BILL NUMBER: AB 835	CHAPTERED
	BILL TEXT

	CHAPTER   1030
	FILED WITH SECRETARY OF STATE   SEPTEMBER 30, 1998
	APPROVED BY GOVERNOR   SEPTEMBER 30, 1998
	PASSED THE ASSEMBLY   AUGUST 20, 1998
	PASSED THE SENATE   AUGUST 18, 1998
	AMENDED IN SENATE   AUGUST 17, 1998
	AMENDED IN SENATE   AUGUST 6, 1998
	AMENDED IN SENATE   JULY 2, 1998
	AMENDED IN SENATE   JUNE 24, 1998
	AMENDED IN SENATE   MARCH 25, 1998
	AMENDED IN ASSEMBLY   MAY 15, 1997
	AMENDED IN ASSEMBLY   MAY 5, 1997
	AMENDED IN ASSEMBLY   APRIL 15, 1997

INTRODUCED BY   Assembly Member Wright

                        FEBRUARY 27, 1997

   An act to amend Sections 4533, 4533.1, 4534, 4535.1, 4535.2, 7084,
and 14840 of, and to add Section 14838.5 to, the Government Code,
and to amend Section 12102 of the Public Contract Code, relating to
state contracts.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 835, R. Wright.  State contracts:  bidder preferences and
incentives.
   (1) Under existing law, in inviting bids for contracts for goods
in excess of $100,000, with a specified exception, the state is
required to award a 5% preference to California based companies that
certify under penalty of perjury that no less than 50% of the labor
required to perform the contract is at a worksite or worksites
located in a distressed area or within an enterprise zone.  The 5%
preference for a proposal for a services contract in excess of
$100,000 applies if the company certifies that the contract will be
performed, at a worksite or worksite in a distressed area.  In
enterprise zones, the 5% preference for a proposal for a services
contract in excess of $100,000 applies only if the California based
company certifies that not less than 90% of the labor required to
perform the contract is accomplished at a worksite located in the
zone.
   Existing law also requires that a specified bidder who agrees to
hire persons with a high risk of unemployment is entitled to
additional preferences equal to a specified percentage of the work
force hired during the period of contract performance up to a maximum
of 15% for all preferences.  Any business that requests and is given
a preference by the state under a false certification and is awarded
a contract may be ineligible to transact any business with the state
for a period of not less than 3 months and not more than 24 months.

   This bill would require the California-based company to
demonstrate its eligibility for the 5% preference, as specified, and
to certify under penalty of perjury the company's eligibility for any
additional preference based on its hiring of persons with a high
risk of unemployment.  The bill would also require that the 5%
preference for a services contract in excess of $100,000 in a
distressed area depend on whether the company demonstrates and
certifies that not less than 90% of the labor hours required to
perform the contract shall be accomplished at an identified worksite
or worksites located in the distressed area.
   By expanding the scope of the crime of perjury, this bill would
impose a state-mandated local program.
   The bill would also recast the maximum preference of 15% as a
maximum preference and incentive and revise the sanction to prohibit
any direct or indirect transaction of business with the state.
   (2) Existing law requires the Department of General Services to
report annually to the Legislature regarding small businesses that
are awarded contracts under the Small Business Procurement and
Contract Act.
   This bill would revise the contents of this report and authorize a
state agency to award a contract for goods, services, or information
technology in an amount of $2,500 up to $49,999 to a small business,
notwithstanding advertising and bidding requirements that would
otherwise apply, as long as price quotations are obtained from 2 or
more small businesses.  The bill would institute similar authority
for the acquisition of goods, services, or information technology if
the estimated cost is less than $2,500 or in a greater amount as
established by the Director of General Services.
  (3) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.
   (4) The bill would also provide that specified provisions of this
bill shall become effective only if AB 3 and this bill are chaptered
and become operative on or before January 1, 1999.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 4533 of the Government Code is amended to read:

   4533.  Whenever the state prepares a solicitation for a contract
for goods in excess of one hundred thousand dollars ($100,000),
except a contract in which the worksite is fixed by the provisions of
the contract, the state shall award a 5-percent preference to
California-based companies who demonstrate and certify under penalty
of perjury that of the total labor hours required to manufacture the
goods and perform the contract, at least 50 percent of the hours
shall be accomplished at an identified worksite or worksites located
in a distressed area.
  SEC. 2.  Section 4533.1 of the Government Code is amended to read:

