BILL ANALYSIS
Bill No: SB
467
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2009-2010 Regular Session
Staff Analysis
SB 467 Author: Dutton
As Introduced: February 26, 2009
Hearing Date: April 14, 2009
Consultant: Art Terzakis
SUBJECT
Prison Industry Authority
DESCRIPTION
SB 467 authorizes agencies and departments to award
contracts of less than $25,000 for goods or services by
California certified small businesses, microbusinesses, or
Disabled Veteran Business Enterprises (DVBEs) without
seeking an exemption of the Prison Industries Authority
(PIA) mandate.
EXISTING LAW
Existing law establishes the Prison Industry Authority
(PIA) and states that the purposes of the authority are:
(1) to develop and operate industrial, agricultural, and
service enterprises employing prisoners in institutions
under the jurisdiction of the Department of Corrections,
which enterprises may be located either within those
institutions or elsewhere, all as may be determined by the
PIA; (2) to create and maintain working conditions within
the enterprises as much like those which prevail in private
industry as possible, to assure prisoners employed therein
the opportunity to work productively, to earn funds, and to
acquire or improve effective work habits and occupational
skills; and, (3) to operate a work program for prisoners
which will ultimately be self-supporting by generating
sufficient funds from the sale of products and services to
pay all the expenses of the program, and one which will
provide goods and services which are or will be used by the
SB 467 (Dutton) continued
Page 2
Department of Corrections, thereby reducing the cost of its
operation. (Penal Code 2801.)
Existing law authorizes the PIA to operate industrial,
agricultural, and service enterprises which will provide
products and services needed by the state, or any political
subdivision thereof, or by the federal government, or any
department, agency, or corporation thereof, or for any
other public use. Products may be purchased by state
agencies to be offered for sale to inmates of the
department and to any other person under the care of the
state who resides in state-operated institutional
facilities. Fresh meat may be purchased by food service
operations in state-owned facilities and sold for onsite
consumption. (Penal Code 2807(a).)
Existing law further states that all things authorized to
be produced by the PIA shall be purchased by the state, or
any agency thereof, and may be purchased by any county,
city, district, or political subdivision, or any
agency thereof, or by any state agency to offer for sale to
persons residing in state-operated institutions, at the
prices fixed by the PIA. State agencies shall make maximum
utilization of these products, and shall consult with the
staff of the PIA to develop new products and adapt existing
products to meet their needs. (Penal Code 2807(b).)
Existing law provides that notwithstanding Section 2807 of
the Penal Code, the director of the Department of General
Services (DGS) may procure goods from the private sector
even though the goods may be available from the PIA, when
it is cost beneficial to do so and if the director of DGS
continues to include the PIA in soliciting quotations for
goods. (Government Code 14612.)
Existing law requires state agencies to give
"California-based" small businesses, as defined, a 5% bid
preference in contracts for construction, the procurement
of goods, or the delivery of services. Executive Order
D-37-01 established a certified small business
participation goal of 25% for state agencies, departments,
boards and commissions to achieve.
Under existing law, contracts awarded by state entities for
professional bond services, construction, and acquisition
of materials, supplies, and services are required to have
annual statewide participation goals of not less than 15%
SB 467 (Dutton) continued
Page 3
for minority-owned firms, 5% for women-owned firms, and 3%
for DVBEs. Contractors must achieve these minimum
participation goals or demonstrate that they have made a
"good faith effort" to achieve participation. (Public
Contract Code 10115) [These statutes have essentially been
rendered inoperative as a result of a U.S. 9th Circuit
Court of Appeals decision - Monterey Mechanical v. State of
California.] Unaffected by that court order are
contracting preferences for disabled veterans.
Current law requires qualified small business and
microbusiness bidders to have precedence over nonsmall
business bidders in that the application of any bidder
preference for which nonsmall business bidders may be
eligible under this provision or any other provision of law
shall not result in the denial of the award to a small
business or microbusiness bidder. In the event of a
precise tie between the low responsible bid of a
bidder meeting specifications of a small business or
microbusiness, and the low responsible bid of a bidder
meeting specifications of a DVBE owned small business or
microbusiness, the contract shall be awarded to the
disabled veteran-owned small business or microbusiness.
This provision applies if the small business or
microbusiness bidder is the lowest responsible bidder, as
well as if the small business or microbusiness bidder is
eligible for award as the result of application of the
small business and microbusiness bidder preference.
(Government Code 14838.)
BACKGROUND
What is the PIA: The PIA is an inmate work program created
in 1983 to develop profitable enterprises while helping
inmates gain marketable job skills. PIA currently employs
approximately 5,900 inmates at 22 prisons.
Purpose of SB 467: The author's office contends that the
PIA mandate drives up state costs and unnecessarily reduces
business opportunities for private companies. The author's
office points out that by reducing the impact of the PIA
mandate and setting the bidding preference for
micro-businesses at the same level as the PIA, the state
would expand the number of businesses that can compete for
small state projects, with potential savings for most bids.
The author's office notes that the state already certifies
SB 467 (Dutton) continued
Page 4
California small businesses, microbusinesses, and/or DVBEs
to provide a five percent bidding preference on applicable
state solicitations. However, the PIA mandate supersedes
this preference, resulting in increased state costs.
Additionally, the author's office indicates that by
spending state money to support the PIA instead of on small
businesses that pay taxes, the state is losing money that
would have been collected through business and sales taxes.
Arguments in Support: Proponents believe that SB 467
strikes a reasonable balance between promoting the
interests of small businesses while maintaining economic
opportunities for the PIA. Proponents also claim that
easing the mandate for state agencies to purchase from the
PIA will allow greater flexibility for state agencies to
determine which vendors meet their needs at the best price.
PRIOR/RELATED LEGISLATION
SB 1397 (Negrete McLeod) 2007-08 Session. Would have
required the Prison Industry Board, in procuring the
purchase of raw materials, component parts, and goods and
services, to comply with certain provisions of law that
give priority to small businesses and disabled veteran
business enterprises in awarding contracts. (Referred to
Senate Public Safety Committee - held in Committee at
author's request)
SUPPORT: As of April 10, 2009:
A-1 Building Maintenance & Supply Co.
ABC Ventures
Boot Barn
California Disabled Veterans Business Alliance
California Veteran Supply Inc.
Champion Chemical Co.
Consumer Specialty Products Association
Ellis Building Maintenance Company
Golden State Provisions
ISSA
Maintex, Inc.
Reliable Printing
Small Business California
Value Business Products
SB 467 (Dutton) continued
Page 5
OPPOSE: None on file as of April 10, 2009.
FISCAL COMMITTEE: Senate Appropriations Committee