BILL ANALYSIS Ó
AB 2690
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Date of Hearing: April 6, 2016
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Susan Talamantes Eggman, Chair
AB 2690
(Ridley-Thomas) - As Introduced February 19, 2016
SUBJECT: Los Angeles County Metropolitan Transportation
Authority: contracting.
SUMMARY: Allows the Los Angeles County Metropolitan
Transportation Authority (Metro) to facilitate contract awards
with disabled veteran business enterprises, and makes a number
of changes to Metro's existing authority to facilitate contract
awards with small business enterprises. Specifically, this
bill:
1)Allows Metro to facilitate contract awards with disabled
veteran business enterprises (DVBEs), except for contracts for
professional services involving private architectural,
landscape architectural, engineering, environmental, land
surveying, or construction management, as specified.
2)Deletes a provision that allows Metro to require bidders,
prior to the time bids are opened, to make a good faith effort
to comply with small business enterprise (SBE) goals and
requirements established by Metro.
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3)Allows Metro, in facilitating contract awards with SBEs and
DVBEs, to do any of the following:
a) Require bidders, prior to the time bids are opened, to
comply with the SBE and DVBE goals and requirements
established by Metro on contracts financed with nonfederal
funds;
b) In awarding contracts to the lowest responsible bidder,
award the contract to the lowest responsible bidder meeting
the SBE and DVBE goals;
c) Set aside work for competition among certified SBEs and
award a contract to the lowest responsible bidder whenever
the expected expenditure required exceeds $3,000, but is
less than a threshold amount established by Metro, as long
as price quotations are obtained by Metro from three or
more certified SBEs; and,
d) Set aside work for competition among certified SBEs and
award a contract to the lowest responsible bidder whenever
the expected expenditure required exceeds Metro's threshold
amount in c), above, but is less than $5 million, as long
as price quotations are obtained by Metro from three or
more certified SBEs.
4)Requires a SBE recommended for a contract award through use of
a set aside to be performing a commercially useful function.
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An SBE shall be presumed to be performing a commercially
useful function if it performs and exercises responsibility of
at least 30% of the total cost of the contract work with its
own workforce.
5)Deletes a number of requirements that apply to bidders
pursuant to Metro's existing authority to facilitate contract
awards to SBEs.
6)Defines "disabled veteran business enterprise" to have the
meaning as defined in California's DVBE Program pursuant to
the Military and Veterans Code.
7)Defines "goal" as used in the statutes governing Metro's
authority to facilitate contract awards with SBEs and DVBEs to
mean a numerically expressed objective that bidders are
required to achieve.
EXISTING LAW:
1)Allows Metro, except as to contracts for professional services
involving private architectural, landscape architectural,
engineering, environmental, land surveying, or construction
management, to do any of the following in facilitating
contract awards to small businesses:
a) Provide for a small business preference in construction,
the construction component of a design-build team, the
procurement of goods, or the delivery of services. The
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preference shall be 5% of the lowest responsible bidder
meeting specifications that provide for small business
participation;
b) Establish a subcontracting participation goal for small
businesses on contracts financed with nonfederal funds and
grant a preference of 5% to the lowest responsible bidders
who meet the goal; and,
c) Require bidders to make a good faith effort, in
accordance with the criteria established in 2), below,
prior to the time bids are opened, to comply with the goals
and requirements established by Metro relating to
participation in the contract by small businesses.
2)Provides that the following shall apply to bidders under the
above provisions:
a) The bidder attended any presolicitation or prebid
meetings that were scheduled by Metro to inform all bidders
of the SBE program requirements for the project for which
the contract will be awarded. Metro may waive this
requirement if it determines that the bidder is informed as
to those program requirements;
b) The bidder identified and selected specific items of the
project for which the contract will be awarded to be
performed by SBEs to provide an opportunity for
participation by those enterprises;
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c) The bidder advertised, not less than 10 calendar days
before the date the bids are opened, in one or more daily
or weekly newspapers, trade association publications or
trade-oriented publications, trade journals, or other
media, specified by Metro for SBEs that are interested in
participation in the project. This only applies if Metro
gave public notice of the project not less than 15 calendar
days prior to the date the bids are opened;
d) The bidder provided written notice of his or her
interest in bidding on the contract to the number of SBEs
required to be notified by the project specifications not
less than 10 calendar days prior to the opening of bids.