   4533.1.  Where a bidder complies with the provisions of Section
4533, or the worksite or worksites where at least 50 percent of the
labor required to perform the contract is within commuting distance
of a distressed area, the state shall award a 1-percent preference
for bidders who certify under penalty of perjury to hire persons with
high risk of unemployment equal to 5 to 9 percent of its work force
during the period of contract performance; a 2-percent preference for
bidders who shall agree to hire persons with high risk of
unemployment equal to 10 to 14 percent of its work force during the
period of contract performance; a 3-percent preference for bidders
who shall agree to hire persons with high risk of unemployment equal
to 15 to 19 percent of its work force during the period of contract
performance; and a 4-percent preference for bidders who shall agree
to hire persons with high risk of unemployment equal to 20 or more
percent of its work force during the period of contract performance.

  SEC. 3.  Section 4534 of the Government Code is amended to read:
   4534.  In evaluating proposals for contracts for services in
excess of one hundred thousand dollars ($100,000), except a contract
in which the worksite is fixed by the provisions of the contract, the
state shall award a 5-percent preference on the price submitted by
California-based companies who demonstrate and certify under penalty
of perjury that not less than 90 percent of the total labor hours
required to perform the contract shall be accomplished at an
identified worksite or worksites located in a distressed area.
  SEC. 4.  Section 4535.1 of the Government Code is amended to read:

   4535.1.  A business which requests and is given the preference
provided for in Section 4533, 4533.1, 4534, or 4534.1 by reason of
having furnished a false certification, and which by reason of that
certification has been awarded a contract to which it would not
otherwise have been entitled, shall be subject to all of the
following:
   (a) Pay to the state any difference between the contract amount
and what the state's cost would have been if the contract had been
properly awarded.
   (b) In addition to the amount specified in subdivision (a), be
assessed a penalty in an amount of not more than 10 percent of the
amount of the contract involved.
   (c) Be ineligible to directly or indirectly transact any business
with the state for a period of not less than three months and not
more than 24 months.
   Prior to the imposition of any sanction under this chapter, the
contractor or vendor shall be entitled to a public hearing and to
five days' notice of the time and place thereof.  The notice shall
state the reasons for the hearing.
  SEC. 5.  Section 4535.2 of the Government Code is amended to read:

   4535.2.  (a) The maximum preference and incentive a bidder may be
awarded pursuant to this chapter and any other provision of law shall
be 15 percent.  However, in no case shall the maximum preference and
incentive cost under this chapter exceed fifty thousand dollars
($50,000) for any bid, nor shall the combined cost of preferences and
incentives granted pursuant to this chapter and any other provision
of law exceed one hundred thousand dollars($100,000).  In those cases
where the 15-percent cumulated preference and incentive cost would
exceed the one hundred thousand dollar ($100,000) maximum preference
and incentive cost limit, the one hundred thousand dollar ($100,000)
maximum preference and incentive cost limit shall apply.
   (b) Notwithstanding the provisions of this chapter, small business
bidders qualified in accordance with Section 14838 shall have
precedence over nonsmall business bidders in that the application of
any bidder preference for which nonsmall business bidders may be
eligible, including the preference contained in this chapter, shall
not result in the denial of the award to a small business bidder.
This subdivision shall apply to those cases where the small business
bidder is the lowest responsible bidder, as well as to those cases
where the small business bidder is eligible for award as the result
of application of the 5-percent small business bidder preference and
incentive.
  SEC. 8.  Section 7084 of the Government Code is amended to read:
   7084.  (a) Whenever the state prepares a solicitation for a
contract for goods in excess of one hundred thousand dollars
($100,000), except a contract in which the worksite is fixed by the
provisions of the contract, the state shall award a 5-percent
preference to California-based companies that demonstrate and certify
under penalty of perjury that of the total labor hours required to
manufacture the goods and perform the contract, at least 50 percent
of the hours shall be accomplished at an identified worksite or
worksites located in an enterprise zone.
   (b) In evaluating proposals for contracts for services in excess
of one hundred thousand dollars ($100,000), except a contract in
which the worksite is fixed by the provisions of the contract, the
state shall award a 5-percent preference on the price submitted by
California-based companies that demonstrate and certify under penalty
of perjury that not less than 90 percent of the labor hours required
to perform the contract shall be accomplished at an identified
worksite or worksites located in an enterprise zone.
   (c) Where a bidder complies with subdivision (a) or (b), the state
shall award a 1-percent preference for bidders who certify under
penalty of perjury to hire persons living within a targeted
employment area or are enterprise zone eligible employees equal to 5
to 9 percent of its work force during the period of contract
performance; a 2-percent preference for bidders who shall agree to
hire persons living within a targeted employment area or are
enterprise zone eligible employees equal to 10 to 14 percent of its
work force during the period of contract performance; a 3-percent
preference for bidders who shall agree to hire persons living within
a targeted employment area or are enterprise zone eligible employees
equal to 15 to 19 percent of its work force during the period of
contract performance; and a 4-percent preference for bidders who
shall agree to hire persons living within a targeted employment area
or are enterprise zone eligible employees equal to 20 or more percent
of its work force during the period of contract performance.
   (d) The maximum preference a bidder may be awarded pursuant to
this chapter and any other provision of law shall be 15 percent.
However, in no case shall the maximum preference cost under this
section exceed fifty thousand dollars ($50,000) for any bid, nor
shall the combined cost of preferences granted pursuant to this
section and any other provision of law exceed one hundred thousand
dollars ($100,000).  In those cases where the 15-percent cumulated
preference cost would exceed the one hundred thousand dollar
($100,000) maximum preference cost limit, the one hundred thousand
dollar ($100,000) maximum preference cost limit shall apply.
   (e) Notwithstanding any other provision of this section, small
business bidders qualified in accordance with Section 14838 shall
have precedence over nonsmall business bidders in that the
application of any bidder preference for which nonsmall business
bidders may be eligible, including the preference contained in this
section, shall not result in the denial of the award to a small
business bidder.  This subdivision shall apply to those cases where
the small business bidder is the lowest responsible bidder, as well
as to those cases where the small business bidder is eligible for
award as the result of application of the 5-percent small business
bidder incentive.
   (f) All state contracts issued to bidders who are awarded
preferences under this section shall contain conditions to ensure
that the contractor performs the contract at the location specified
and meets any commitment to employ persons with high risk of
unemployment.
   (g) (1) A business that requests and is given the preference
provided for in subdivision (a) or (b) by reason of having furnished
a false certification, and that by reason of this certification has
been awarded a contract to which it would not otherwise have been
entitled, shall be subject to all of the following:
   (A) Pay to the state any difference between the contract amount
and what the state's cost would have been if the contract had been
properly awarded.
   (B) In addition to the amount specified in subparagraph (A), be
assessed a penalty in an amount of not more than 10 percent of the
amount of the contract involved.
   (C) Be ineligible to directly or indirectly transact any business
with the state for a period of not less than three months and not
more than 24 months.
   (2) Prior to the imposition of any sanction under this
subdivision, the business shall be entitled to a public hearing and
to five days' notice of the time and place thereof.  The notice shall
state the reasons for the hearing.
   (h) In each instance in this section an enterprise zone shall also
mean any enterprise zone or program area previously authorized under
any other provision of state law.
   (i) As used in this section, "enterprise zone eligible employees"
means employees who meet any of the requirements of clause (iv) of
subparagraph (A) of paragraph (4) of subdivision (b) of Section
17053.74, or clause (iv) of subparagraph (A) of paragraph (4) of
subdivision (b) of Section 23622.5 of the Revenue and Taxation Code.

