BILL ANALYSIS
SB 967
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SENATE THIRD READING
SB 967 (Correa and DeSaulnier)
As Amended August 16, 2010
Majority vote
SENATE VOTE :23-13
BUSINESS & PROFESSIONS 7-4 APPROPRIATIONS 12-5
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|Ayes:|Hayashi, Eng, Hernandez, |Ayes:|Fuentes, Bradford, Huffman, |
| |Hill, Ma, | |Coto, Davis, De Leon, |
| |Nava, Ruskin | |Gatto, Hall, Skinner, |
| | | |Solorio, Torlakson, Torrico |
| | | | |
|-----+-------------------------+-----+----------------------------|
|Nays:|Conway, Niello, Smyth, |Nays:|Conway, Harkey, Miller, |
| |Nestande | |Nielsen, Norby |
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SUMMARY : Requires a 5% bid preference be provided on state
contracts for goods and services exceeding $1 million, including
contracts funded by the federal American Recovery and Reinvestment
Act (ARRA) of 2009, to contractors who substantiate that 90% of
their employees performing work on the contract are California
residents, by July 1, 2011. Specifically, this bill :
1)Requires, by July 1, 2011, any state agency that accepts bids or
proposals for goods or services exceeding $1 million, including
ARRA-funded contracts, shall provide a 5% preference of the bid
price or quotation to a business that directly provides the
goods or services and certifies that at least 90% of their
employees performing work on the contract are California
residents. The preference shall be provided as follows:
a) For contracts awarded to the lowest responsible bidder,
the bid preference shall be 5% of the lowest responsible
bidder, and:
b) For contracts awarded to the highest scored bidder, the
bid preference shall be 5% of the total score of the highest
responsible bidder.
2)Requires a business to submit all the necessary substantiating
documentation and information to the appropriate state agency in
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order to be eligible for the 5% preference.
3)Requires the Department of General Services (DGS), by July 1,
2011, to establish a process to verify that a business meets the
criteria for the 5% preference.
4)Makes legislative findings and declarations.
EXISTING LAW :
1)Governs the solicitation, review and award of state contracts
and establishes various programs and preferences in public
contract law designed to serve a broad public purpose, such as
preference for small businesses, disabled veteran business
enterprises (DVBEs) and recycled products. Existing law
designates the DGS to administer the Small Business Procurement
and Contract Act (Small Business Act), including, but not
limited to, small business, microbusinesses and DVBE
certification processes.
2)Requires the DGS and state agencies entering into contracts for
goods, services, information technology, and construction, to
establish small business participation goals, provide for small
business bid preferences, and provide assistance to small
businesses, under the Small Business Act.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)Unknown but significant annual state costs (General Fund and
special funds), potentially in the millions of dollars, to the
extent state contracts are awarded to other than the lowest
bidder due to the preference. In 2008-09, 110 contracts exceeded
$1 million. The total costs of these contracts was $402 million.
Also, to the extent the bill dissuades some businesses from
bidding on state contracts, costs could increase due to reduced
competition.
2)Similarly, to the extent the ARRA funds were awarded to other
than the lowest bidder, fewer projects would be funded within
the state allotment of ARRA dollars.
3)To the extent application of the bid preference results in more
employment of California residents, the increased state costs
would be offset to some extent by increased income and sales tax
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revenues.
4)Significant administrative costs for state contracting agencies
to verify compliance with the 90% residency requirement for
successful bidders that receive the bid preference. DGS would
incur one-time costs of around $150,000 and ongoing costs of at
least $250,000 for this work, including auditing compliance.
State agencies with significant contracting workload would also
incur some administrative costs.
COMMENTS : According to the author, "With record unemployment,
California must do everything in its power to spur job creation -
an even bigger challenge when facing a budget deficit. With so
many Californians out of work, taxpayer money should not be spent
on contracts that simply create jobs in other states or countries.
Bid preferences are a way to use state dollars to incentive
certain behavior. In this case, we want to spur the creation of
California jobs?. This bill does not discriminate against
out-of-state businesses and focuses only on the workers hired to
perform the specific contract. This bill would not apply to
public works contracts."
Current law provides certain circumstances where contractors
bidding on a state contract can have the overall cost of their bid
discounted by 5% in order to make them more competitive as a low
bidder. Preferences can currently be given for small businesses
in general, in economically target areas, in economically
distressed areas, and that are DVBEs. The maximum amount provided
for each qualifying bid preference is $50,000 with a total bid
preference maximum of $100,000. This means that contractors with
bids of up to $100,000 more than the lowest bid can be awarded the
contract if they qualify for two bidding preferences.
Currently, the state may give a 5% bid preference to certified
small businesses and may offer up to a 5% incentive to DVBEs in
the formal bid process. All state agencies and departments may
use a streamlined procurement process and directly contracting
with a California small business or DVBE for goods, services, and
information technology valued more than $5,000 or less than
$250,000 after obtaining price quotes from at least two small
businesses or two DVBEs.
Analysis Prepared by : Joanna Gin / B.,P. & C.P. / (916)
319-3301 FN: 0006011
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