BILL ANALYSIS
AB 309
Page 1
Date of Hearing: April 28, 2009
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Mary Hayashi, Chair
AB 309 (Price) - As Amended: April 23, 2009
SUBJECT : Public contracts: small business participation.
SUMMARY : Requires a 25% small business participation goal for
state contracts and requires the Department of General Services
(DGS) to monitor progress in meeting this goal. Specifically,
this bill :
1)Requires all state agencies, departments, boards, and
commissions to establish and report on their progress in
meeting or exceeding the 25% small business participation goal
established by Executive Order (EO) D-37-01 and EO S-02-06.
2)Requires state entities that fail to meet the small business
participation goal to submit an annual implementation and
corrective action plan to DGS until the goal is met.
3)Includes the University of California (UC), California State
University (CSU), and the California Community Colleges (CCC)
in the 25% small business participation goals when state money
is used.
4)Requires DGS to monitor the progress of meeting the 25% small
business participation goal.
5)Requires that the Office of the Small Business Advocate (OSBA)
receive the same progress report information as state
entities. Directs DGS and the OSBA to collaboratively work to
review each implementation and corrective plan and explore
ways to work with agencies that have not met their performance
goal.
6)Requires, whenever possible, that state entities to use the
streamlined procurement process for contracting with small
businesses for goods and services in contract amounts under
$100,000 and for any construction contract exceeding $120,000.
7)Requires DGS to actively promote small business certification
and help small businesses market their products, goods, and
services to the state.
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8)Requires DGS to work with OSBA to help small businesses secure
financing.
EXISTING LAW :
1)Requires DGS to administer the state Small Business
Procurement and Contract Act (Small Business Act), including
a small business certification process and a streamlined
procurement process for state contracts under $100,000 that is
exempt from advertising, bidding, and protest provisions in
the State Contract Act.
2)Declares that small businesses and microbusinesses receive a
fair portion of the total purchases and contracts or
subcontracts for state goods, services, information
technology, and construction.
3)Establishes a 25% small business participation goal for all
contracts financed with the proceeds of the
infrastructure-related bond acts of 2006.
4)Establishes bid preferences for certified small businesses and
microbusinesses for the award of state procurement contracts
of at least 5% of solicitations made either on the basis of
lowest responsible dollar bid or on the basis of highest
score, with a single bid preference limit of $50,000.
Non-small businesses that subcontract at least 25% of their
contracts with certified small businesses also qualify for the
small business bidders' preference.
5)Requires each state agency to consolidate its existing staff
functions that relate to contract opportunities for small
businesses into a single point of contract for small
businesses and designate a small business advocate as a
liaison to small business suppliers.
6)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 previous three years.
FISCAL EFFECT : Unknown
COMMENTS :
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Purpose of the bill . According to the author's office, "This
bill seeks to codify Executive Order S-02-06, which establishes
participatory goals for state certified small businesses. The
State consistently struggles to achieve the 25% small business
and 3% Disabled Veteran Business Enterprise (DVBE) goals. As
the state continues to award contracts funded through the 2006
infrastructure bonds and prepare for projects to be funded from
the recently enacted American Recovery and Reinvestment Act, it
is important to ensure that contracting officials have the tools
they need to promote robust small business and DVBE
participation on those projects."
Background . The Small Business Act, administered through DGS,
was established 30 years ago to grant a small business
preference within the state's procurement process. In 1989, a
DVBE component was added to state procurement practices.
Current law requires DGS to report the participation levels of
DVBEs and businesses that include the owner's race, ethnicity,
and gender information in statewide contracts.
EO S-02-06 requires all state agencies, departments, boards and
commissions to achieve a goal of 25% small business
participation in state procurements and contracts reaffirms the
Administration's commitment to meet or exceed this goal through
the coordinated efforts of all levels of State government.
Since 2001, the Governor has issued several EOs specifying a 25%
participation goal for small businesses 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 SBA 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 participation goal for contracts related to
revenues expended from the 2006 infrastructure bonds.
Notwithstanding the longstanding existence of the SBA, statutory
upgrades, and EOs, the state's success in obtaining small
business and DVBE participation goals in state procurement
contracts has been inconsistent. Since small business
participation targets were established in 2001, DGS has achieved
the 25% participation goal only twice.
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In 2009, the federal government enacted a $787 billion American
Recovery and Reinvestment Act that includes over $3 billion in
funding for California infrastructure projects. 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.
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.
Support . According to the sponsor, this bill "increases
contracting opportunities for certified California small
businesses. AB 309 mandates that state agencies achieve a goal
of 25% small business participation in procurement and
contracts, and requires agencies that do not meet that threshold
to develop a corrective action plan for submission to the
Governor's Office of the Small Business Advocate.
"Under Governor Arnold Schwarzenegger's Executive Order S-02-06,
state agencies have been required to meet this 25% goal. In
response, state agencies achieved a small and DVBE participation
rate of 28.3% in 2007. Maintaining a strong small business
participation requirement promotes competition that helps
control costs and ensures state agencies receive a good deal on
state contracts. AB 309 ensures that progress on small business
participation does not end with changes in administrations."
Related Legislation . AB 31 (Price) makes several key changes to
state procurement procedures, including increasing the maximum
contract threshold amount for awards to small business and DVBE,
from $100,000 to $250,000. This bill also requires contractors
to include small business or DVBE participation in reporting
requirements. This bill is pending in the Assembly
Appropriations Committee.
AB 926 (Ruskin) requires state contracting opportunities to
state that using a "loss leader" is prohibited. This bill is
pending in the Assembly Business and Professions Committee.
SB 356 (Wright) requires an agency to consult with affected
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persons and businesses when considering regulations if the
proposal is large or complex. This bill is pending in the
Senate Business, Professions and Economic Development Committee.
SB 642 (Denham) 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. This bill also requires contractors to include small
business or DVBE participation in reporting requirements. This
bill is pending in the Senate Governmental Organization
Committee.
Prior Legislation . AB 1942 (Ruskin) of 2008 would have
increased penalties for persons engaging in fraudulent
activities relating to the Small Business Act, including DVBEs.
The Governor vetoed a substantial number of bills that year with
the same message that, due to the delay in passing the 2008-09
State Budget, he would only sign bills that were "the highest
priority for California. AB 1942 was vetoed for this reason.
AB 2773 (Price) of 2008 would have 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. Further, the
bill also would have required contractors to include small
business or DVBE participation in reporting requirements. This
bill was held in the Senate Appropriations Committee.
AB 761 (Coto), Chapter 611, Statutes of 2007, 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.
SB 115 (Florez), Chapter 451, Statutes of 2005, made various
changes to the DVBE Program, and required DGS to establish a
state agency-wide mandatory DVBE participation incentive. This
bill required the DGS Small Business Advocate to provide
specified services to small businesses and certified DVBEs.
This bill also required DGS to adopt a streamlined reporting
procedure for state agencies to use in reporting their DVBE
participation to the Department of Veterans Affairs.
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REGISTERED SUPPORT / OPPOSITION :
Support
National Federation of Independent Business California (NFIB
California) (sponsor)
Opposition
None on file.
Analysis Prepared by : Joanna Gin / B. & P. / (916) 319-3301