BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
1830 (Jones)
Hearing Date: 08/12/2010 Amended: 08/02/2010
Consultant: Mark McKenzie Policy Vote: T&H 6-2
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BILL SUMMARY: AB 1830 would require the High Speed Rail
Authority (HSRA) to provide a five percent bid preference for
train rolling stock and related equipment that are manufactured
in California when contracting for the purchase of that
equipment.
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
Bid preference unknown, potentially significant state
costs Bond*/ to the extent
contracts are not awarded to Federal**
the lowest bidder due to the preference.
Contract administrationminor one-time costs to establish bid
Bond*
preference and minor ongoing costs to
determine
whether a contractor qualifies for the
preference
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*High-Speed Passenger Train Bond Fund
** American Recovery and Reinvestment Act (ARRA) Funds
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STAFF COMMENTS: SUSPENSE FILE.
Existing state contracting laws currently allow for bidding
preferences for small business in general, disabled veteran
owned business enterprises, small businesses in economically
targeted areas, and businesses, regardless of size, located in
economically distressed areas. The maximum amount provided for
each qualifying bidding preference is $50,000, with a total
maximum preference allowance of $100,000. A contractor that
qualifies for two bidding preferences may be awarded a contract
if his or her bid is up to $100,000 greater than the lowest bid.
This bill is intended to maximize the number of California-based
jobs that will be created or sustained by contracts related to
the purchase of train rolling stock and related materials. AB
1830 would require HSRA to make every effort to purchase
high-speed train rolling stock and related equipment
manufactured in California, consistent with applicable
provisions of state and federal law. HSRA would be required to
provide a preference of five percent of the lowest bidder for
trains and equipment manufactured in California, as specified.
The total amount of funding made available for the high-speed
rail project is $11.2 billion, including $9 billion in
voter-approved bond funds, $1.85 billion in federal ARRA funds,
and $336 million in other public funds. HSRA's current estimate
for constructing Phase I of the project (Anaheim to San
Francisco) is $42.6 billion. The high speed rail project is
expected to create hundreds of thousands of direct and indirect
jobs in California.
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AB 1830 (Jones)
Preliminary estimates indicate that the total cost of rolling
stock and related equipment on the project are projected to be
10-15 percent of the overall project costs, or approximately $4
to $6 billion for the entire project. To the extent that the
bid preference in this bill results in the award of contracts to
entities who are not the lowest responsible bidder, this bill
could result in cost increases of up to five percent, or over
$200 million in total project cost increases. Staff notes,
however, that HSRA has the authority to award projects on a
"best value" basis that considers multiple factors, including
price, life-cycle costs, performance, and other intangibles.
Under these circumstances, the bid preference may translate into
a bidder receiving more points on the scoring evaluation of its
bid. If this is the case, the bill may result in contracts
being awarded to firms that aren't the "best value" based on
existing evaluation criteria. Perhaps more importantly, this
bill could have the result of creating an entry barrier for
companies that do not have a California manufacturing presence,
thereby discouraging some suppliers from submitting bids. This
reduction in competition could result in higher contract costs.
HSRA would also be required to establish a process for
determining eligibility for the preference, enforce compliance
with the preference once awarded, and provide technical
assistance. These costs are expected to be minor. HSRA is not
expected to solicit bids for rolling stock and related equipment
in the near future.
Staff notes that AB 733 (Galgiani), which was approved by the
Legislature in 2009, would have authorized HSRA to consider the
creation of jobs in California when awarding contracts or
purchasing rolling stock and equipment for the high-speed rail
project, to the extent allowable under federal and state laws.
The Governor vetoed AB 733 with the following message:
While I recognize the merits of this measure, it could
result in unnecessary additional costs and delays and may
jeopardize the success of the project in securing the
billions of dollars that are needed to construct this
project.