BILL ANALYSIS
AB 756
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Date of Hearing: April 21, 2009
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Mary Hayashi, Chair
AB 756 (Eng) - As Amended: March 31, 2009
SUBJECT : Public contracts: reports.
SUMMARY : Requires state agencies to annually prepare a report,
available on each agency's Internet Web site listing personal
services and consulting services contracts entered into in the
previous fiscal year (FY) and to electronically submit that
report to the Department of Finance (DOF) and the Legislature.
Specifically, this bill :
1)Requires each state agency to prepare an annual report on
personal services and consulting services contracts entered
into during the previous FY that includes all of the
following:
a) The name and identification number of each contractor;
b) The statutory basis for the authorization of each
contract, including, if relevant, any applicable condition
permitting personal services contracts provided by current
law, as specified;
c) The duration of each contract;
d) The number of amendments to each contract and the number
of renewals of each contract, where applicable;
e) The total amount of the contract price over the duration
of the contract, including all known amendments to the
contract, the total amount paid by the state agency during
the most recently completed fiscal year, and the number,
cost, bill rate, and staffing levels associated with each
type of contract employee retained during the most recently
completed fiscal year. Staffing levels shall also be
described or accounted for in personnel year or full-time
equivalent terms;
f) Costs and relevant staffing information shall be
organized and reported using the following contract
categories:
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i) Architectural, engineering, and environmental
services and consulting services;
ii) Information technology (IT) consulting
services; and,
iii) Other personal services and consulting
services contracts shall be organized and reported as
follows:
Professional,
administrative, financial, and staff
services and consulting contracts;
Legal services and
consulting contracts;
Education and information
science services and consulting contracts;
Clerical and office
services and consulting contracts;
Security services and
consulting contracts;
Scientific and technical
services and consulting contracts;
Facility, equipment, and
landscape maintenance services and
consulting contracts;
Printing and publishing
services and consulting contracts;
Property and food services,
including janitorial services, and
consulting contracts;
Medical and health services
and consulting contracts;
Psychiatric, psychological, and social welfare
services and consulting contracts; and,
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Miscellaneous.
1)Defines the following terms:
a) "Consulting services contracts" has the same meaning as
defined in current law; and,
b) "Personal services contracts" means any contract,
requisition, or purchase order, excluding public works
contracts, under which labor or personal services is a
significant, separately identifiable element.
2) Requires contractors to electronically provide staffing and
cost information for all personal services and consulting
services contracts to state agencies at the end of each FY,
and states that failure to report this information results in
the following (until that information is provided):
a) A breach of contract;
b) Ineligibility for future personal services and
consulting services contracts; and,
c) Cease of payments for ongoing contracts.
3)Requires state agencies to provide electronically provide the
annual report to the DOF and the Legislature within 60
workings days after the end of the previous FY.
4)Requires the report to be made available to the public in an
electronic format similar to that used by the agency in its
Wages and Salaries Supplement report.
5)States that the section does not apply to confidential
contracts with attorney-client privilege.
EXISTING LAW :
1)Governs contracting between state agencies and private
contractors, and sets forth requirements for the procurement
of supplies, materials, equipment, and services by state
agencies.
2)Delineates the various responsibilities of the Department of
General Services (DGS) and other state agencies in overseeing
and implementing state contracting procedures and policies.
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3)Provides that contracting is permissible to achieve cost
savings when specified conditions are met, and all efforts are
made to use civil servants to provide services.
4)Provides that contracting is permissible, after all efforts
are made to use civil servants to provide services, and when
any of the following can be met:
a) The services are exempt as defined by the State
Constitution (legislative staff and political appointees);
b) The services are for new state functions and the
legislature has specifically authorized contracting for the
services;
c) The work is of a highly technical nature and the skills
needed cannot be provided by civil servants;
d) The services are incidental to the purchase of goods;
e) The services are contracted to avoid a conflict of
interest;
f) Emergency services are being provided;
g) Legal services are provided to avoid a conflict of
interest;
h) It is unfeasible for the state to provide the services;
i) Service providers are training civil servants on an
interim basis; or,
j) Services provided are temporary, urgent, or of an
occasional nature.
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of the bill . According to the author's office, "This
measure would ensure transparency in state contracts involving
personnel by requiring departments to report monetary
expenditures and associated staffing levels related to the use
of all personal service contracts. Expenditures and staffing
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levels associated with the use of civil service workers is
routinely reported to the Legislature and is readily available
to the public through the budget process each year. The same
reporting requirements should apply for personal service and
consulting contracts.
"Currently, California is spending almost $3 million a day and
over $1 billion a year on costly
IT contracts that pay contract employees 2-3 times the amount
it would cost to employ state workers. The state has 2,345
active IT contracts worth just over $4 billion. By reducing our
dependence on IT contractors and in-sourcing just a fraction,
the state could save untold millions."
