BILL ANALYSIS
AB 31
Page 1
ASSEMBLY THIRD READING
AB 31 (Price)
As Introduced December 1, 2008
Majority vote
ECONOMIC DEVELOPMENT 7-0 APPROPRIATIONS 17-0
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|Ayes:|V. Manuel Perez, Logue, |Ayes:|De Leon, Nielsen, Ammiano, |
| |Beall, | | |
| |Bill Berryhill, Block, | |Charles Calderon, Davis, |
| |Huber, Salas | |Duvall, Fuentes, Hall, |
| | | |Harkey, Miller, |
| | | |John A. Perez, Price, |
| | | |Skinner, Solorio, Audra |
| | | |Strickland, Torlakson, |
| | | |Krekorian |
|-----+--------------------------+-----+---------------------------|
| | | | |
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SUMMARY : Increases the maximum contract threshold amount for
awards to small business, including microbusiness, and disabled
veteran-owned business enterprise (DVBE) under the state's
streamlined procurement process, from $100,000 to $250,000, as
specified. 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 allocated to those entities.
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. A
microenterprise is defined as a small business that has
average annual gross receipts of $250,000 or less during the
AB 31
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previous three years or is a manufacturer with 25 or fewer
employees. A DVBE is defined as a business entity that is at
least 51% owned or controlled by one or more disabled
veterans, as specified.
3)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 : According to the Assembly Committee on
Appropriations, implementation of this bill could result in
General Fund costs of approximately $250,000 per year, largely
offset by administrative savings associated with the streamlined
process.
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. Under the streamlined procurement method
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.
This bill is sponsored by DGS.
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.
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 1989, a
disabled veteran owned business enterprise (DVBE) component
was added to state procurement practices.
AB 31
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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). Statutory advancements were also made to
strengthen the Small Business Act including SB 115 (Florez),
Chapter 451, Statutes of 2005, which required DGS to establish
a DVBE incentive program for state contracts; and 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,
statutory upgrades, and 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. 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.
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916)
319-2090
FN: 0001172