BILL ANALYSIS                                                                                                                                                                                                    




                   Senate Appropriations Committee Fiscal Summary
                           Senator Christine Kehoe, Chair

                                           2494 (Blumenfield)
          
          Hearing Date:  8/2/2010         Amended: 5/28/2010
          Consultant:  Bob Franzoia       Policy Vote: G O 7-1
          _________________________________________________________________ 
          ____
          BILL SUMMARY: AB 2494 would require a state agency to  
          immediately discontinue a contract disapproved by the State  
          Personnel Board (board) unless ordered otherwise by the board.  
          This bill would prohibit the state agency from circumventing or  
          disregarding the board's action by entering into another  
          contract for the same service or to continue the services that  
          were the subject of the contract that was disapproved.  This  
          bill would require the state agency to serve notice of the  
          discontinuation of the contract to the vendor within 15 days  
          from the board's final action, and to serve a copy of the notice  
          on the board and the employee organization that filed the  
          contract challenge.
          _________________________________________________________________ 
          ____
                            Fiscal Impact (in thousands)

           Major Provisions         2010-11      2011-12       2012-13     Fund
           State Personnel Board  Unknown, likely minor costs annually  
          toGeneral/
          contract review processensure state agencies discontinue  
          contracts              Special
                                 pursuant to board directives     

          Contract disapprovals               Unknown savings or short  
          term costs       General/                                
          resulting from immediate terminations   Special
                                            of contracts
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          ____

          STAFF COMMENTS: This bill may meet the criteria for referral to  
          the Suspense File.
          
          Government Code 19130 provides that personal service contracting  
          is permissible to achieve cost savings if the contracting agency  
          clearly demonstrates that the proposed contract will result in  
          actual overall cost savings to the state taking into  










          consideration several conditions.

          Government Code 19131 provides that any state agency proposing  
          to execute a contract shall notify the board.  All organizations  
          that represent state employees who perform the type of work to  
          be contracted, and any person or organization which has filed  
          with the board, a request for notice, shall be contacted  
          immediately so they may be given a reasonable opportunity to  
          comment on the proposed contract.  Any employee organization may  
          request, within ten days of notification, the board review any  
          contract proposed or executed pursuant to the Government Code  
          noted above.

          A report by the Bureau of State Audits on the use of information  
          technology (IT) personal services and consulting contracts at  
          the Department of Health Care Services and the Department of  
          Public Health found that, over the preceding five years, the  
          board had disapproved 17 IT contracts because the departments,  
          upon formal challenge from a union, could not adequately justify  
          contracting under Government 
          Page 2
          AB 2494 (Blumenfield)

          Code 19130.  Although the union prevailed in 17 of 23 contract  
          challenges, many of the board's decisions were moot because the  
          contracts had already expired before the board rendered its  
          decision.

          The report recommended that the Legislature specify that  
          contracts disapproved by the board be terminated and require  
          state agencies to provide documentation to the board and the  
          applicable unions demonstrate to the satisfaction of the board  
          the termination of the contracts.  This bill implements that  
          recommendation.

          Generally, immediately discontinuing a contract should result in  
          savings as it is an acknowledgement by the board that that the  
          contract violated Government Code 19130 and resulted in the  
          state contracting for work that civil service employees would  
          have performed at a lower cost.  Immediately discontinuing a  
          contract could, however, result in a job not being completed,  
          requiring a greater short term expenditure of funds.  How the  
          board would enforce an action to disapprove a contract is  
          uncertain.  The board could incur legal costs when contract  
          holders contest discontinuation orders.











          It does not appear that the immediately discontinuing of a  
          contract would necessarily conflict with termination language in  
          a contract as the bill provides the board discretion such that,  
          in cases where a termination clause existed, the board could  
          honor that clause.