Background. According to information provided by the sponsors
of the bill, the Services Employees International Union, Local
1000 (SEIU 1000), since January 2008, the state has entered into
15,116 new contracts worth $5.5 billion. Overall, the state
spends an estimated $10.5 billion on services and consultant
contracts in a typical year or $28.7 million daily.
SEIU Local 1000 estimates that the state could save
approximately $350 million annually by utilizing state workers
to cut unnecessary and wasteful outsourcing in three areas: $100
million or more annually in IT contracts, $144-205 million or
more annually in medical registry contracts, and $50 million or
more annually in architectural and engineering contracts. SEIU
Local 1000 estimates indicate the state persists in renewing
contracts that cost from 22% to 200% more than the cost to
perform the same service using state workers.
State agencies register their contract expenditures through the
State Contract Procurement Registration System (SCPRS) operated
by the Department of General Services (DGS). SEIU Local 1000
states that the current contract recordkeeping system is
incomplete or inconsistent, making it difficult to assess
whether taxpayer funds are spent efficiently on contracts.
Currently, contracts are not organized by categories or
unsearchable by a specific field or across fiscal years. As a
result, users cannot search contracts by state agency name,
contractor name, contract number, or cross-reference contract
amendments across fiscal years.
On March 12, 2008, this committee along with the Assembly Public
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Employees, Retirement and Social Security Committee, held a
joint hearing entitled, "Use of Personal Services Contracts for
IT Services in State Government." The purpose of the hearing
was to explore and evaluate whether state agency IT personnel
service contracts obtain the best value for the state and are in
compliance with laws governing state contracts.
According to a memo provided by SPB to the committee for the
hearing, "Government Code section 19130 codifies the exceptions
to the civil service mandate recognized in various court
decisions. The purpose of SPB's review of contracts under
Government Code section 19130 is to determine whether,
consistent with Article VII and its implied civil service
mandate, state work may legally be contracted to private
entities or whether it must be performed by state employees.
"A state agency seeking to enter into a personal services
contract on a cost savings basis must submit the contract to the
SPB for review and approval prior to the contract becoming
effective. Upon receipt of the request for contact review, the
SPB will forward the contract to the affected employee
organization. The employee organization can file a challenge to
the contract within ten days of receipt of the notification by
the SPB. If the employee organization challenges the contract,
the SPB's Executive Officer will, after receipt of written
briefs from the parties, issue a decision that approves or
disapproves the contract."
According to SEIU 1000 testimony at the hearing, "The union
estimates that California could save approximately $100 million
if it significantly reduced its use of IT contracts. The state
often pays twice as much for IT contractors as it does to employ
state IT workers. The typical cost to employ an IT worker is
$98,985 per year (including all benefits and payroll taxes).
The typical cost to employ an IT contractor is $218,136 per
year. We conservatively estimate the state employs between
1,000 and 1,475 IT contractors. Filling existing IT vacancies
and eliminating the use of contractors to perform work that can
be done by state workers could save about $100 million or more
each year."
Support . According to the sponsor, "This bill would cover
various classifications where there is use of (personal service
and consulting) contracts. These include health services,
engineering, custodial services and IT. Using IT as an example
and data taken directly from the DGS SCPRS database shows that
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between 2003 and January 2009, state agencies entered into over
10,000 IT personal services and IT consulting contracts. These
current contracts are worth over $2 billion. Since the
Governor's declaration of (a) fiscal emergency on January 10,
2008, 1,833 IT consulting and personal services contracts have
been entered into for a cost of $598 million. However, even in
these times of fiscal crisis, there is little tracking of the
details of these contracts."
Related Legislation .
AB 400 (De Leon) requires the Financial Information System for
California (FISCal) to list State General Fund and federal fund
expenditures, including contracts, in the amount of $10,000 or
greater on a public Web site and to update this information
annually. This bill is currently pending in the Assembly
Appropriations Committee.
Prior Legislation
AB 2603 (Eng) would have required state agencies to prepare an
annual report for the DOF listing personal services and
consulting services contracts, entered into by the agency in the
previous fiscal year. This bill was held in the Senate
Appropriations Committee.
SB 1331 (Oropeza) of 2008 would have required the Governor to
submit with the annual State Budget a report that contains
specified information regarding current and proposed contracts
for services in the amount of $5,001 or more. This bill was
held in Senate Rules.
SB 786 (Oropeza) of 2007, is identical to SB 1331 (Oropeza) of
2008. This bill was held in the Senate Appropriations
Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
Service Employees International Union, Local 1000 (SEIU Local
1000)
Professional Engineers in California Government (PECG)
Opposition
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None on file.
Analysis Prepared by : Joanna Gin / B. & P. / (916) 319-3301