Metro shall make available to the bidder not less than 15
calendar days prior to the date the bids are opened a list
or source of lists of enterprises which are certified by
Metro as SBEs;
e) The bidder followed up initial solicitations of interest
by contacting the enterprises to determine with certainty
whether the enterprises were interested in performing
specific items of the project;
f) The bidder provided interested SBEs with information
about the plans, specifications, and requirements for the
selected subcontracting or material supply work;
g) The bidder requested assistance from small business
community organizations; small business contractor groups;
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local, state, or small business assistance offices; or,
other organizations that provide assistance in the
recruitment and placement of SBEs, if any are available;
h) The bidder negotiated in good faith with the SBEs, and
did not unjustifiably reject as unsatisfactory bids
prepared by any SBEs, as determined by Metro;
i) Where applicable, the bidder advised and made efforts to
assist interested SBEs in obtaining bonds, lines of credit,
or insurance required by Metro or contractor; and,
j) The bidder's efforts to obtain SBE participation could
reasonably be expected by Metro to produce a level of
participation sufficient to meet the goals and requirements
of Metro.
3)Defines "small business enterprise" to mean a business
enterprise that is classified as a small business under United
States Small Business Administration rules and meets the
current SBE size standards found in part 121 of Title 13 of
the Code of Federal Regulations appropriate to the type of
work the enterprise seeks to perform.
4)Allows Metro to establish limitations regarding the average
annual gross receipts of a small business over the previous
three fiscal years and establish limitations regarding the
personal net worth of the owner of the small business,
exclusive of the value of the owner's personal residence.
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5)Allows, pursuant to the Small Business and Procurement and
Contract Act (Act), state agencies to award contracts for
goods, services, or information technology to a certified
small business or a DVBE without complying with formal
advertising and bidding requirements if the following
conditions are met:
a) The contract award is greater than $5,000 and less than
$250,000; and,
b) Quotes are obtained from two or more SBs or from two or
more DVBEs.
6)Allows state agencies to award contracts for construction to a
certified small business or a DVBE without complying with
formal advertising and bidding requirements if the following
conditions are met:
a) The contract award is greater than $5,000 and less than
$250,000, as specified; and,
b) Quotes are obtained from two or more SBs or from two or
more DVBEs.
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FISCAL EFFECT: None
COMMENTS:
1)Bill Summary. This bill makes a number of changes to Metro's
contracting authority. First, it allows Metro to facilitate
contract awards with DVBEs. It eliminates Metro's authority
to require bidders to make a good faith effort to comply with
SBE goals, and instead, allows Metro to do the following in
facilitating contract awards with SBEs and DVBEs:
a) Require bidders, prior to the time bids are opened, to
comply with the SBE and DVBE goals and requirements
established by Metro on contracts financed with nonfederal
funds;
b) In awarding contracts to the lowest responsible bidder,
award the contract to the lowest responsible bidder meeting
the SBE and DVBE goals;
c) Set aside work for competition among certified SBEs and
award a contract to the lowest responsible bidder whenever
the expected expenditure required exceeds $3,000, but is
less than a threshold amount established by Metro, as long
as price quotations are obtained by Metro from three or
more certified SBEs; and,
d) Set aside work for competition among certified SBEs and
award a contract to the lowest responsible bidder whenever
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the expected expenditure required exceeds Metro's threshold
amount in c), above, but is less than $5 million, as long
as price quotations are obtained by Metro from three or
more certified SBEs.
The bill requires an SBE recommended for a contract award
through use of a set aside to be performing a commercially
useful function, which the bill defines an SBE that performs
and exercises responsibility for at least 30% of the total
cost of the contract work with its own workforce. The bill
also defines "goal," as that term is used for purposes of
Metro's SBE and DVBE contracting, to mean a numerically
expressed objective that bidders must achieve.
This bill is sponsored by Metro.
2)Author's Statement. According to the author, "LA Metro is the
largest transportation agency in the state, issuing
approximately $2 to $5 billion in contracts annually.
