BILL ANALYSIS
Bill No: SB
1108
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2009-2010 Regular Session
Staff Analysis
SB 1108 Author: Price
As Introduced: February 17, 2010
Hearing Date: April 13, 2010
Consultant: Art Terzakis
SUBJECT
Public Contracts: small business participation
DESCRIPTION
SB 1108 authorizes the Department of General Services (DGS)
to direct all state agencies, departments, boards and
commissions to establish and achieve a goal of 25% small
business participation in state procurements and contracts.
Specifically, this measure:
1. Provides that DGS may direct all state agencies,
departments, boards, and commissions to establish the
goal to achieve 25% small business participation in state
procurements and contracts.
2. Provides that, should DGS give this direction, the
heads of all state agencies, departments, boards and
commissions, must implement procurement and contract
processes in order to meet the goal of 25% small business
participation and shall report to the Director of DGS
statistics regarding the annual participation of small
businesses in the agency's procurements and contracts.
3. Provides that DGS may establish policies and procedures
to monitor the progress of all state agencies,
departments, boards, and commissions toward meeting the
goal of 25% small business participation.
4. Provides that DGS may require a state agency,
department, board, or commission that has not achieved
its fiscal year goal of 25% small business participation
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to submit an implementation and corrective action plan,
and to submit such plan annually thereafter, as long as
that entity fails to meet or exceed the goal. Also,
permits DGS to establish criteria for such a plan and to
publish it in the State Administrative Manual (SAM).
5. Provides that DGS may undertake reasonable means to
assist agencies in improving small business
participation, including entering into memoranda of
understanding with agencies that have not met the goal.
6. Requires DGS to actively promote small business
certification.
EXISTING LAW
Existing law 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 (DVBE)
and recycled products. Existing law designates the
Department of General Services (DGS) to administer the
Small Business Procurement and Contract Act, including, but
not limited to, small business, microbusinesses and DVBE
certification processes.
The Small Business Procurement and Contract Act requires
the Director of DGS and the heads of other state agencies
that enter into contracts for the provision of goods,
services,
and information technology and for the construction of
state facilities to establish goals for the participation
of small businesses in these contracts, to provide for
small business preference in the award of these contracts,
to give special consideration and special assistance to
small businesses, and, whenever possible, to make awards to
small businesses, as specified.
BACKGROUND
The Small Business Act : The Small Business Act,
administered through DGS, was implemented more than 30
years ago to establish a small business preference within
the state's procurement process that would increase the
number of contracts between the state and small businesses.
In 1989, a DVBE component was added to state procurement
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practices (SB 1517 - Dills, Chapter 1207 of 1989).
Certification of small businesses, including
microbusinesses, and DVBEs is generally undertaken by DGS.
The Small Business Act declares that it is the policy of
the State of California that the state aid the interests of
small businesses in order to preserve free competitive
enterprise and to ensure that a fair portion of the total
purchases and contracts of the state be placed with these
enterprises.
Since 2001, there have been four Executive Orders (EO)
specifying goals for small business and DVBE participation
in state procurement contracts, including EO D-37-01
(2001), EO S-02-06 (2006), EO D-43-01(2001), and EO S-11-06
(2006). The first two EOs set 25% small business
participation goals, and the third set a 3% DVBE
participation goal for all state procurement contracts.
The fourth EO set a 25% participation goal for state
construction contracts, particularly those awarded by the
California Department of Transportation (Caltrans) when
implementing Proposition 1B.
Bidding Preferences: Under current law, there are 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 business in
general, disabled veteran-owned business enterprises, for
small businesses in economically target areas, and for
businesses, regardless of size, located in economically
distressed areas. The maximum amount provided for each
qualifying bidding preference is $50,000 with a
total bid maximum of $100,000. This means that contractors
with bids of up to $100,000 higher than the lowest bid can
be awarded the contract if they qualify for two bidding
preferences.
Purpose of SB 1108: According to the author's office, this
bill is intended to codify Governor Schwarzenegger's
Executive Order S-02-06 to ensure that the state continues
to meet or exceed the 25% overall annual California
certified small business participation goal on state-funded
contracts. Under the executive order, state agencies are
required to meet the 25% small business and 3% DVBE
participation goals. Maintaining a strong small business
participation requirement on state-funded contracts
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promotes competition that helps control state costs and
ensures that state agencies receive a good deal on their
state contracts.
The author's office notes that the State of California has
historically set a goal of having 25% of state contracting
dollars go to small businesses and 3% go to DVBEs but has
historically struggled to achieve these goals. The author's
office notes that small business is a key economic driver
of job growth and economic development and continues to
play a leading role in the state's economic recovery
efforts. The author's office emphasizes that it is
important to ensure that contracting officials have the
tools they need to promote robust small business and DVBE
participation in state contracts.
Arguments in Support: Writing in support of SB 1108, the
National Federation of Independent Business (NFIB), notes
that under the Governor's Executive Order of 2006 state
agencies as a whole met the 25% goal in 2006-07 and 2008-09
but failed to do so in fiscal year 2007-08. By placing
this requirement in statute and providing DGS support, the
NFIB claims SB 1108 will contribute to the success of
California small business contractors. Additionally, the
NFIB believes that "maintaining a strong small business
participation requirement promotes competition that helps
control costs and ensures state agencies receive a good
deal on state contracts."
PRIOR/RELATED LEGISLATION
AB 309 (Price) 2009-10 Session. Similar to SB 1108 (Price)
of 2010. (Died on Assembly Appropriations Suspense File)
SB 1249 (Ducheny) 2009-10 Session. Would authorize DGS to
use an additional criterion in the contract bidding and
procurement process that takes into consideration the
relative economic benefit to California in considering bids
for goods and/or services. (Pending in this Committee)
SB 967 (Correa) 2009-10 Session. Would require that a 5%
bid preference be provided on state contracts for goods and
services, including bids or proposals for the distribution
of funds pursuant to the federal American Recovery and
Reinvestment Act (ARRA) of 2009, to contractors who
substantiate that 90% of their employees performing work on
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the contract are residents of California. (Pending in this
Committee)
AB 177 (Ruskin) 2009-10 Session. Would increase and
conform penalties for persons who falsely engage in
activities relating to the Small Business Procurement and
Contract Act, including small businesses, microbusinesses,
and disabled veteran-owned business enterprises. (Pending
in this Committee)
AB 2708 (Bill Berryhill) 2009-10 Session. Among other
things, would require the Director of DGS or any agency,
department, board or commission to provide for the
participation of subcontractors that are small businesses
and microbusinesses in awarding contracts for goods and
services by directly contracting with a small business or
microbusiness. (Pending in Assembly policy committee)
AB 31 (Price) Chapter 21, Statutes of 2009. Made several
key changes to state procurement procedures including
increasing the maximum contract threshold amount for awards
to a small business and disabled veteran business
enterprise, under a specific streamlined procurement
process, from $100,000 to $250,000.
AB 761 (Coto) Chapter 611, Statutes of 2007. Requires each
state agency awarding contracts financed with proceeds from
the infrastructure bonds approved by the voters in November
2006, to establish a 25% small business participation goal
for state infrastructure construction contracts and to
provide specified assistance to small businesses bidding on
state infrastructure bond-related contracts.
SUPPORT: As of April 9, 2010:
Coalition of Small and Disabled Veteran Businesses
National Federation of Independent Business
Small Business California
Small Manufacturers Association of California
OPPOSE: None on file as of April 9, 2010.
FISCAL COMMITTEE: Senate Appropriations Committee
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