  SEC. 9.  Section 7084 of the Government Code is amended to read:
   7084.  (a) Whenever the state prepares a solicitation for a
contract for goods in excess of one hundred thousand dollars
($100,000), except a contract in which the worksite is fixed by the
provisions of the contract, the state shall award a 5-percent
preference to California-based companies that demonstrate and certify
under penalty of perjury that of the total labor hours required to
manufacture the goods and perform the contract, at least 50 percent
of the hours shall be accomplished at an identified worksite or
worksites located in an enterprise zone.
   (b) In evaluating proposals for contracts for services in excess
of one hundred thousand dollars ($100,000), except a contract in
which the worksite is fixed by the provisions of the contract, the
state shall award a 5-percent preference on the price submitted by
California-based companies that demonstrate and certify under penalty
of perjury that not less than 90 percent of the labor hours required
to perform the contract shall be accomplished at an identified
worksite or worksites located in an enterprise zone.
   (c) Where a bidder complies with subdivision (a) or (b), the state
shall award a 1-percent preference for bidders who certify under
penalty of perjury to hire persons living within a targeted
employment area or are enterprise zone eligible employees equal to 5
to 9 percent of its work force during the period of contract
performance; a 2-percent preference for bidders who shall agree to
hire persons living within a targeted employment area or are
enterprise zone eligible employees equal to 10 to 14 percent of its
work force during the period of contract performance; a 3-percent
preference for bidders who shall agree to hire persons living within
a targeted employment area or are enterprise zone eligible employees
equal to 15 to 19 percent of its work force during the period of
contract performance; and a 4-percent preference for bidders who
shall agree to hire persons living within a targeted employment area
or are enterprise zone eligible employees equal to 20 or more percent
of its work force during the period of contract performance.
   (d) The maximum preference a bidder may be awarded pursuant to
this chapter and any other provision of law shall be 15 percent.
However, in no case shall the maximum preference cost under this
section exceed fifty thousand dollars ($50,000) for any bid, nor
shall the combined cost of preferences granted pursuant to this
section and any other provision of law exceed one hundred thousand
dollars ($100,000).  In those cases where the 15-percent cumulated
preference cost would exceed the one hundred thousand dollar
($100,000) maximum preference cost limit, the one hundred thousand
dollar ($100,000) maximum preference cost limit shall apply.
   (e) Notwithstanding any other provision of this section, small
business bidders qualified in accordance with Section 14838 shall
have precedence over nonsmall business bidders in that the
application of any bidder preference for which nonsmall business
bidders may be eligible, including the preference contained in this
section, shall not result in the denial of the award to a small
business bidder.  This subdivision shall apply to those cases where
the small business bidder is the lowest responsible bidder, as well
as to those cases where the small business bidder is eligible for
award as the result of application of the 5-percent small business
bidder incentive.
   (f) All state contracts issued to bidders who are awarded
preferences under this section shall contain conditions to ensure
that the contractor performs the contract at the location specified
and meets any commitment to employ persons with high risk of
unemployment.
   (g) (1) A business that requests and is given the preference
provided for in subdivision (a), (b), or (c) by reason of having
furnished a false certification, and that by reason of this
certification has been awarded a contract to which it would not
otherwise have been entitled, shall be subject to all of the
following:
   (A) Pay to the state any difference between the contract amount
and what the state's cost would have been if the contract had been
properly awarded.
   (B) In addition to the amount specified in subparagraph (A), be
assessed a penalty in an amount of not more than 10 percent of the
amount of the contract involved.
   (C) Be ineligible to directly or indirectly transact any business
with the state for a period of not less than three months and not
more than 24 months.
   (2) Prior to the imposition of any sanction under this
subdivision, the business shall be entitled to a public hearing and
to five days' notice of the time and place thereof.  The notice shall
state the reasons for the hearing.
   (h) In each instance in this section an enterprise zone shall also
mean any enterprise zone or program area previously authorized under
any other provision of state law.
   (i) As used in this section, "enterprise zone eligible employees"
means employees who meet any of the requirements of clause (iv) of
subparagraph (A) of paragraph (4) of subdivision (b) of Section
17053.74, or clause (iv) of subparagraph (A) of paragraph (4) of
subdivision (b) of Section 23622.5 of the Revenue and Taxation Code.

