BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON TRANSPORTATION AND HOUSING
                              Senator Jim Beall, Chair
                                2015 - 2016  Regular 

          Bill No:          AB 2690           Hearing Date:     6/28/2016
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          |Author:   |Ridley-Thomas                                         |
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          |Version:  |4/12/2016                                             |
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          |Urgency:  |No                     |Fiscal:      |No              |
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          |Consultant|Manny Leon                                            |
          |:         |                                                      |
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          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.







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             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.  








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          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  








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            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








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