BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 1219 (Hancock) - Small Business Procurement and Contract Act:
employment social enterprises
-----------------------------------------------------------------
| |
| |
| |
-----------------------------------------------------------------
|--------------------------------+--------------------------------|
| | |
|Version: April 4, 2016 |Policy Vote: G.O. 11 - 0 |
| | |
|--------------------------------+--------------------------------|
| | |
|Urgency: No |Mandate: No |
| | |
|--------------------------------+--------------------------------|
| | |
|Hearing Date: April 25, 2016 |Consultant: Robert Ingenito |
| | |
-----------------------------------------------------------------
This bill meets the criteria for referral to the Suspense File.
Bill
Summary: SB 1219 would include employment social enterprises
within the Small Business Procurement and Contract Act, for the
purpose of allowing them to participate in state contracting bid
preferences.
Fiscal
Impact:
The Department of General Services (DGS) would incur a
SB 1219 (Hancock) Page 1 of
?
one-time information technology (IT) expense, likely in the
low millions of dollars, to implement the provisions of the
bill. Additionally, DGS would incur rulemaking expenses
likely to range in the hundreds of thousands of dollars.
(See Staff Comments). Finally, DGS would incur unknown
ongoing, but potentially significant costs to review and
approve applications for certification as an employment
social enterprise.
All state agencies would experience ongoing costs
associated with both (1) the operation of the bid
preference, and (2) from administration. Because, DGS does
not know many eligible firms exist and would seek
certification, these costs are unknown.
Background: The Small Business Procurement and Contract Act (Act) was
implemented in 1973 to establish a preference for small business
within the state's procurement process. Specifically, the
objective is to increase the number of contracts between small
business and the State. The Act states that it is the policy of
the State (1) to aid the interests of small businesses in order
to preserve free competitive enterprise, and (2) to ensure that
a fair portion of the total purchases and contracts of the State
goes toward small businesses.
Under current law, certified small businesses (SBs) and
micro-businesses (MBs) are entitled to a five percent bid
preference on applicable state solicitations once eligibility
requirements have been satisfied. Additionally, certified SBs
and MBs are eligible for the State's Small Business
Participation Program. This program sets a goal for the use of
small businesses in at least 25 percent of the State's overall
annual contract dollars.
Employment social enterprises (ESEs) are businesses that provide
jobs for individuals who have experienced significant barriers
to employment, including youth and inexperience, previous
incarceration, homelessness, or mental health disorders. Most
social enterprises, in addition to employment opportunities also
provide on-the-job skills development, counseling and other
support such as clothing, food, and housing.
SB 1219 (Hancock) Page 2 of
?
Proposed Law:
This bill would do all of the following:
Include ESEs within the Small Business Procurement and
Contract Act for the purposes of allowing them to
participate in state contracting bid preferences.
Define an "employment social enterprise" as a nonprofit
or for profit business dedicated to hiring and assisting
individuals who (1) face "significant barriers to
employment", and (2) at least 51 percent of the business'
employees have these barriers.
Define "individuals who face significant barriers to
employment" to include, but not be limited to, individuals
who have been incarcerated, individuals who are, or have
been, homeless, youth and young adults disconnected from
school or work, and individuals with disabilities,
including, but not limited to, substance addictions and
mental illness.
Related
Legislation: SB 1176 (Galgiani, 2016) would revise the
definition of an SB and MB by (1) increasing the threshold for
an SB to $30 million and for an MB to $5 million and (2)
requiring those dollar amounts to be adjusted to reflect
increases in the California Consumer Price Index biennially. The
bill is currently pending in Senate Governmental Organization
Committee.
Staff
Comments: This bill designates DGS as having the responsibility
for certifying and determining eligibility for ESE
certification. As noted above, to be eligible for certification,
SB 1219 (Hancock) Page 3 of
?
at least 51 percent of the ESE's employees must be individuals
who face significant barriers to employment, as defined.
Over the last several years, the State has been engaged in the
design, development, and implementation of the Financial
Information System for California (FI$Cal) Project. This project
will replace the state's aging and decentralized IT financial
systems with a new system integrating state government processes
in the areas of budgeting, accounting, cash management, and
procurement. Specifically, FI$Cal will ultimately eliminate the
need for over 2,500 department-specific applications and enable
the state financial systems and workforce to function in an
integrated environment. DGS is one of four state agencies that
have unique constitutional and/or statutory over state
responsibilities that will be integrated through FI$Cal.
This bill would require a major programming change to FI$Cal to
implement the bid preference and the certification system for
ESEs, the cost of which, based on preliminary information, would
likely total in the low millions of dollars. As an order of
magnitude developing the certification systems for the small
business and disabled veteran business enterprise programs cost
roughly $8 million.
Because the bill would take effect January 1, 2017, and the
FI$Cal project is subject to many competing priorities and
deadlines, it is very likely that DGS could need to begin
certifying ESEs before a FI$Cal-based solution is available.
Thus, DGS would need to develop and process paper forms on an
interim basis until the system was ready. The cost of this
scenario is unknown.
DGS would need to complete a sophisticated round of rulemaking
to establish standards for acceptable documentation for the
various categories of people who must comprise at least 51
percent of an ESE's workforce, specifically (1) individuals who
have been incarcerated, (2) individuals who are, or have been,
homeless, (3) youth and young adults disconnected from school or
work, and (4) individuals with disabilities, including, but not
limited to, substance addiction and mental illness. Certain
definitions in the current version of the bill are sufficiently
vague to likely further complicate determining eligibility
criteria. For instance, it is unclear what specifically
SB 1219 (Hancock) Page 4 of
?
constitutes "incarcerated," "homelessness", and "youth, and
young adults," and "disconnected from school or work."
The number of existing ESEs is unknown. It is not clear how many
would seek DGS certification; thus, DGS workload to review and
approve applications for certification as an ESE is unknown.
Moreover, all state agencies would experience ongoing costs
associated with both (1) the operation of the bid preference,
and (2) from administration. Because, DGS does not know many
eligible firms exist and would seek certification, the magnitude
of these costs is unknown.
-- END --