BILL ANALYSIS                                                                                                                                                                                                    Ó



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          Date of Hearing:  April 13, 2016


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                               Lorena Gonzalez, Chair


          AB  
          2358 (Bigelow) - As Introduced February 18, 2016


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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).


          FISCAL EFFECT:









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          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. The  
          Department of General Services (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. It should be noted that, according  
          to DGS, for 2015, state agencies reported an aggregate  
          participation rate on state contracts by DVBEs of four  
          percent-exceeding the statewide goal of three percent.



          According to DGS, over the last three calendar years, an average  
          of 1,270 contracts, valued at $460 million, have been awarded  
          that have a contract value 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 $4.5 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:










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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. 

            According to the author, "Adequate access to contract  
            opportunities for both small businesses and DVBEs is a  
            continual problem.  This bill will allow small and  
            veteran-owned businesses to have more access to state agency  
            contracts by increasing the direct contracting limit from  
            $250,000 to $500,000." 



          2)Prior Legislation. AB 1445 (Brown) of 2015, which was  
            identical to this bill, was held on this committee's Suspense  
            file. SB 276 (Roth) of 2013, another identical bill, was held  
            on Suspense in Senate Appropriations.



          Analysis Prepared by:Chuck Nicol / APPR. / (916)  
          319-2081

















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