BILL ANALYSIS Ó
AB 2358
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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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|Policy |Accountability and |Vote:|9 - 0 |
|Committee: |Administrative Review | | |
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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:
AB 2358
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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
AB 2358
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