BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
31 (Price)
Hearing Date: 7/13/2009 Amended: As Introduced
Consultant: Bob Franzoia Policy Vote: G O 10-0
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BILL SUMMARY: AB 31 would increase the maximum amount of a
contract for goods, services, or information technology to a
certified small business (CSB) from $100,000 to $250,000 without
complying with specified competitive bidding requirements. This
bill would require the contractor, upon completion of a public
contract for which a commitment to achieve CSB or disabled
veteran business enterprise (DVBE) participation goals was made,
to report the actual percentage of CSB or DVBE participation
that was achieved.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
Increase in optional certified Unknown, potentially
significant increase General/
small business contract bid in contract costs; unknown,
but not off- Special/
amount setting administrative savings from
ex-Bond
panded use of bid option
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STAFF COMMENTS: This bill may meet the criteria for referral to
the Suspense File.
Under current law, state agencies are permitted to award a
contract for goods, services, or information technology with a
value of $5,000 to $100,000, and up to $149,000 for construction
contracts, to a CSB, including micro businesses and DVBEs,
without complying with specified competitive bidding
requirements.
Costs for these optional contracts likely will be higher, as the
competitive pressure would be reduced if an awarding department
solicited only two CSBs or two DVBEs, rather than allowing all
potential vendors, including non-CSB low bidders, to bid on the
contracts. Because this option is faster and administratively
simpler, increased costs may be offset by an unknown amount from
a reduction in administrative workload associated with reduced
advertising and avoiding more complex bidding procedures.
The Department of General Services (DGS) indicates that in
2007-08, there were 853 contracts between $100,000 and $250,000
for a combined value of $130,855,711. (In 2006-07, there were
872 such contracts for a combined value of $135,520,403.)
If one percent of the total amount of contracts awarded in
2007-08 was awarded to CSBs and not potential low bidders,
contract costs would have increased by $1,308, 557. It is
unlikely administrative savings would have fully offset these
costs. DGS estimates $13,000,000 (ten percent) of the $130
million in contracts would be bid using this option. If one
percent under that estimate had been awarded to CSBs and not
potential low bidders, contract costs would have increased by
$130,000. Administrative savings would be reduced accordingly.
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AB 31 (Price)
This bill is designed to increase the number of CSBs and DVBEs
that participate in the state's contract procurement process.
By making it easier for CSBs and DVBEs to compete for these
contracts DGS hopes to increase the pool of available
contractors. At this time, it does not appear there is
information which may indicate that increasing this bid
threshold, and by what amount, will result in savings.
Preliminary information indicates this contracting option is
used in approximately eight percent of contracts between $5,000
and $100,000 and, as noted above, is anticipated to increase to
approximately ten percent of contracts between $100,000 and
$250,000. Whether the increase in the bid threshold will
increase CSB participation, without increasing contract costs
because potential non-CSB low bidders will be excluded, will
depend greatly on whether state agencies perform their due
diligence of market research to determine if this option is in
the state's best interest. If there are numerous non-CSBs
providing a product or service, state agencies should include
them in the bid. Presumably, if an agency uses this option and
the bids appear high, that agency will switch to a formal bid
procedure, adding an estimated one week to the process, but
allowing participation by all businesses.