  SEC. 10.  Section 14838.5 is added to the Government Code, to read:

   14838.5.  (a) Notwithstanding the advertising and bidding
requirements of Chapter 6 (commencing with Section 14825) and Section
10302, a state agency may award a contract for the acquisition of
goods, services, or information technology that has an estimated
value of greater than two thousand five hundred dollars ($2,500), but
less than fifty thousand dollars ($50,000), to a small business, as
long as the agency obtains price quotations from two or more small
businesses.
   (b) In carrying out subdivision (a), state agencies shall consider
a responsive offer timely received from a responsible small
business.
   (c) If the estimated cost to the state is less than two thousand
five hundred dollars ($2,500) and for the acquisition of goods,
services, or information technology, or a greater amount as
administratively established by the director, a state agency shall
obtain at least two price quotations from responsible suppliers
whenever there is reason to believe a response from a single source
is not a fair and reasonable price.
  SEC. 11.  Section 14840 of the Government Code is amended to read:

   14840.  The department shall submit an annual report to the
Legislature no later than January 1 of each year commencing in 1975
containing the following information:
   (a) Upon request, an up-to-date list of eligible small business
bidders by general procurement and construction contract categories,
noting company names and addresses.
   (b) By general procurement and construction contract categories,
statistics comparing the small business contract participation
dollars to the total state contract participation dollars.
   (c) By awarding department and general procurement and
construction categories, statistics comparing the small business
contract participation dollars to the total state contract
participation dollars.
   (d) Any recommendations for changes in statutes or state policies
to improve opportunities for small business.
   (e) A statistical summary of small businesses certified for state
contracting by the number of employees at the business for each of
the following categories:  0-25, 26-50, 51-75, and 76-100.
   (f) To the extent feasible, beginning in the year 2002, the number
of contracts awarded by the department in the categories specified
in subdivision (e).
  SEC. 12.  Section 12102 of the Public Contract Code is amended to
read:
   12102.  The Department of Information Technology and the
Department of General Services shall maintain, in the State
Administrative Manual, policies and procedures governing the
acquisition and disposal of electronic data processing and
telecommunications goods and services.
   (a) Acquisition of electronic data processing and
telecommunications goods and services shall be conducted through
competitive means, except when the Director of General Services
determines that (1) the goods and services proposed for acquisition
are the only goods and services which can meet the state's need, or
(2) the goods and services are needed in cases of emergency where
immediate acquisition is necessary for the protection of the public
health, welfare, or safety.  The acquisition mode to be used and the
procedure to be followed shall be approved by the Director of General
Services.  The Department of General Services shall maintain, in the
State Administrative Manual, appropriate criteria and procedures to
ensure compliance with the intent of this chapter.  These criteria
and procedures shall include acquisition and contracting guidelines
to be followed by state agencies with respect to the acquisition of
electronic data processing and telecommunications goods and services.
  These guidelines may be in the form of standard formats or model
formats.
   (b) Contract awards for all large-scale systems integration
projects shall be based on the proposal that provides the most
value-effective solution to the state's requirements, as determined
by the evaluation criteria contained in the solicitation document.
Evaluation criteria for procurement of electronic data processing and
telecommunications services, including systems integration, shall
provide for the selection of a vendor on an objective basis not
limited to cost alone.
   (1) The Department of General Services shall invite active
participation, review, advice, comment, and assistance from the
private sector and state agencies in developing procedures to
streamline and to make the acquisition process more efficient,
including but not limited to consideration of comprehensive
statements in the request for proposals of the business needs and
governmental functions, access to studies, planning documents,
feasibility study reports and draft requests for proposals applicable
to procurements, minimizing the time and cost of the proposal
submittal and selection process, and development of a procedure for
submission and evaluation of a single rather than multiple proposals.

