BILL ANALYSIS                                                                                                                                                                                                    



                                                                    AB 2690


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          Date of Hearing:  April 18, 2016


                        ASSEMBLY COMMITTEE ON TRANSPORTATION


                                 Jim Frazier, Chair


          AB 2690  
          (Ridley-Thomas) - As Amended April 12, 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 (DVBEs), and makes a  
          number of changes to Metro's existing authority to facilitate  
          contract awards with small business enterprises (SBEs).   
          Specifically, this bill:  


          1)Allows Metro to facilitate contract awards with DVBEs, except  
            for contracts for professional services involving private  
            architectural, landscape architectural, engineering,  
            environmental, land surveying, or construction management, as  
            specified.



          2)Replaces provisions allowing Metro to require bidders to make  
            a good faith effort to comply with SBE goals and requirements  
            prior to bid opening with provisions that require bidders to  
            comply with the SBE and DVBE goals and requirements prior to  
            bid opening. 









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          3)Allows Metro to award contracts to the lowest responsible  
            bidder meeting the SBE and DVBE goals.



          4)Allows Metro to set aside work for competition among certified  
            SBEs and to award a contract to the lowest responsible bidder  
            whenever the expected expenditure required exceeds $5,000 but  
            is less than $3 million, as long as price quotations are  
            obtained by Metro from three or more certified SBEs; requires  
            Metro to report to the Legislature regarding contracts awarded  
            under this authority.



          5)Requires an SBE recommended for a contract award through the  
            use of a set aside to be performing a commercially useful  
            function.  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.



          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.











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          8)Deletes a number of provisions related to how a bidder would  
            demonstrate good faith efforts to meet SBE goals.  
           











          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  
               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 non-federal funds and  
               grant a preference of 5% to the lowest responsible bidders  
               who meet the goal; and,









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             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)Sets forth parameters by which bidders can demonstrate good  
            faith efforts to achieve SBE goals.



          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.



          5)Allows, pursuant to the Small Business and Procurement and  
            Contract 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:










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             a)   The contract award is greater than $5,000 and less than  
               $250,000; and,



             b)   Quotes are obtained from two or more SBEs 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 SBEs or from two or  
               more DVBEs.



          FISCAL EFFECT:  Unknown, this bill is keyed non-fiscal by the  
          Legislative Counsel.


          COMMENTS:  AB 2690 is intended to allow Metro to utilize a range  
          of tools to further promote and facilitate increased  
          participation of SBEs and DVBEs in its contracting.  The agency  
          lets between $2 billion and $5 billion in contracts annually.   
          The small business set-asides provided for in this bill will  
          allow for small business to bid as prime contractors and foster  
          opportunities to grow and continue to build capacity.  








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          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) 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."





          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  








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          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.





          Double referral.  This bill passed out of the Assembly Local  
          Government Committee on       April 6, 2016, on a vote of 9-0.





          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.





          AB 1341 (Price), Chapter 494, Statutes of 2010, authorized Metro  
          to facilitate contract awards to small businesses on contracts  








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          over $100,000.


           











































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          REGISTERED SUPPORT / OPPOSITION:




          Support


          Los Angeles County Metropolitan Transportation Authority  
          (Sponsor)




          Opposition


          None on file




          Analysis Prepared by:Janet Dawson / TRANS. / (916) 319-2093