BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
1650 (Feuer)
Hearing Date: 8/2/2010 Amended: 8/2/2010
Consultant: Bob Franzoia Policy Vote: G O 7-0
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BILL SUMMARY: AB 1650 would prohibit a person that is engaged in
investment
activities in the energy sector in Iran from bidding on,
entering into or renewing a contract with a state agency for
goods or services or a contract with a local public entity for
goods or services of $1 million or more. The bill would require
a prospective bidder for those contracts, to certify, after
exercising due diligence, that it is not engaged in investment
activities in the energy sector in Iran and would impose
penalties for a person that provides a false certification.
This bill would require the awarding body to give reasonable
notice, and hearing if requested before penalties are imposed.
This bill would impose the penalties on a person that provides a
false certification but exercised due diligence, unless the
person ceases engagement. This bill would, for a pending bid or
contract proposal, or for a contract for which no false
certification was made, require the awarding body, if the
awarding body determines that a person is a person that engages
in investment activities in the energy sector in Iran, to
provide 90 days notice of its intent not to enter into or renew
a contract for goods or services with that person. This bill
would provide a person that is alleged to be engaged in
investment activities in the energy sector in Iran with an
opportunity to demonstrate it is not engaged in those
activities. This bill would become inoperative upon the date
federal authorization in Public Law 111-195 ceases.
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
New state contracting Unknown potential increased costs
forGeneral/
requirements and restrictions state goods and
servicesSpecial
State contracts oversight Unknown costs ongoing to
administer General/
a more complex contracting
process, Special
including costs to resolve
protests, delays
in contracting and rebidding
contracts;
unknown, if any, penalty
revenue
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
It is unknown how many companies might be restricted from
bidding on state contracts, whether any of those companies might
be low bid awardees, and how companies and the state will
respond to the provisions of the bill. Implementing a more
complex bid process likely will result in new costs ongoing.
The federal Comprehensive Iran Sanctions, Accountability, and
Divestment Act of 2010 (Public Law 111-195), authorizes a state
or local government to adopt and enforce measures meeting
certain requirements, to divest the assets of the state or local
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AB 1650 (Feuer)
government from, or prohibit the investment of those assets in,
any person determined to be engaged in investment activities in
Iran.
A person is engaged in investment activities in the energy
sector in Iran if any of the following is true:
- The person has an investment of $20 million or more in the
energy sector in Iran.
- The person provides oil or liquefied natural gas tankers, or
products used to construct or maintain pipelines used to
transport oil or liquefied natural gas, for the energy sector in
Iran.
- The person is a financial institution that extends $20 million
or more in credit to another person, for 45 days or more, if
that person will use the credit to invest in the energy sector
in Iran.
A person submitting a false certification would be subject to a
civil penalty, termination of an existing contract with the
awarding body at the option of the awarding body and
ineligibility to bid on a contract for a period of three years.
The bill provides for combinations of these penalties where a
person submitted false certification but exercised due
diligence. The awarding body shall report to the Attorney
General the person determined to have submitted a false
certification and the Attorney General shall determine whether
to bring a civil action against the person to collect the
specified penalty in an amount that is equal to the greater of
$250,000 or twice the amount of the contract for which the false
certification was made. Penalty revenue could be paid to the
state or to local governments.
Staff notes AB 498 (Hernandez) Chapter 272/2008 requires a
company that bids or submits a proposal for a contract for goods
and services with a state agency to self- certify that it is not
a scrutinized company engaged in specified activities in Sudan.
Also, AB 221 (Anderson) Chapter 671/2007 requires CalPERS and
CalSTRS to sell or transfer any investments in a company with
business operations in Iran.