchasing authority by DGS. In addition,
DGS provides information technology audits, special reviews,
and investigations, as required by DGS' executive management
and authorized by the director and chief deputy director.
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According to DGS, its Office of Audit Services audits the 40
largest state agencies on a rotating basis in order to assess
their business management functions and services, including
procurement and contracting. The most recent DGS audit that is
publicly available was completed in 1995. This report
identified a number of deficiencies, including: the lack of
written policies and procedures, and contract oversight, the
use of an "informal contracting process" for contracts in
amounts greater than $1,000; and that the CPUC's delegated
purchases are not following procedures that would support the
use of competitive purchasing practices, among other things.
A DGS audit conducted in 2006 was not published. DGS's most
recent audit of the CPUC is due in April 2016. By comparison,
DGS has published five audits of the California Energy
Commission made between 2008 and 2011.
6)August 2015 Oversight Hearing: In August 2015, the Assembly
Utilities and Commerce Committee held an oversight hearing on
the CPUC's contracting practices and examined whether or not
the CPUC is sufficiently using competitive solicitation
practices and adhering to the state's contracting rules.
Subsequently, in January 2016, Assemblymember Anthony Rendon
requested a Joint Legislative Audit Committee audit to examine
whether the CPUC solicits competitive bids for contacts
whenever possible and uses the state's contracting process for
all contracts. The audit also seeks to examine whether or not
the CPUC directs regulated entities to expend ratepayer funds
to certain entities.
This bill requires the CPUC to post a copy of each contract
that the CPUC enters into, including the names, address, and
points of contact of parties to the contract, the goods and
services requested by the contract and the contract value, on
its web site at least once a month. Beginning July 1, 2017,
this bill requires the CPUC to also post contracts entered
into at its direction, regardless if the CPUC is a party of
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the contract. This bill also requires the CPUC to post any
audits conducted by DGS on the CPUC's contracting practices.
7)Arguments in Support: According to the CPUC, the sponsor of
the bill, "CPUC contracting practices have come under scrutiny
in recent years. Any oversight hearing of the Assembly
Committee on Utilities and Commerce on August 17, 2015
identified the need for greater contracting transparency. A
subsequent audit to examine CPUC contracting practices was
approved by the Joint Legislative Audit Committee on January
13, 2016. While the California State Auditor's report is
still pending, common sense legislative changes can help
ensure maximal transparency moving forward."
REGISTERED SUPPORT / OPPOSITION:
Support
California Public Utilities Commission (Sponsor)
Opposition
None on file.
Analysis Prepared by:Edmond Cheung / U. & C. / (916) 319-2083
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