BILL ANALYSIS                                                                                                                                                                                                    Ó




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          |SENATE RULES COMMITTEE            |                       AB 2690|
          |Office of Senate Floor Analyses   |                              |
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                                      CONSENT 


          Bill No:  AB 2690
          Author:   Ridley-Thomas (D) 
          Amended:  4/12/16 in Assembly
          Vote:     21 

           SENATE TRANS. & HOUSING COMMITTEE:  10-0, 6/28/16
           AYES:  Beall, Cannella, Allen, Bates, Gaines, Leyva, McGuire,  
            Mendoza, Roth, Wieckowski
           NO VOTE RECORDED:  Galgiani

           ASSEMBLY FLOOR:  77-0, 4/25/16 - See last page for vote

           SUBJECT:   Los Angeles County Metropolitan Transportation  
                     Authority:  contracting


          SOURCE:    Los Angeles County Metropolitan Transportation  
          Authority


          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  








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            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.

             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, as specified.

          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  








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               $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 specific  
            conditions are met.

          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.









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

          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  
          disadvantaged 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 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  








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          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.
          
          Comments

          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." 


          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:NoLocal:    No


          SUPPORT:   (Verified7/7/16)


          Los Angeles County Metropolitan Transportation Authority  
          (source)
          Hispanic Engineers Business Corporation 
          Redwood Resources
          T&T Public Relations


          OPPOSITION:   (Verified7/7/16)










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          None received

          ASSEMBLY FLOOR:  77-0, 4/25/16
          AYES:  Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker,  
            Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke,  
            Calderon, Campos, Chau, Chávez, Chiu, Chu, Cooley, Cooper,  
            Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines,  
            Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson,  
            Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger  
            Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey,  
            Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes,  
            McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte,  
            O'Donnell, Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas,  
            Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner,  
            Waldron, Weber, Wilk, Wood, Rendon
          NO VOTE RECORDED:  Chang, Olsen, Williams


          Prepared by:Manny Leon / T. & H. / (916) 651-4121
          7/29/16 10:43:32


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