BILL ANALYSIS
AB 31
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Date of Hearing: March 31, 2009
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT AND THE ECONOMY
V. Manuel Perez, Chair
AB 31 (Price) - As Introduced: December 1, 2009
SUBJECT : Small Business and Procurement Act
SUMMARY: Makes several key changes to state procurement
procedures for the purpose of increasing small business,
including microbusiness, and disabled veteran-owned business
enterprise (DVBE) participation rates. More specifically, the
bill :
1)Increases the maximum contract threshold amount for awards to
a small business and DVBE, under a specific streamlined
procurement process, from $100,000 to $250,000.
2)Requires contractors that made contract commitments to include
small business or DVBE participation to report at the
conclusion of the contract on the actual percent of the
contract amount that was paid to those entities.
3)Increases the minimum threshold for projects covered under the
State Contract Act from $100,000 with a base year of 1993 to
$250,000 with a base year of 2010. This effectively increases
the value of contracts not covered by the advertising,
bidding, and protest provisions under the State Contract Act.
EXISTING LAW :
1)Designates the Department of General Services (DGS) to
administer the state Small Business Procurement and Contract
Act (Small Business Act), including a streamlined procurement
process which is exempt from advertising, bidding, and protest
provisions in the State Contract Act for the acquisition of
goods, services, or information technology.
2)Defines a small business as 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 revenues for the three previous years.
3) Defines a microenterprise as a small business that has
average annual gross receipts of $250,000 or less during the
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previous three years or is a manufacturer with 25 or fewer
employees.
4)Defines a DVBE as a business entity that is at least 51% owned
or controlled by one or more disabled veterans, as specified.
5)Establishes the State Contract Act for the purpose of
governing contract practices between state agencies and
private contractors, covering, among other items, contracts
for projects with a value of over $100,000, adjusted
biennially for changes in the California Construction Index,
as specified.
FISCAL EFFECT : Unknown
COMMENTS :
1)Purpose of the bill : According to the author, AB 31 makes a
number of changes in state procurement practices to improve
the ability of the state to increase small business and DVBE
participation rates. This bill is sponsored by DGS.
In 2006, California voters approved over $40 billion in
general obligation infrastructure development bonds. The
funding provided by the bonds will be spent on improvements to
roads, highways, public transit, flood control, schools, and
affordable housing. Project funding is expected to occur over
the next 10 years, although the Governor and Legislature have
placed a priority on expediting project delivery.
In 2009, the federal government enacted a $787 billion
economic stimulus package that included over $3 billion in
funding for infrastructure. These massive public works
endeavors provide an opportunity for the state to use these
moneys to strengthen the core of California's economy by
expanding business opportunities for small contractors and
DVBEs.
2)The Small Business Act : The Small Business Act, administered
through DGS, was implemented more than 30 years ago to
establish a small business preference within the state's
procurement process that would increase the number of
contracts between the state and small businesses. In 1998, a
DVBE component was added to state procurement practices.
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Since 2001, there have been four Executive Orders (EOs)
specifying a 25% goal for small business and a 3% DVBE
participation in state procurement contracts, including EO
D-37-01 (2001), EO S-02-06 (2006), EO D-43-01(2001), and EO
S-11-06 (2006). These participation goals were codified in SB
115 (Florez), Chapter 451, Statues of 2005, which called for
DGS to set a statewide goal for DVBE contracts; and in AB 761
(Coto), Chapter 611, Statutes of 2007, which specifically
codified the 25% small business target for contracts related
to revenues expended from the 2006 infrastructure bonds.
Notwithstanding the longstanding existence of the Act and
these EOs, the state's success in obtaining small business and
DVBE participation goals in state procurement contracts has
been inconsistent.
For only the second time since the small business
participation target was established in 2001, DGS has reported
that in 2006-07 the state achieved its small business target
by awarding 28.31%, or $2.65 billion, of the value of all
contracts to small businesses. This represents a $1.3 billion
increase in contracts from 2005-06. The state did not achieve
its 3% DVBE participation goal, however, as only 2.8% of
contract dollars, $186 million, was awarded in contracts
including DVBE participation.
3)Streamlined procurement process : In order to assist agencies
in reaching state participation goals, contracting entities
are authorized to use a streamlined procurement method. This
method allows the process for awarding contracts to bypass the
advertising, bidding, and protest provisions in the State
Contract Act. Under the provisions of the Act, a contract may
be made directly with a certified small business or DVBE at a
contract price established by checking the proposed rate with
two other small businesses or DVBEs.
Contracts offered under the streamlined procurement process
are currently limited to contracts between $5,000 and
$100,000. AB 31 would increase this amount to $250,000 for
contracts for goods, services, and information technology. In
2006-07, 9,685 contracts were initiated using this streamlined
procurement process, which accounts for $211 million (7.43%)
of the total DVBE and small business contracts. The
California State University System reported using this process
for 1,620 contracts totaling $37 million in contracts.
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4)Related legislation : Below is a list of related legislation:
a) AB 761 (Coto) : This bill required each state agency
awarding contracts that are financed with proceeds from the
infrastructure bonds approved by voters in November 2006 to
establish a 25% small business participation goal for state
infrastructure construction contracts and to provide
specified assistance to small businesses bidding on state
infrastructure bond-related contracts. Status: Signed by
the Governor, Chapter 611, Statutes of 2007.
b) AB 2773 (Price): This bill increased the maximum
contract threshold amount for awards to small business,
including microbusiness and DVBEs under the streamlined
procurement process, from $100,000 to $250,000, as
specified. Further, the bill required contractors that
made contract commitments to include small business or DVBE
participation to report those final percent of the contact
actually paid to these entities. Status: Held under
submission in Senate Appropriations Committee.
c) SB 115 (Florez) : This bill made various changes to the
DVBE Program, including requiring DGS to establish a state
agency-wide mandatory DVBE participation incentive. This
bill also requires the DGS Small Business Advocate to
provide specified services to small businesses and
certified DVBEs. Additionally, this bill requires DGS to
adopt a streamlined reporting procedure for state agencies
to use in reporting their DVBE participation to the
Department of Veterans Affairs. Status: Signed by the
Governor - Chapter 451, Statutes of 2005.
d) SB 642 (Denham) : This bill increases the maximum
contract threshold amount for awards to small business,
including microbusiness and DVBEs under the streamlined
procurement process, from $100,000 to $250,000, as
specified. Further, the bill required contractors that
made contract commitments to include small business or DVBE
participation to report those final percent of the contact
actually paid to these entities. Status: Set for hearing
in Senate Governmental Organization Committee on April 28,
2009.
REGISTERED SUPPORT / OPPOSITION :
AB 31
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Support
Department of General Services (sponsor)
National Federation of Independent Businesses
Opposition
None received
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916)
319-2090