BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
1108 (Price)
Hearing Date: 4/26/2010 Amended: A I
Consultant: Bob Franzoia Policy Vote: GO 8-0
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BILL SUMMARY: SB 1108 would authorize the Department of General
Services (DGS) to direct all state agencies, departments,
boards, and commissions to establish the goal to achieve 25
percent small business participation in state procurements and
contracts, to ensure that the state's procurement and contract
processes are administered in order to meet or exceed the goal,
and to report to DGS statistics regarding small business
procurement and contracting participation. This bill would
authorize DGS to establish policies and procedures to monitor
the progress of the agencies toward meeting the goal of 25
percent small business participation and to provide this
information to the Office of Small Business Advocate. This bill
would also authorize DGS to require a state agency, department,
board, or commission that has not achieved its fiscal year goal
to submit an implementation and corrective action plan and every
year thereafter as long as the agency fails to meet or exceed
the goal. This bill would authorize DGS to establish criteria
for such a plan and to undertake reasonable means to assist
agencies in improving small business participation in their
contracting.
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
Statutory small business Unknown, multi millions of
dollars in costs General/
contract participation annually various
Special
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File. To the extent this bill sets forth, and
maintains in statute, a small business participation rate, this
bill could result in multi millions of dollars in contract
preferences over an Executive Order (EO), which may change to
decrease participation and reduce contracting costs. However,
to the extent existing EOs remains effective and DGS continues
to administer contracts consistent with those EOs, there are no
costs above the current level as the proposed statute and the
EOs are nearly identical in fiscal impact. Where contracting
participation falls below EO goals, there would be contract
savings and increased administrative costs.
As noted in the policy committee analysis, since 2001, there
have been four Executive Orders specifying goals for small
business and disabled veteran business enterprises (DVBE)
participation in state procurement contracts. EO D-37-01 (2001)
and EO S-02-06 (2006) set 25 percent small business
participation goals. Under current law, contractors bidding on a
state contract can have the overall cost of their bid discounted
by five percent in order to make them more competitive as a low
bidder. The maximum amount provided for each qualifying bidding
preference is $50,000 with a total bid
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SB 1108 (Price)
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.
State agencies with annual expenditures over $100,000 have
available to small business and DVBE suppliers, a liaison to
help them resolve contracting issues with the state. The small
business/DVBE advocate's duties must at minimum, include the
following services:
- Make information regarding pending solicitations available to,
and consider offers from, California small business suppliers
capable of meeting the state's business need, and who have
registered with the state for this purpose.
- Ensure that payments due on a small business contract are made
promptly.
DGS maintains a current directory of all Small Business
Advocates and thier contact information.
Government Code 11148.5 (a) requires that each state agency that
significantly regulates small business or that significantly
impacts small business shall designate at least one person who
shall serve as a small business liaison. The small business
liaison has the general responsibility of responding to small
business concerns relating to his or her agency's activities and
responsibilities.
From 2006-07 through 2008-09, the state directed 26.34 percent
of all its spending toward small business and 2.72 percent to
disabled veteran business. During this three-year timeframe, a
total of nearly $8 billion in contracts were awarded to small
businesses and almost $600 million to DVBEs.
For 2006-07, the state spent 28.31 percent with small business
and 2.8 percent with DVBEs. This represented an improvement of
9 percent and .75 percent respectively from the previous year's
small business and DVBE numbers.
For 2007-08, state entities reported 23.84 percent of purchasing
with small business and 2.39 percent with disabled veteran
businesses. This marked a fall-off from the previous year, with
declines coming primarily in construction and information
technology contracting.
For 2008-09, state departments spent 26.88 percent with small
business and 2.96 percent with DVBEs. This represents the
highest DVBE participation level achieved.
The costs to administer the provisions of this bill are minor
and absorbable because DGS is currently administering similar
provisions. The cost calculation of the preference is harder to
determine as departments have many ways to achieve the
participation goal with out using the preference. For example,
the small business option in Chapter 212/2009, AB 31(Price) does
not use the preference. Similarly, if only small businesses are
answering a solicitation, the preference is not applied because
it is only used to help a small business compete against a
non-small business.