   (2) Solicitations for acquisitions based on evaluation criteria
other than cost alone shall provide that sealed cost proposals shall
be submitted and that they shall be opened at a time and place
designated in the solicitation for bids and proposals.  Evaluation of
all criteria, other than cost, shall be completed prior to the time
designated for public opening of cost proposals, and the results of
the completed evaluation shall be published immediately before the
opening of cost proposals.  The state's contact person for
administration of the procurement shall be identified in the
solicitation for bids and proposals, and that person shall execute a
certificate under penalty of perjury, which shall be made a permanent
part of the official procurement file, that all cost proposals
received by the state have been maintained sealed and under lock and
key until the time cost proposals are opened.
   (c) The acquisition of hardware purchased independently of a
system integration project may be made on the basis of lowest cost
meeting all other specifications.
   (d) The 5 percent small business preference provided for in
Chapter 6.5 (commencing with Section 14835) of Part 5.5 of Division 3
of Title 2 of the Government Code and the regulations implementing
that chapter shall be accorded to all qualifying small businesses.
   (e) For all transactions formally advertised, evaluation of
bidders' proposals for the purpose of determining contract award for
electronic data processing and telecommunications goods shall provide
for consideration of a bidder's best financing alternatives,
including lease or purchase alternatives, if any bidder so requests,
not less than 30 days prior to the date of final bid submission,
unless the acquiring agency can prove to the satisfaction of the
Department of General Services that a particular financing
alternative should not be so considered.
   (f) Acquisition authority may be delegated by the Director of
General Services to any state agency which has been determined by the
Department of General Services to be capable of effective use of
that authority.  This authority may be limited by the Department of
General Services.  Acquisitions conducted under delegated authority
shall be reviewed by the Department of General Services on a
selective basis.
   (g) To the extent practical, the solicitation documents shall
provide for a contract to be written to enable acquisition of
additional items to avoid essentially redundant acquisition processes
when it can be determined that it is economical to do so.
   Further, it is the intent of the Legislature that, if a state
electronic data processing advisory committee or a state
telecommunications advisory committee is established by the Governor,
the Director of Information Technology, or the Director of General
Services, the policies and procedures developed by the Director of
Information Technology and the Director of General Services in
accordance with this chapter shall be submitted to that committee,
including vendor representatives, for review and comment, and that
the comment be considered by both departments prior to the adoption
of any policy or procedure.  It is also the intent of the Legislature
that this section shall apply to the Department of General Services
Information Technology Customer Council.
   (h) Protest procedures shall be developed to provide bidders an
opportunity to protest any formal, competitive acquisition conducted
in accordance with this chapter.  The procedures shall provide that
protests must be filed no later than five working days after the
issuance of an intent to award.  Authority to protest may be limited
to participating bidders.  The Director of General Services, or a
person designated by the director, may consider and decide on initial
protests.  A decision regarding an initial protest shall be final.
If prior to the last day to protest, any vendor who has submitted an
offer files a protest with the department against the awarding of the
contract or purchase order on the ground that his or her bid or
proposal should have been selected in accordance with the selection
criteria in the solicitation document, the contract or purchase order
shall not be awarded until either the protest has been withdrawn or
the State Board of Control has made a final decision as to the action
to be taken relating to the protest.  Within 10 calendar days after
filing a protest, the protesting vendor shall file with the State
Board of Control a full and complete written statement specifying in
detail the grounds of the protest and the facts in support thereof.
   (i) Electronic data processing and telecommunications goods which
have been determined to be surplus to state needs shall be disposed
of in a manner which will best serve the interests of the state.
Procedures governing the disposal of surplus goods may include
auction or transfer to local governmental entities.
   (j) A vendor may be excluded from bid processes if the vendor's
performance with respect to a previously awarded contract has been
unsatisfactory, as determined by the state in accordance with
established procedures which shall be maintained in the State
Administrative Manual.  This exclusion may not exceed 360 calendar
days for any one determination of unsatisfactory performance.  Any
vendor excluded in accordance with this section shall be reinstated
as a qualified vendor at any time during this 360-day period, upon
demonstrating to the department's satisfaction that the problems
which resulted in the vendor's exclusion have been corrected.
  SEC. 13.  No reimbursement is required by this act pursuant to
Section 6 of Article XIIIB of the California Constitution because the
only costs that may be incurred by a local agency or school district
will be incurred because this act creates a new crime or infraction,
eliminates a crime or infraction, or changes the penalty for a crime
or infraction, within the meaning of Section 17556 of the Government
Code, or changes the definition of a crime within the meaning of
Section 6 of Article XIIIB of the California Constitution.

Notwithstanding Section 17580 of the Government Code, unless
otherwise specified, the provisions of this act shall become
operative on the same date that the act takes effect pursuant to the
California Constitution.
  SEC. 14.  Section 8 of this act shall become effective only if AB 3
and this act are chaptered and become operative on or before January
1, 1999, in which case Section 9 of this act shall not become
operative.