BILL ANALYSIS Ó
SB 1176
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Date of Hearing: August 3, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
SB 1176
(Galgiani) - As Amended April 21, 2016
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|Policy |Jobs, Economic Development, |Vote:|9 - 0 |
|Committee: |and the Economy | | |
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Urgency: No State Mandated Local Program: YesReimbursable:
No
SUMMARY:
This bill increases the average annual gross revenue limit for
small businesses from $10 million to $15 million and for
microbusinesses from $2.5 million to $5 million, in order to be
eligible for state small business procurement benefits and
incentives. Specifically, this bill:
1)Establishes a new category of small business for the purpose
of bidding on state public works projects, including the
erection, construction, alteration, repair, or improvement of
any kind, upon real property, as specified. Specifies
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business may employ up to 200 employees and have average
annual gross receipts of up to $25 million over the preceding
three years.
2)Requires, rather than authorizes, the Department of General
Services (DGS) to biannually adjust the average annual gross
receipt levels to reflect the changes in the California
Consumer Price Index.
FISCAL EFFECT:
1)One-time General Fund costs, in the range of $5.5 million to
$7.5 million, to make programming changes to FI$Cal to modify
system functionality to the new category of small business in
the processing of procurements. As a point of comparison,
developing the certification systems for the small business
and disabled veteran business enterprise programs cost roughly
$8 million.
2)Ongoing administrative costs to DGS of approximately $270,000
(special funds) to support two positions to handle additional
workload associated with the new subcategory of contractors on
public works projects.
3)DGS indicates the costs of raising the threshold for small
businesses and microbusinesses are minor and absorbable.
COMMENTS:
1)Purpose. According to the author, given the type and
complexity of projects the state is currently building, or
will build in the near future - dams, water systems, rail -
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the technical expertise many construction businesses must
maintain has increased requiring companies to invest in
greater amounts of human and technical capital, thus limiting
the entry of small construction companies from being
considered a small business for state contracting purposes.
With regard to the requirement for DGS to biennially adjust
the revenue limits based on the CCPI, the author notes that
limits have not been adjusted for 7 years.
2)Comments. This bill would create a split system of small
business certification. Firms with less than 100 employees and
$15 million in revenue would continue to qualify as small
businesses for all contracts. Other firms with 101-200
employees and/or $15-25 million in revenue would qualify as
small businesses only for the purposes of public works
contracts. DGS would need to establish a separate
certification for this new category in Fi$Cal which they
estimate will cost between $5.5 million and $7.5 million. SB
1219 (Hancock), pending in this committee, proposes to add a
new subcategory to the Small Business Procurement and Contract
Act. DGS has provided the same cost estimate for this bill
related to adjustments to Fi$Cal.
3)Related legislation. SB 1219 (Hancock), pending in this
committee, includes employment social enterprises within the
Small Business Procurement and Contract Act, starting July 1,
2017, for the purpose of allowing them to participate in state
contracting bid preferences.
Analysis Prepared by:Misty Feusahrens / APPR. / (916)
319-2081
SB 1176
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