BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 467|
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THIRD READING
Bill No: SB 467
Author: Dutton (R)
Amended: As introduced
Vote: 21
SENATE GOVERNMENTAL ORG. COMMITTEE : 12-0, 4/14/09
AYES: Wright, Harman, Benoit, Calderon, Denham, Florez,
Negrete McLeod, Oropeza, Padilla, Wiggins, Wyland, Yee
NO VOTE RECORDED: Romero
SUBJECT : Public contracts: Prison Industry Authority
SOURCE : Author
DIGEST : This bill 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 without seeking an
exemption of the Prison Industry Authority mandate.
ANALYSIS : Existing law establishes the Prison Industry
Authority (PIA) and states that the purposes of the PIA are
(1) to develop and operate industrial, agricultural, and
service enterprises employing prisoners in institutions
under the jurisdiction of the Department of Corrections and
Rehabilitation, 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
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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 Department of Corrections
and Rehabilitation, thereby reducing the cost of its
operation. (Section 2801 of the Penal Code)
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. (Section 2807(a) of the Penal Code)
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. (Section 2807(b) of the
Penal Code)
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. (Section 14612 of the Government Code)
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Existing law requires state agencies to give
"California-based" small businesses, as defined, a five
percent 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 percent 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
percent for minority-owned firms, five percent for
women-owned firms, and three percent for disabled veteran
business enterprises (DVBEs). Contractors must achieve
these minimum participation goals or demonstrate that they
have made a "good faith effort" to achieve participation.
(Section 10115 of the Public Contract Code) [These
statutes have essentially been rendered inoperative as a
result of a U.S. Ninth 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.
(Section 14838 of the Government Code)
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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 the bill . 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
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.
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)
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
ARGUMENTS IN SUPPORT : Proponents believe that this bill
strikes a reasonable balance between promoting the
interests of small businesses while maintaining economic
opportunities for the PIA. Proponents also claim that
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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.
TSM:mw 4/27/09 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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