BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
1650 (Feuer)
Hearing Date: 8/12/2010 Amended: 8/4/2010
Consultant: Bob Franzoia Policy Vote: G O 7-0
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BILL SUMMARY: AB 1650 would, 90 days after its effective date,
prohibit a person that is engaged in investment activities 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 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, 90 days after its effective
date, 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 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 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, services and
borrowing Special
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: 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
government from, or prohibit the investment of those assets, in
any person determined
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AB 1650 (Feuer)
to be engaged in investment activities in Iran.
A person is engaged in investment activities 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, including in a person that 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.