"Under existing law, contractors voluntarily opt-in to the
current Small Business Enterprise (SBE) preference program.
While the current SBE preference program has aided Metro in
increasing SBE participation, requiring bidders to meet a
specific SBE subcontracting goal on contracts would
substantially increase SBE participation rates. As for
Disadvantaged Veteran Business Enterprise (DBVE)
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participation, existing law does not allow LA Metro to use
goals or preferences on those contracts.
"Small businesses are the engine of economic growth and job
creation in this state. Allowing LA Metro to use a range of
tools to increase opportunities for small businesses will
create multipliers in the local economy and bring
opportunities to underserved communities."
3)Background. AB 1341 (Price), Chapter 494, Statutes of 2010,
authorized Metro to facilitate contract awards to small
businesses on contracts over $100,000. AB 2440 (Lowenthal),
Chapter 703, Statutes of 2012, eliminated the $100,000
limitation on Metro's authority to facilitate contract awards
to small businesses. In facilitating SBE contracts, Metro may
provide a bid preference of 5% to the lowest responsible
bidder. Metro can also establish a subcontracting
participation goal for SBEs on certain contracts financed with
nonfederal funds and give a preference of 5% to the lowest
responsible bidders that meet that goal. Metro currently has
no authorization to facilitate contract awards to DVBEs, or to
use small business set-asides.
Small business set-asides help small businesses win government
contracts by "setting aside" specific government purchases
exclusively for participation by small business concerns. The
contracts are still competitive, but the competition is
narrowed to small businesses only.
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California has had a small business preference within the
state's procurement process for more than 30 years, and a DVBE
component for more than 15 years. Some cities have programs
that grant preference to local or regional small businesses.
These may be in lieu
of or in addition to preferences for small businesses in
general. These current programs are governed by a combination
of state law and city charter provisions.
This bill significantly strengthens Metro's authority to
facilitate contracting with SBEs and DVBEs, in addition to
expanding the existing 5% bid preference for SBEs to DVBEs.
Bidders will now be required to meet (rather than make a good
faith effort to meet) SBE and DVBE goals, and these goals will
now carry a numerically expressed objective that bidders must
achieve. In awarding contracts to the lowest responsible
bidder, Metro will now be allowed to award the contract to the
lowest responsible bidder who meets the SBE and DVBE goals.
Metro will also be able to set aside contracts for competition
by certified SBEs, as long as Metro obtains quotes from three
or more certified SBEs. These SBEs must perform and exercise
responsibility for at least 30% of the total cost of the
contract work with their own workforce.
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4)Suggested Amendment. The Committee may wish to consider the
following amendment:
This bill allows small business set-asides under two
categories:
a) When the expected expenditure exceeds $3,000, but is
less than a threshold amount established by Metro; and,
b) When the expected expenditure exceeds a threshold amount
established by Metro, but is less than $5 million.
Under the Act, which applies to state agencies, the thresholds
for SBE set-asides are between $5,000 and $250,000. While the
Act's provisions require only two price quotes, and this bill
would require three, the Committee may wish to amend this bill
to allow small business set-asides when the expected
expenditure exceeds $5,000 but is less than $250,000.
5)Previous Legislation. AB 2440 (Lowenthal), Chapter 703,
Statutes of 2012, eliminated the $100,000 limitation on
Metro's authority to facilitate contract awards to small
businesses.
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AB 1341 (Price), Chapter 494, Statutes of 2010, authorized
Metro to facilitate contract awards to small businesses on
contracts over $100,000.
6)Arguments in Support. The Los Angeles County Metropolitan
Transportation Authority, sponsor of this bill, states, "Small
business set-asides allow for small business to bid as primes,
fostering opportunities to grow and continue to build
capacity. This bill will allow Metro to utilize a range of
tools to further promote and facilitate increased
participation of SBEs and DVBEs in public contracting with
Metro."
7)Arguments in Opposition. None on file.
8)Double-Referral. This bill is double-referred to the
Transportation Committee.
REGISTERED SUPPORT / OPPOSITION:
Support
Los Angeles County Metropolitan Transportation Authority
[SPONSOR]
AB 2690
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Opposition
None on file
Analysis Prepared by:Angela Mapp / L. GOV. / (916) 319-3958