BILL ANALYSIS Ó SENATE COMMITTEE ON TRANSPORTATION AND HOUSING Senator Jim Beall, Chair 2015 - 2016 Regular Bill No: AB 2690 Hearing Date: 6/28/2016 ----------------------------------------------------------------- |Author: |Ridley-Thomas | |----------+------------------------------------------------------| |Version: |4/12/2016 | ----------------------------------------------------------------- ----------------------------------------------------------------- |Urgency: |No |Fiscal: |No | ----------------------------------------------------------------- ----------------------------------------------------------------- |Consultant|Manny Leon | |: | | ----------------------------------------------------------------- SUBJECT: Los Angeles County METROpolitan Transportation Authority: contracting DIGEST: This bill 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). ANALYSIS: 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. AB 2690 (Ridley-Thomas) Page 2 of ? c) Require bidders to make a good faith effort, in accordance with the criteria established in the parameters specified 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: a) The contract award is greater than $5,000 and less than $250,000 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 b) Quotes are obtained from two or more SBEs or from two or AB 2690 (Ridley-Thomas) Page 3 of ? more DVBEs 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. 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. 8)Deletes a number of provisions related to how a bidder would demonstrate good faith efforts to meet SBE goals. AB 2690 (Ridley-Thomas) Page 4 of ? COMMENTS: 1)Purpose. The author notes, "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 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 DBVE participation, existing law does not allow LA METRO to use goals or preferences on those contracts." 2)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. 3)Various state and local programs. 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. Furthermore, local transportation agencies such as the Riverside County Transportation Commission, the Orange County Transportation Authority, and the San Bernardino Associated Governments have similar programs for disadvantage businesses. Ultimately, these programs assist various types of businesses win government contracts by "setting aside" specific government purchases exclusively for participation by these particular types of businesses. It is important to note that the AB 2690 (Ridley-Thomas) Page 5 of ? contracts are still competitive; however, the competition is narrowed. This bill improves METRO's efforts to contract with SBEs and DVBEs by providing the authority to facilitate contracting with both SBEs and DVBEs, in addition to expanding the existing 5% bid preference for SBEs to DVBEs. Furthermore, bidders will now be required to meet, rather than make a good faith effort to meet, SBE and DVBE goals, which will allow METRO to award contracts to the bidder who meets these SBE and DVBE goals; in turn providing economic growth for these particular industries. Lastly, this bill substantially increases the SBE bid threshold to require METRO to obtain three bids for projects greater than $5,000 but less than $3 million to encourage participation. In order to determine the effectiveness of these changes to METRO's SBE and DVBE programs, this bill additionally requires METRO to report to the Legislature on the contracts awarded under the provisions specified in this bill. Assembly Votes: Floor: 77-0 Trans: 15-0 LGov: 9-0 FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No POSITIONS: (Communicated to the committee before noon on Wednesday, June 22, 2016.) SUPPORT: Los Angeles County Metropolitan Transportation Authority (Sponsor) Hispanic Engineers Business Corporation Redwood Resources T&T Public Relations OPPOSITION: None received AB 2690 (Ridley-Thomas) Page 6 of ? -- END --