BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 2844 (Bloom) - Public contracts: discrimination
-----------------------------------------------------------------
| |
| |
| |
-----------------------------------------------------------------
|--------------------------------+--------------------------------|
| | |
|Version: June 20, 2016 |Policy Vote: JUD. 5 - 2 |
| | |
|--------------------------------+--------------------------------|
| | |
|Urgency: No |Mandate: Yes |
| | |
|--------------------------------+--------------------------------|
| | |
|Hearing Date: August 1, 2016 |Consultant: Jolie Onodera |
| | |
-----------------------------------------------------------------
This bill meets the criteria for referral to the Suspense File.
Bill
Summary: AB 2844 would require a person that submits a bid or
proposal to enter into or renew a contract of $100,000 or more
with a state agency to certify under penalty of perjury that any
policy that they have against any sovereign nation or peoples
recognized by the government of the United States, including,
but not limited to, the nation and people of Israel, is not used
as a pretext for discrimination in violation of the Unruh Civil
Rights Act or the California Fair Employment and Housing Act, as
specified.
This bill would authorize the Attorney General to receive and
investigate complaints regarding violations of, and may bring
suit to enforce the provisions of, this bill.
Fiscal
Impact:
Attorney General (AG) : Potentially significant increase in
AB 2844 (Bloom) Page 1 of
?
staffing costs of $370,000 in FY 2016-17, and $625,000
annually thereafter (50 percent General Fund/ 50 percent
Special Fund*) to the Civil Rights Enforcement Section and
False Claims Unit of the Department of Justice (DOJ) to
receive and respond to complaints, conduct investigations, and
implement related enforcement activities. The actual workload
impact of this measure is largely unknown and would be
dependent on the volume and nature of complaints received and
subsequently investigated. Although the bill effectively
authorizes but does not mandate the AG to investigate and
bring suit to enforce the provisions of this measure, the
potential workload impact could be substantial.
Department of General Services (DGS) : Unquantifiable but
potentially major future increase in ongoing operating costs
due to higher contract costs (General Fund) resulting from the
exclusion of otherwise qualified bidders that may no longer
submit bids under the required certification. The DGS
administers over 9,000 contracts with a value of $100,000 or
more with a combined value of $27.9 billion. In the absence of
any exceptions for situations involving a sole source or for
cases in which all otherwise qualified bidders are excluded,
the costs to obtain alternative goods and/or services may
increase costs to the state. Additionally, to the extent
exercising an option to extend a contract, which oftentimes
provides for advantageous rates or prices, is deemed a renewal
under the provisions of this bill could likewise result in
additional administrative workload and higher costs to the
state for goods and services. While the magnitude of the
impact cannot be quantified, for context, even a one-half of
one percent (0.5%) increase to overall contract costs would
result in increased costs to the state of about $140 million.
Perjury violations : Unknown; potential increase in local
enforcement and incarceration costs (Local Funds) to the
extent felony arrests and convictions for the offense of
perjury are pursued under the provisions of this measure.
Other state agencies : In addition to the DGS, numerous other
state agencies that enter into contracts of over $100,000
would be impacted by an unquantifiable but potentially
significant amount due to the contract certification
requirement established in this bill.
AB 2844 (Bloom) Page 2 of
?
*False Claims Act Fund
Background: Existing law prohibits any person in this state from being
unlawfully denied, on the basis of race, national origin, ethnic
group identification, religion, age, sex, sexual orientation,
color, genetic information, or disability, full and equal access
to the benefits of, or the unlawful discrimination under, any
program or activity that is conducted, operated, or administered
by the state or by any state agency, is funded directly by the
state, or receives any financial assistance from the state.
(Government Code § 11135(a).)
It has been reported that numerous states across the country
have taken or are considering taking action to withdraw state
support for companies participating in a boycott of the State of
Israel, known as the Boycott, Divestment and Sanctions (BDS)
movement. According to the BDS Movement website, BDS is "a
Palestinian-led movement for freedom, justice and equality. BDS
upholds the simple principle that Palestinians are entitled to
the same rights as the rest of humanity. [?] Inspired by the
South African anti-apartheid movement, the BDS call urges
non-violent pressure on Israel to comply with international law.
BDS is now a vibrant global movement made up of unions, academic
associations, churches, and grassroots movements across the
world. [?] The call urges various forms of boycott against
Israel until it meets its obligations under international law
by: (1) Ending its occupation and colonization of all Arab lands
and dismantling the Wall; (2) Recognizing the fundamental rights
of the Arab-Palestinian citizens of Israel to full equality;
and, (3) Respecting, protecting and promoting the rights of
Palestinian refugees to return to their homes and properties as
stipulated in UN Resolution 194." (BDS Movement, What is BDS?,
[as of July 29, 2016].)
According to various reports, legislatures across the country
have considered or are pending consideration of bills in a
display of disapproval of the BDS movement. This bill seeks to
balance the rights of individuals and businesses to exercise
their constitutionally-protected freedoms with the right of the
State to select its business partners as a market participant,
and its obligation to protect tax payer funds to support
individuals who discriminate in violation of this State's
AB 2844 (Bloom) Page 3 of
?
fundamental anti-discrimination laws.
