BILL ANALYSIS Ó AB 2358 Page 1 Date of Hearing: April 13, 2016 ASSEMBLY COMMITTEE ON APPROPRIATIONS Lorena Gonzalez, Chair AB 2358 (Bigelow) - As Introduced February 18, 2016 ----------------------------------------------------------------- |Policy |Accountability and |Vote:|9 - 0 | |Committee: |Administrative Review | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- 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 Page 2 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: AB 2358 Page 3 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 Page 4