BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 1108|
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THIRD READING
Bill No: SB 1108
Author: Price (D)
Amended: 6/1/10
Vote: 21
SENATE GOVERNMENTAL ORG. COMMITTEE : 8-0, 4/13/10
AYES: Wright, Calderon, Denham, Florez, Oropeza, Padilla,
Price, Yee
NO VOTE RECORDED: Harman, Negrete McLeod, Wyland
SENATE APPROPRIATIONS COMMITTEE : 9-1, 5/27/10
AYES: Kehoe, Alquist, Corbett, Denham, Leno, Price, Wolk,
Wyland, Yee
NOES: Walters
NO VOTE RECORDED: Cox
SUBJECT : Public contracts: small business participation
SOURCE : Author
DIGEST : This bill authorizes the Department of General
Services, commencing on July 1, 2011, to direct all state
agencies, departments, boards and commissions to establish
and achieve a goal of 25 percent small business
participation in state procurements and contracts.
ANALYSIS : 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
CONTINUED
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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.
This bill:
1. Commencing on July 1, 2011, provides that DGS may direct
all state agencies, departments, boards, and commissions
to establish the goal to achieve 25 percent 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 percent 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 percent 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 percent small business
participation to submit an implementation and corrective
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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.
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
practices (SB 1517 [Dills], Chapter 1207, Statutes 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 percent small business
participation goals, and the third set a three percent DVBE
participation goal for all state procurement contracts.
The fourth EO set a 25 percent participation goal for state
construction contracts, particularly those awarded by the
California Department of Transportation (Caltrans) when
implementing Proposition 1B.
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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 five
percent 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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
Statutory small business Unknown, multi-millions of
dollars General/
contract participation in costs annually
Various/
Special
SUPPORT : (Verified 5/27/10)
California Black Chamber of Commerce
California Small Business Association
Coalition of Small and Disabled Veteran Businesses
Kammerer & Company
Kern Minority Contractors Association
National Federation of Independent Business
Sacramento Black Chamber of Commerce
San Francisco County Board of Supervisors
San Joaquin Valley Black Contractors Association
Small Manufacturers Association of California
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ARGUMENTS IN SUPPORT : Writing in support of this bill,
the National Federation of Independent Business (NFIB),
notes that under the Governor's EO of 2006 state agencies
as a whole met the 25 percent 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 this bill 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."
TSM:mw 5/28/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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