BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Senator Ellen M. Corbett, Chair
2009-2010 Regular Session
AB 20
Assemblymember Solorio
As Amended May 26, 2009
Hearing Date: June 23, 2009
Education Code
GMO:jd
SUBJECT
Contracts between the State and the University of California
and between the State and the California State University
DESCRIPTION
This bill would require the Department of General Services (DGS)
and the California State University (CSU) to negotiate and
establish by July 1, 2010, a model contract with standard
contract provisions, as specified, applicable to all state-CSU
contracts. It would urge the University of California (UC) to
also establish a similar model contract by July 1, 2010. The
standard contract provisions so developed would be used for all
contracts between the state and the CSU and between the state
and the UC unless the contracting parties determine that a
specific standard provision would be inappropriate for use in a
particular contract.
BACKGROUND
This bill is virtually identical to AB 3033 (Laird, 2008), which
was vetoed, along with many other bills deemed not to be of
"highest priority" by the Governor, last session.
According to the author, the current system of negotiating and
executing contracts between UC and the state is too slow and
lengthy and, therefore, too expensive. In 2004-05, UC entered
into 1,100 contracts with 72 different state agencies. In
2006-07, UC entered into 1,266 contracts with 102 different
state agencies. Each of these contracts, apparently, were
individually developed and drafted by separate groups of
attorneys and other personnel. According to UC, "the federal
(more)
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government utilizes a simplified and streamlined approach by
issuing grants and contracts under predetermined and
mutually agreeable terms and conditions, as set forth under
the federal policy and regulations" which expedites the process
resulting in significant cost savings.
CHANGES TO EXISTING LAW
Existing law does not prescribe any standardized format,
conditions, or verbiage in contracts negotiated between the
state and the University of California or the California State
University.
This bill would require the Department of General Services,
acting for the state, and the California State University to
create model provisions to be included in standard contracts
between the state and the CSU, including provisions addressing
the following areas:
(1) Liability
(2) Intellectual property
(3) The right to undertake additional research
(4) The right to publish
(5) Hiring and other personnel-related matters
(6) Invoicing
(7) Payments
(8) Dispute resolution
(9) Travel
(10) Termination
(11) Administrative overhead and indirect costs
The model contract between the DGS and the CSU would be
negotiated and established by July 1, 2010.
This bill would urge the Regents of the University of California
to also enter into negotiations with the DGS and establish a
model contract applicable to the UC by July 1, 2010.
This bill would require the DGS to seek the active participation
of state agencies and departments that have contracts with the
UC or CSU in developing the standard contract, and the DGS and
both universities would be allowed to revise the standard
contracts in consultation with those state agencies and
departments.
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The bill would then require the use of the model contract
provisions in contracts between the state and the CSU and
between the state and the UC, unless both contracting parties
mutually determine that a specified standard contract provision
is inappropriate for a particular contract.
COMMENT
1. Stated need for the bill
The author states:
Currently, State agencies do not use standardized language in
their agreements with the California State University (CSU)
and the University of California (UC). All State programs
have their own extensive documentation requirements, which are
time-consuming and costly for UC to prepare and for agencies
to review. Unlike the pre-determined and mutually agreeable
terms that expedite the federal contract process, both UC and
the State Agencies spend weeks and months individually
negotiating the terms of each agreement.
The enactment of AB 20 will streamline the contracting process
between CSU and UC and the State Agencies while reducing the
costs and time associated with negotiating standard
governmental agreements. AB 20 will also expedite CSU's and
UC's ability to conduct research for the State. ?
AB 20 seeks to address the lack of standardized contract
provisions in agreements entered between the CSU and UC and
the State. The process would be similar to the agreements
entered by UC and the federal government as dictated by the
Federal Demonstration Project. State contracting costs UC
three times as much as the federal process for one tenth of
the dollar amount of a contract. These high costs result from
non-uniformity of contract terms, non-uniform and complex
financial accounting/invoicing requirements, and the lack of
harmonization with relatively uniform federal contracting
terms.
AB 20 (Solorio)
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2. Some contract provisions will be standardized
Both the UC and the CSU are in agreement that each of them
spends excessive amounts of time, effort, and money negotiating
contracts with the state, even where some of the provisions of
those contracts could be reduced to boilerplate language for the
parties. According to the bill's findings and declarations, the
drafting of many of the 2,500 contracts in 2006-2007 alone took
six months to one year, and in many cases, because the
universities are primarily funded by the state ($6 billion from
the General Fund each year), the state pays for both sides of
negotiations. This, the author states, must be curtailed.
The UC is keen on reducing these costs, especially in light of
the current budget crisis. It cites the Federal Demonstration
Project that established standardized contract terms between the
federal government and universities across the nation, and touts
the resulting savings in legal costs and expedited commencement
of contracted research work. The UC, which entered more than
1,383 new contracts or amendments to contracts totaling $421
million with more than 70 state agencies in 2007-08, also states
that "it is not uncommon for a State agency to insist upon
renegotiating an identical contract year after year."
AB 20 intends to streamline the contracting process between
these two university systems and state agencies. Both
universities and the state Department of General Services would
be required, by July 1, 2010, to establish standardized
provisions for contracts involving these parties, including
those that address liability, intellectual property, rights to
undertake additional research, rights to publish, invoicing,
payments, dispute resolution, travel, and termination, among
others.
Because the list of possible standardized provisions is not
exhaustive, the parties will be free, under AB 20, to include
other relevant provisions that may be standardized depending on
the nature of the contract (services, research, etc), the
duration of the contract, the location of the services or
research to be performed, etc.
3. Standard terms may be rejected for a particular contract if
inappropriate
For maximum flexibility of use by the state and the UC or CSU,
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AB 20 would require the use of the standard provisions developed
by July 1, 2010, but also allow the parties, by mutual consent,
to not use a standardized provision for a particular contract if
it would be inappropriate to do so. This flexibility is
necessary in order to not place unreasonable constraints on the
ability of the parties to negotiate better or other terms where
possible and appropriate.
Any standardized contract provision should also be subject to
modification or rejection if the provision is inadequate for the
particular contract.
Suggested amendment :
On page 4, line 33, after "inappropriate" insert: or
inadequate
Support : University of California; California State University
Opposition : None Known
HISTORY
Source : Author
Related Pending Legislation : None Known
Prior Legislation : AB 3033 (Laird, 2008). See Background.
Prior Vote :
Assembly Higher Education Committee (Ayes 9, Noes 0)
Assembly Business and Professions Committee (Ayes 10, Noes 0)
Assembly Appropriations Committee (Ayes 16, Noes 0) (Consent)
Assembly Floor (Ayes 75, Noes 0)
Senate Education Committee (Ayes 8, Noes 0)
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