Proposed Law:
This bill would require a person that submits a bid or proposal
to, or otherwise proposes to enter into or renew a contract
with, a state agency with respect to any contract in the amount
of $100,000 or more to certify, under penalty of perjury, at the
time the bid or proposal is submitted or the contract is
renewed, all of the following:
That they have complied with the Unruh Civil Rights Act
(Section 51 of the Civil Code).
That they have complied with the California Fair Employment
and Housing Act (FEHA) (Chapter 7 (commencing with Section
12960) of Part 2.8 of Division 3 of Title 2 of the Government
Code).
That any policy that they have against any sovereign nation or
peoples recognized by the government of the United States,
including, but not limited to, the nation and people of
Israel, is not used as a pretext for discrimination in
violation of the Unruh Civil Rights Act or FEHA, as specified.
This bill would authorize the Attorney General to receive and
investigate complaints regarding violations of, and may bring
suit to enforce the provisions of, the bill.
This bill sets forth numerous uncodified legislative findings
and declarations regarding the state's anti-discrimination
policies and the First Amendment rights of individuals,
including but not limited to the following:
It is the policy of the State of California to promote
fairness and equality and to combat discrimination and if
California hopes to remain a national leader on behalf of
these communities, action must be taken to recognize that
discriminatory laws and policies are unacceptable for
California's partners in business.
AB 2844 (Bloom) Page 4 of
?
California has significant influence in the marketplace. The
state at times operates not as a market regulator, but as a
market participant, and in this latter role it may determine
that companies engaging in discriminatory actions in the
conduct and operation of their business adversely affects the
state's procurement activities and places the state in a
position of supporting activities that could be seen as a
violation of the nondiscrimination policies of the State of
California.
It is the intent of the Legislature to ensure that taxpayer
funds are not used to do business with or otherwise support
any state or private entity that engages in discriminatory
actions against individuals under the pretext of exercising
First Amendment rights. This includes, but is not limited to,
discriminatory actions taken against individuals of the Jewish
faith under the pretext of a constitutionally protected
boycott or protest of the State of Israel.
Related
Legislation: AB 1551 (Allen) 2016 would prohibit state trust
funds from making or holding any investment in any business firm
or financial institution, as well as prohibit state moneys from
being deposited in any financial institution, that engages in
discriminatory business practices in furtherance of or in
compliance with the boycott of Israel. This bill remains pending
referral from the Assembly Committee on Rules.
AB 1552 (Allen) 2016 would, with certain exceptions, prohibit a
public entity from entering into a contract to acquire or
dispose of goods, services, information technology, or
construction unless the contract includes a representation that
the contractor is not currently engaged in, and an agreement
that the contractor will not during the duration of the contract
engage in, the boycott, as defined, of a person or an entity
based in or doing business with a jurisdiction with which the
state can enjoy open trade, defined as a state that is a member
of the World Trade Organization. This bill remains pending
referral from the Assembly Committee on Rules.
Prior Legislation: AB 1151 (Feuer) Chapter 441/2011 required
AB 2844 (Bloom) Page 5 of
?
additional public reporting requirements, as specified, by
CalPERS and CalSTRS, regarding retirement investments in
companies with business operations in Iran. AB 1151 additionally
clarified the fiduciary duties of CalPERS and CalSTRS regarding
investments subject to the CPDIA.
AB 1650 (Feuer) Chapter 573/2010, the Iran Contracting Act of
2010, prohibits all public entities in the state from renewing
or entering into contracts of $1 million or more with companies
identified by the Department of General Services as having
substantial business in Iran's energy sector.
AB 221 (Anderson) Chapter 671/2007 enacted the California Public
Divest from Iran Act (CPDIA), which prohibits CalPERS and
CalSTRS from investing public employee retirement funds in a
company with business operations in Iran, as specified.
AB 2251 (Friedman) Chapter 1351/1992 prohibited state trust fund
and state money investments in business firms or financial
institutions that engage in discriminatory business practices,
as defined, in furtherance of or in compliance with the Arab
League's economic boycott of Israel.
Staff
Comments:
AG Impact
By authorizing the AG to receive and investigate complaints
regarding violations of, and to bring suit to enforce the
provisions of, the bill, the AG could experience a significant
increase in ongoing workload to its Civil Rights Enforcement
Section and False Claims Unit. Additional workload would include
but not be limited to receiving and responding to complaints,
conducting investigations, and implementing related enforcement
activities, potentially culminating in bringing suit to enforce
the bill's provisions. The DOJ has indicated the need for
additional staffing at a cost of $370,000 in FY 2016-17, and
$625,000 annually thereafter to address the potential workload
increase.
AB 2844 (Bloom) Page 6 of
?
Staff notes the actual workload impact of this measure is
largely unknown at this time and would be dependent on the
volume and nature of complaints received and subsequently
investigated. Although the bill effectively authorizes but does
not mandate the AG to investigate and bring suit to enforce the
provisions of this measure, the potential workload impact could
be substantial.
