BILL ANALYSIS                                                                                                                                                                                                    



                                                                    AB 2905


                                                                    Page  1





          Date of Hearing:  May 18, 2016


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                               Lorena Gonzalez, Chair


          AB  
          2905 (Committee on Jobs, Economic Development, and the Economy)  
          - As Amended April 12, 2016


           ----------------------------------------------------------------- 
          |Policy       |Jobs, Economic Development,    |Vote:|9 - 0        |
          |Committee:   |and the Economy                |     |             |
          |             |                               |     |             |
          |             |                               |     |             |
          |-------------+-------------------------------+-----+-------------|
          |             |                               |     |             |
          |             |                               |     |             |
          |             |                               |     |             |
          |-------------+-------------------------------+-----+-------------|
          |             |                               |     |             |
          |             |                               |     |             |
          |             |                               |     |             |
           ----------------------------------------------------------------- 


          Urgency:  No  State Mandated Local Program:  NoReimbursable:  No


          SUMMARY:


          This bill expands existing reporting requirements related small  
          business and disabled veteran business enterprise (DVBE)  
          participation in state contracts, and specifies Legislative  








                                                                    AB 2905


                                                                    Page  2





          intent that the state set and implement a 25% small business  
          participation goal for state procurement and contracting.  
          Specifically, this bill:


          1)Requires a state agency to annually report small business  
            participation by prime contractors and subcontractors,  
            beginning with the 2017-18 contract period.


          2)Modifies the categories of reporting for small businesses from  
            0-5, 26-50, 51-75, and 76-100 employees, to 0-5, 0-20, and  
            21-100 employees.


          FISCAL EFFECT:


          1)General Fund administrative costs, likely in excess of $1  
            million, to reconfigure FI$Cal to support electronic reporting  
            based on the prime contractor and subcontractor distinctions.  
            This bill would also result in unknown costs to state  
            departments, including the Department of General Services, to  
            report this information. 

          2)To the extent the Legislature sets and implements a 25% small  
            business participation goal for procurement and contracting,  
            and to the extent this requirement increases the number of  
            state contracts awarded to other than the low bidder, state  
            contracting costs will increase.  Given the thousands of state  
            contracts, the cost impact of the bill could be in the tens of  
            millions of dollars each year. 

          COMMENTS:


          1)Purpose. Small businesses play an essential role within the  
            California economy. According to the author, in recognition of  
            the sacrifices made by California's disabled veteran community  








                                                                    AB 2905


                                                                    Page  3





            and the important economic role of small businesses, state  
            agencies are required to take certain actions to include these  
            two groups in state procurement opportunities. The author is  
            concerned that participation rates of these groups have not  
            been as high as desired. This bill is intended to enhance the  
            state's procurement management practices as they relate to  
            small businesses.  





          2)Background. Governors Arnold Schwarzenegger and Gray Davis  
            issued executive orders calling for all state agencies to  
            pursue an annual 25% small business participation level in  
            state contracting.  According to the consolidated annual  
            report on procurement for fiscal year (FY) 2013-14 by DGS, the  
            state entered into nearly $9 billion in contracts, with  
            approximately 26% awarded to small businesses.  The report  
            also indicates statewide departments achieved nearly 26%  
            percent small business participation in contracts.

          3)Related Legislation.  

             a)   AB 351 (Jones-Sawyer) of 2015, would have required each  
               state agency to establish and achieve a 25% small business  
               procurement participation goal.  Agencies that failed to  
               meet the goal would have been required to develop and  
               implement a corrective plan, as specified.  This bill was  
               held on the Suspense file in this committee.

             b)   AB 1734 (Jones-Sawyer) of 2014, would have required each  
               state agency to establish and achieve a goal of 25 % small  
               business (SB) participation and an annual phased-in goal of  
               5 % disabled veteran business enterprises (DVBE)  
               participation in state contracting.  This bill was held on  
               Suspense in this committee.

             c)   AB 550 (Brown) of 2013, would have codified the  








                                                                    AB 2905


                                                                    Page  4





               executive order establishing the 25% small business  
               participation goal.  The bill also made changes to state  
               procurement procedures for small business, including  
               microbusiness and DVBE participation rates.  This bill was  
               held on Suspense in this committee.

             d)   SB 67 (Price) of 2011, would have authorized DGS to  
               direct all state entities to establish an annual goal of  
               achieving no less than 25% small business participation in  
               state procurement contracts, as specified. This bill was  
               held on the Suspense file in this committee.

             e)   AB 309 (Price) of 2011, would have required the  
               establishment of a 25% small business participation goal  
               for all state entities and directs DGS to monitor each  
               agency's progress in meeting this goal. The bill would have  
               required that the Office of the Small Business Advocate  
               receive the same progress report information as state  
               entities and directs DGS and the Office of the Small  
               Business Advocate to work collaboratively to assist state  
               entities in meeting their goal. This bill was held on the  
               Suspense file in this committee.



          Analysis Prepared by:Misty Feusahrens / APPR. / (916)  
          319-2081