BILL ANALYSIS
SB 1108
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Date of Hearing: June 29, 2010
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Mary Hayashi, Chair
SB 1108 (Price) - As Amended: June 23, 2010
SENATE VOTE : 33-3
SUBJECT : Public contracts: small business participation.
SUMMARY : Requires a 25% small business participation goal for
state contracts and allows the Department of General Services
(DGS) to establish policies and procedures to monitor progress
in meeting this goal. Specifically, this bill :
1)Requires all state agencies, departments, boards, and
commissions to establish procurement and contract processes in
order to meet the 25% small business participation goal, and
to report statistics on their annual participation to the DGS.
2)Allows the DGS to direct all state agencies, departments,
boards, and commissions to establish a 25% small business
participation goal in state procurement and contracts, and
allows the DGS to establish policies and procedures to monitor
the progress of meeting that goal.
3)Allows the DGS to require state entities that fail to meet the
small business participation goal to submit an annual
implementation and corrective action plan to the DGS until the
goal is met, and allows the DGS to establish and publish the
plan's criteria in the State Administrative Manual and the
State Contracting Manual.
4)Allows the DGS to undertake reasonable means to assist
agencies in improving small business participation in their
contracting.
5)Requires the DGS to establish policies in the State
Administrative Manual, policies for all state agencies,
departments, boards and commissions to use the contracting
procedure authorized in the Small Business Procurement and
Contract Act (Small Business Act) to contract with small
businesses.
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6)Requires the DGS to actively promote small business
certification.
7)Becomes operative on July 1, 2011.
EXISTING LAW :
1)Requires the DGS to administer the Small Business Act,
including a small business certification process and a
streamlined procurement process for state contracts under
$100,000 that is exempt from advertising, bidding, and protest
provisions in the State Contract Act.
2)Declares that small businesses and microbusinesses receive a
fair portion of the total purchases and contracts or
subcontracts for state goods, services, information
technology, and construction.
3)Establishes a 25% small business participation goal for all
contracts financed with the proceeds of the
infrastructure-related bond acts of 2006.
4)Establishes bid preferences for certified small businesses and
microbusinesses for the award of state procurement contracts
of at least 5% of solicitations made either on the basis of
lowest responsible dollar bid or on the basis of highest
score, with a single bid preference limit of $50,000.
Non-small businesses that subcontract at least 25% of their
contracts with certified small businesses also qualify for the
small business bidders' preference.
5)Requires each state agency to consolidate its existing staff
functions that relate to contract opportunities for small
businesses into a single point of contract for small
businesses and designate a small business advocate as a
liaison to small business suppliers.
6)Defines a small business as independently owned, not dominant
in its field of operation, domiciled in California, employing
100 or fewer employees, and earning $10 million or less in
average annual gross revenues for the previous three years.
FISCAL EFFECT : Unknown
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COMMENTS :
Purpose of this bill . According to the author's office, "This
bill seeks to codify Executive Order (EO) S-02-06 to ensure
that state agencies, departments, boards and commissions
continue to meet or exceed the state's 25% small business
participation in its procurement regardless of administration
change. As the state continues to award contracts funded
through the 2006 infrastructure bonds and prepare for projects
to be funded from the recently enacted American Recovery and
Reinvestment Act (ARRA), it is important to ensure that
contracting officials have the tools they need to promote robust
small business and Disabled Veteran Business Enterprise (DVBE)
participation on those projects."
Background . The Small Business Act, administered through the
DGS, was established 30 years ago to grant a small business
preference within the state's procurement process. In 1989, a
DVBE component was added to state procurement practices.
Current law requires a 25% small business participation goal for
state contracts and requires the DGS to monitor progress in
meeting this goal and to report the participation levels of
DVBEs and businesses, including the owner's race, ethnicity, and
gender information in statewide contracts.
EO S-02-06 requires all state agencies, departments, boards and
commissions to achieve a goal of 25% small business
participation in state procurements and contracts. Since 2001,
the Governor has issued several EOs specifying a 25%
participation goal for small businesses and a 3% DVBE
participation in state procurement contracts, including EO
D-37-01 (2001), EO D-43-01(2001), EO S-02-06 (2006), and EO
S-11-06 (2006). Statutory advancements also strengthened the
Small Business Act, including SB 115 (Florez), Chapter 451,
Statutes of 2005, which required the DGS to establish a DVBE
incentive program for state contracts, and AB 761 (Coto),
Chapter 611, Statutes of 2007, which specifically codified the
25% small business participation goal for contracts related to
revenues expended from the 2006 infrastructure bonds.
Notwithstanding the longstanding existence of the Small Business
Act, statutory changes, and EOs, the state's success in
obtaining small business and DVBE participation goals in state
procurement contracts has been inconsistent. Since small
business participation targets were established in 2001, the DGS
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has achieved the 25% participation goal only twice.
In 2006, California voters approved over $40 billion in general
obligation infrastructure development bonds. The funding
provided by the bonds will be spent on improvements to roads,
highways, public transit, flood control, schools, and affordable
housing. Project funding is expected to occur over the next 10
years, although the Governor and Legislature have placed a
priority on expediting project delivery.
In 2009, the federal government enacted a $787 billion ARRA that
includes over $3 billion in funding for California
infrastructure projects. These massive public works endeavors
provide an opportunity for the state to use these moneys to
strengthen the core of California's economy by expanding
business opportunities for small contractors.
Support . According to Natoma Technologies of Sacramento,
"Natoma Technologies is a certified small business by the State
of California and provides extensive services to a number of
state departments and agencies. We also sit on the Small
Business Advisory Council at the DGS and have provided reform
testimony to the Little Hoover Commission. We supported the
Governor's EO (S-02-06) which ensures that the State continues
to meet or exceed the 25% threshold for certified small business
participation. This bill has the effect of promoting
competition and ensuring that the State of California controls
contract costs and receives the most valuable bids for its
procurements."
Previous Legislation . AB 309 (Price) would have required a 25%
small business participation goal for state contracts and
requires the DGS to monitor progress in meeting this goal. This
bill was held in the Assembly Appropriations Committee.
AB 761 (Coto), Chapter 611, Statutes of 2007 required each state
agency awarding contracts that are financed with proceeds from
the infrastructure bonds approved by voters in November 2006 to
establish a 25% small business participation goal for state
infrastructure construction contracts and provide specified
assistance to small businesses bidding on state infrastructure
bond-related contracts.
SB 115 (Florez), Chapter 451, Statutes of 2005, required the DGS
to establish a DVBE participation incentive to bidders that
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would be mandatory for all state agencies, and required the
Department of Veterans Affairs to establish a method of
monitoring adherence to the DVBE participation goals.
REGISTERED SUPPORT / OPPOSITION :
Support
Natoma Technologies of Sacramento
Opposition
None on file.
Analysis Prepared by : Joanna Gin / B.,P. & C.P. / (916)
319-3301