DGS/State agency Impact
By requiring a person that submits a bid or proposal to a state
agency for any contract in the amount of $100,000 or more to
certify, under penalty of perjury, at the time a bid or proposal
is submitted or a contract is renewed, to comply with numerous
requirements, this bill could have the practical effect of
severely restricting the ability of businesses and organizations
from contracting with the state due to their inability to submit
the required certification.
DGS could incur an unquantifiable but potentially major future
increase in ongoing costs due to higher contract costs resulting
from the exclusion of otherwise qualified bidders that may no
longer submit bids under the required certification. The DGS
administers over 9,000 contracts with a value of $100,000 or
more with a combined value of $27.9 billion. In the absence of
any exceptions for situations involving a sole source or for
cases in which all otherwise qualified bidders are excluded, the
costs to obtain alternative goods and/or services may increase
costs to the state. Additionally, to the extent exercising an
option to extend a contract, which oftentimes provides for
advantageous rates or prices, is deemed a renewal under the
provisions of this bill could likewise result in additional
administrative workload and higher costs to the state for goods
and services. While the magnitude of the impact cannot be known
with certainty, for context, even a one-half of one percent
(0.5%) increase to contract costs would result in increased
costs to the state of about $140 million. In addition to the
DGS, any other state agency engaged in contracts in the amount
of $100,000 or more would additionally be subject to the
requirements of the bill. Although the impacts may be of smaller
scale that those imposed on the DGS, other state agencies could
additionally incur greater administrative workload and increased
costs for goods and services due to the specified contracting
requirements.
AB 2844 (Bloom) Page 7 of
?
This bill may restrict or in some cases inadvertently prohibit
the ability of qualified businesses and organizations to
contract with the state due to the following certification
requirements:
Mandates past compliance with the Unruh Act and FEHA. This bill
requires businesses and organizations to certify that they have
complied with specified laws, which seems to imply that if, at
any time in the past, the business or organization has failed to
comply, that entity could be violation of the certification.
Because the Unruh Act and FEHA are broad-ranging civil rights
laws that regulate many aspects of business and employment
practices, respectively, it is not improbable for an entity to
have been subject to a prior violation of either of the laws,
for example, a construction-related accessibility violation
filed under the Unruh Act, or a past FEHA violation by a former
employee for a workplace-related incident that is charged
against the business. Businesses that have violated these laws
at any point in the past could potentially be unable to certify
compliance, and therefore, unable to contract with the state for
contracts in excess of $100,000.
Scope of Unruh Act/FEHA. This bill provides that businesses
must have complied with the Unruh Act and FEHA or that any
policy of the business is not used as a pretext for
discrimination in violation of the Unruh Act or FEHA, the scope
of which applies within the State of California. To the extent
the certification requirement has the effect of primarily
disqualifying businesses in California or with physical
facilities within the state, could have additional indirect cost
implications more broadly.
Contract renewals. The term "renewal" is not clearly defined in
the bill. It may be interpreted to refer to an amendment
extending the term of an existing contract beyond its originally
scheduled expiration date. However, it is unclear whether a
renewal would also include options to extend that were included
in the original competitively bid contract. If exercising an
option to extend is deemed a "renewal" for purposes of this
requirement, and the current contractor were unable to make the
required certification, the state would be unable to exercise an
extension option even if the rates or prices were advantageous,
resulting in additional costs to the state, both in staff time
AB 2844 (Bloom) Page 8 of
?
to conduct the contracting process and in higher costs for the
goods and services.
Exclusion of otherwise qualified bidders. Excluding some
otherwise qualified bidders on contracts of $100,000 or more may
result in higher contract costs. Imposing contracting
restrictions may result in the exclusion of otherwise qualified
bidders that may have been the lowest bidder, resulting in the
state paying higher prices for goods, services, or construction.
Under less competitive pressure to bid aggressively once aware
that key competitors are unable to bid, the remaining bidders
may increase the cost of their proposals.
No exceptions. This bill does not contain any exceptions for
situations in which the only vendor(s) capable of performing the
contract is/are unable to make the required certification. In
addition to sole source situations, circumstances in which more
than one source is available, but all potential bidders are
unable to meet the certification requirements, may arise,
effectively precluding the state from acquiring certain goods or
services needed for state operations. The inability to acquire
needed goods and services may result in additional costs to the
state to secure alternative products or services, disrupt state
operations, or both.
Administrative costs. This bill applies both to contract awards
and contract renewals. DGS has indicated that boilerplate
certifications are currently used in bids and contracts, and the
certification required by this bill could be integrated without
undue administrative difficulty. The cost of developing and
implementing such certifications is estimated to be minor and
absorbable. However, contract extensions are granted without
competitive bidding, and currently there is not a comparable
certification requirement. Implementing this recertification
process for extensions/renewals could result in slightly greater
ongoing administrative costs.
-- END --
AB 2844 (Bloom) Page 9 of
?