BILL ANALYSIS Ó
SB 1176
Page 1
SENATE THIRD READING
SB
1176 (Galgiani and Hueso)
As Amended August 19, 2016
Majority vote
SENATE VOTE: 38-0
--------------------------------------------------------------------
|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+-----------------------+---------------------|
|Jobs |9-0 |Eduardo Garcia, Kim, |> |
| | |Achadjian, Brough, | |
| | |Brown, Chau, Chu, | |
| | |Gipson, Irwin | |
| | | | |
|----------------+-----+-----------------------+---------------------|
|Appropriations |20-0 |Gonzalez, Bigelow, |> |
| | |Bloom, Bonilla, Bonta, | |
| | |Calderon, Chang, Daly, | |
| | |Eggman, Gallagher, | |
| | |Eduardo Garcia, | |
| | |Holden, Jones, | |
| | |Obernolte, Quirk, | |
| | |Santiago, Wagner, | |
| | |Weber, Wood, McCarty | |
| | | | |
| | | | |
SB 1176
Page 2
--------------------------------------------------------------------
SUMMARY: Expands the number of businesses which can utilize the
special provisions in the Small Business Procurement and
Contract Act when bidding on a state contract. This bill
modifies the definition of a small business and microbusiness by
increasing the maximum revenue limits and the number of
employees, as specified. Specifically, this bill:
1)Increases the average annual gross revenue limit for
businesses eligible for state small business procurement
benefits and incentives, as follows:
a) The revenue cap for small businesses is increased from
$10 million to $15 million; and
b) The revenue cap for microbusinesses is increased from
$2.5 million to $5 million.
2)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. The new category
of small business is identical to the existing category,
except that the business may employ up to 200 employees and
have average annual gross receipts of up to $25 million over
the preceding three years.
3)Requires rather than authorizes the Department of General
Services (DGS) to adjust the average annual gross receipt
levels to reflect the changes in the California Consumer Price
Index.
SB 1176
Page 3
4)Includes two technical sections, which incorporate amendments
to Government Code Sections 14837 and 14838, should this bill
and SB 1219 (Hancock) of the current legislative session both
be enacted.
EXISTING LAW:
1)Designates the Department of General Services (DGS) as the
administrator of the state Small Business Procurement and
Contract Act (Small Business Procurement Act), which includes
certifying and implementing targeted preference programs for
certified small businesses, microbusinesses, and disabled
veteran owned business enterprises (DVBEs).
2)Authorizes a 5% preference for state contract bidders that are
either a certified small business, microbusiness, or a larger
business that commits to using a certified small business or
microbusiness in undertaking the contract. This 5% is
calculated based on the bid of the lowest responsible bidder.
3)Designates DGS as the administrator of the state Small
Business Procurement and Contract Act, which includes
certifying and implementing targeted preference programs for
certified small businesses, microbusinesses, and DVBEs.
4)Authorizes a 5% preference for state contract bidders that are
either a certified small business, microbusiness, or a larger
business that commits to using a certified small business or
microbusiness in undertaking the contract. This 5% is
calculated based on the bid of the lowest responsible bidder,
which may be a small or non-small business.
5)Authorizes a state agency and the California State University
to award specified types of contracts with a value of between
SB 1176
Page 4
$5,000 and $250,000 to a certified small business, including a
microbusiness and a disabled veteran business enterprise,
without complying with certain competitive bidding
requirements, provided the agency obtains price quotations
from at least two small businesses, including microbusinesses,
or two DVBEs.
6)Defines, for the purposes of the Small Business Act, that a:
a) "Small business" is independently owned, not dominant in
its field of operation, domiciled in California, employing
100 or fewer employees, and earning $10 million or less in
average annual gross receipts for the three previous years.
b) "Microbusiness" is a small business which, together with
affiliates, has average annual gross receipts of $2.5
million or less over the previous three years, or is a
manufacturer, as defined, with 25 or fewer employees.
DGS is required to conduct a biennial review of the average
annual gross receipt levels for small businesses and
authorizes DGS to adjust those levels to reflect changes in
the California Consumer Price Index for all items.
7)Defines a DVBE to mean an enterprise that is at least 51%
owned by one or more disabled veterans and the daily business
operations are managed and controlled by one or more disabled
veterans. For certification purposes a "disabled veteran" is
a veteran of the United States military, naval, or air service
who resides in California and has a service-connected
disability of at least 10% or more.
FISCAL EFFECT: According to the Assembly Committee on
Appropriations the fiscal effect of this bill would be:
SB 1176
Page 5
1)According to DGS, 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.
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: Small businesses play an essential role within the
California economy, contributing the most net new jobs, offering
an alternative to un- and underemployment, and helping to
disburse the financial advantages of the state's globally
connected economy. State procurement opportunities represent an
important economic tool to support small business development.
In the last 15 report periods, the state has met the 25% small
business procurement participation goal only five times
including the 2013-14 fiscal year.
Over the next five years, the state is anticipated to initiate
over $50 billion in construction projects related to
transportation and community services including health care,
education, courts, and recreation. To the extent that they can
qualify, these construction projects represent excellent
business opportunities for small businesses. This bill expands
the number of business which would be able to compete for state
contracts under the Small Business Procurement and Contract Act
rules. The policy committee analysis includes background on the
role small businesses play within the overall economy, current
small business procurement activities, and related legislation.
SB 1176
Page 6
Analysis Prepared by:
Toni Symonds / J., E.D., & E. / (916) 319-2090
FN:
0004626