BILL ANALYSIS                                                                                                                                                                                                    



                                                                    AB 2690


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          ASSEMBLY THIRD READING


          AB  
          2690 (Ridley-Thomas)


          As Amended  April 12, 2016


          Majority vote


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          |Committee       |Votes|Ayes                  |Noes                |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Local           |9-0  |Eggman, Waldron,      |                    |
          |Government      |     |Mullin, Bonilla,      |                    |
          |                |     |Chiu, Cooley,         |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     | Beth Gaines, Gordon, |                    |
          |                |     |Linder                |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Transportation  |15-0 |Frazier, Linder,      |                    |
          |                |     |Baker, Bloom, Brown,  |                    |
          |                |     |Chu, Daly, Dodd,      |                    |
          |                |     |Gomez, Kim, Mathis,   |                    |
          |                |     |Medina, Melendez,     |                    |
          |                |     |Nazarian, O'Donnell   |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
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                                                                    AB 2690


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          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.


          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 $5,000, but is  








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               less than $3 million, as long as price quotations are  
               obtained by Metro from three or more certified SBEs.


          4)Requires Metro, for the purposes of legislative oversight, to  
            prepare and submit a report to the Legislature by December 31,  
            2017, regarding contracts awarded, if Metro awards contracts  
            pursuant to 3) c) above.


          5)Requires a SBE recommended for a contract award through 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)Deletes a number of requirements that apply to bidders  
            pursuant to Metro's existing authority to facilitate contract  
            awards to SBEs.


          7)Defines "disabled veteran business enterprise" to have the  
            meaning as defined in California's DVBE Program pursuant to  
            the Military and Veterans Code.


          8)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,  








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            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 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 pre-solicitation or pre-bid  
               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  








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               project for which the contract will be awarded to be  
               performed by SBEs to provide an opportunity for  
               participation by those enterprises;


             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;  
               local, state, or small business assistance offices; or,  








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               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.


          5)Allows, pursuant to the Small Business 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  








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            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.


          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;









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             b)   In awarding contracts to the lowest responsible bidder,  
               award the contract to the lowest responsible bidder meeting  
               the SBE and DVBE goals; and,


             c)   Set aside work for competition among certified SBEs and  
               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.  


            If Metro exercises the authority granted in c) above, it must  
            prepare and submit a report to the Legislature by December 31,  
            2017, regarding contracts awarded, for the purposes of  
            legislative oversight.


            This 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.  This 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.   








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            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."


          3)Background.  SB 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.


            California has had a small business preference within the  








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            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 costing between  
            $5,000 and $3 million 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.


          4)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.  


            SB 1341 (Price), Chapter 494, Statutes of 2010, authorized  
            Metro to facilitate contract awards to small businesses on  
            contracts over $100,000.










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          5)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."


          6)Arguments in Opposition.  None on file.




          Analysis Prepared by:                                             
                          Angela Mapp / L. GOV. / (916) 319-3958  FN:  
          0002759