BILL ANALYSIS
AB 309
Page 1
Date of Hearing: May 20, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
AB 309 (Price) - As Amended: April 23, 2009
Policy Committee: Jobs Vote: 6 - 1
Business and Professions 11 - 0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill requires all state agencies and departments to
establish and achieve a 25% small business participation rate
for state contracts and requires the Department of General
Services (DGS) to monitor progress in meeting this rate.
Specifically, this bill:
1)Requires all state agencies and departments to establish and
achieve a 25% small business participation rate for state
contracts.
2)Requires the heads of all state agencies, departments, boards
and commissions to ensure that the state's procurement and
contract processes are administered in order to meet or exceed
the 25% small business participation goal.
3)Requires the heads of all state agencies, departments, boards,
and commissions to report on an annual basis to DGS the
statistics regarding small business annual participation.
4)Requires any agency that does not meet the 25% requirement by
the end of a fiscal year to submit an implementation and
corrective action plan to DGS within 45 days and annually
thereafter until they reach the goal.
5)Requires DGS and the SBA to undertake reasonable measures to
assist agencies in improving small business participation.
6)Requires DGS to actively promote small business certification,
help small businesses market their services, and use
innovative solutions for notifying small businesses of state
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contracting opportunities.
7)States that this legislation also applies to the California
State University, the University of California, and the
California Community Colleges. But limits the requirement to
those contracts that use state funding.
FISCAL EFFECT
1)GF costs for DGS to implement the new program, monitor
progress, develop corrective action plans, and report on
department progress would be in the range of $700,000 per
year.
2)Unknown GF costs, in excess of $500,000 for the workload
associated with departments, including the California State
University system, the University of California system, and
community colleges, preparing annual reports that include
statistics regarding small business participation and
preparing the required corrective action and implementation
plans.
3)To the extent that the 25% small business requirement
increases the number of state contracts awarded to other than
the low bidder, state contracting costs will increase. Given
the thousands of state contracts awarded annually totaling
several billion dollars, the cost impact of the bill could be
at least in the tens of millions of dollars each year.
COMMENTS
1)Purpose . According to the author, this bill codifies two
executive orders that establish a small business participation
goal for the state of 25%. The author notes that the state
has continually had a 25% small business goal for its
contracts, however departments still struggle to reach the
goal.
According to the sponsor, National Federation of Independent
Business California (NFIB California), 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
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to the Governor's Office of the Small Business Advocate.
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
disabled veteran-owned business enterprise (DVBE) component
was added to state procurement practices. In 2004, nonprofit
veteran service organizations were authorized to be certified
as a small business, including being eligible for the 5% small
business procurement incentive.
3)Bidding Preferences . Under current law, there are certain
circumstances where contractors bidding on a state contract
can have the overall cost of their bid discounted by 5% in
order to make them more competitive as a low bidder.
Preferences can currently be given for small business in
general, disabled veteran-owned business enterprises, for
small businesses in economically target areas, and for
businesses, regardless of size, located in economically
distressed areas. The maximum amount provided for each
qualifying bidding preference is $50,000 with a total bid
maximum of $100,000. This means that contractors with bids of
up to $100,000 higher than the lowest bid can be awarded the
contract if they qualify for two bidding preferences.
4)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 (Price), which is on this committee's
suspense file, would increase this contract limit 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
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contracts. The California State University System reported
using this process for 1,620 contracts totaling $37 million in
contracts.
5)Related Legislation . AB 864 (Price) requires at least 10% of
the total amount of all state contracts for infrastructure
improvements at any racetrack grounds in the state be let to
small businesses or disabled veteran business enterprises
(DVBEs). AB 864 is pending on this committee's suspense file.
Analysis Prepared by : Julie Salley-Gray / APPR. / (916)
319-2081