BILL ANALYSIS
SB 1122
Page 1
Date of Hearing: June 15, 2010
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Mary Hayashi, Chair
SB 1122 (Wright) - As Amended: March 22, 2010
SENATE VOTE : 33-0
SUBJECT : Public contracts: University of California:
competitive bidding and employment.
SUMMARY : Increases the threshold above which the University of
California (UC) must let goods and services contracts to
$100,000, and exempts student employees holding multiple campus
positions from certain conflict of interest provisions.
Specifically, this bill :
1)Increases the annual expenditure threshold above which UC is
required to competitively bid contracts for materials, goods
and specified services from $50,000 to $100,000.
2)Exempts student UC employees from the prohibition on
concurrent employment sponsored or funded by UC, as specified,
for additional campus activities or engagements outside of the
scope of their primary university employment.
EXISTING LAW :
1)Requires UC to let all contracts with expenditures of more
than $50,000 annually for goods and materials to the lowest
responsible bidder.
2)Requires UC to let contracts for services to be performed,
other than personal or professional, with expenditures of more
than $50,000 annually to the lowest responsible bidder.
3)Exempts officers or employees of the university with teaching
or research responsibilities from employment restrictions when
sponsored or funded by university departments or contracts
unrelated to the officer or employee's regular university
employment.
FISCAL EFFECT : Unknown
SB 1122
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COMMENTS :
Purpose of this bill . According to the author's office, "This
bill makes changes to the Public Contract Code (PCC) to provide
for increased efficiencies and cost savings for the UC.
Specifically, this bill would increase the UC's purchasing bid
threshold for goods and services from $50,000 to $100,000. The
statutory purchasing bid threshold of $50,000 for goods and
services was put in place in 1985, while the cost of goods and
services has more than doubled since that time. A formal bid
process on relatively small contracts adds significantly to
costs and the complexity can serve as a barrier to small
businesses."
On a separate provision, the author's office adds that "the PCC
contains a conflict of interest provision that creates an
administrative barrier for student employees that are employed
in a campus department to receive timely payment for other
campus activities (e.g., performing arts)."
Background . Existing law establishes a competitive bid
threshold for goods and services purchase by UC of $50,000.
For purchases in excess of $50,000, UC must competitively bid
the goods and services. According to UC, bids are managed by
the Procurement department, which is understaffed. Increasing
the bid threshold to $100,000 before conducting a competitive
bid process creates greater efficiencies and reduces costs
because it takes anywhere from two to 12 months to run a bid
process depending upon the complexity, number or bids, and the
origin of the bid.
According to UC, the change in the bid threshold proposed by
this bill affects contracts for goods, materials and services
that can include items such as laboratory instruments and
supplies, chemical reagents, computer software licenses and
updates, janitorial supplies, commercial kitchen supplies,
furniture, consultant services, and equipment repair, among
other things. This bill does not affect UC contracts for labor
and materials related to construction projects, which, under
current law, are subject to a $50,000 competitive bid threshold.
Current law prohibits university employees, including student
employees from engaging in any employment, activity or
enterprise for compensation when that employment is sponsored or
funded by university departments or contracts unrelated to the
SB 1122
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officer or employee's regular university employment. According
to UC, these provisions continually raise issues for student
employees employed by campus departments but receiving payment
for other campus activities as well. Though these students
eventually get paid, this requires issuance of an exception,
review and research by campus purchasing and human resource
directors, then manual keying of each check by staff processors,
resulting in delaying payment to students and increased
administrative costs.
Support . According to the sponsor, UC, "Currently, if UC
anticipates that it will spend more than $50,000 with any one
supplier, it must run a competitive bid process?. Formal bud
processes can be costly and the complexity of bid requests can
serve as a barrier to small business. California small
businesses often do not have the resources to respond to UC bid
proposal requests and are challenged in meeting UC requirements
in the formal competitive bid process.
"Increasing the bid threshold would result in immediate cost
savings for UC by reducing the number of contracts that would be
subject to the bid process. UC estimates that this proposal
would save $780,000 annually in administrative costs associated
with managing a competitive bid proposal. Additionally,
increasing the limit would make the requirements for the
procurement of goods and services for UC more in line with those
of the California State University, which has a less rigorous
process for bids between $50,000 and $100,000.
"SB 1122 would exempt student employees from an existing
provision that prohibits university employees from being an
independent contractor with any university department to provide
services or goods. The existing law, which includes an
exemption for employees in teaching and research positions,
raises issues for many of our student employees not covered by
this exemption. Many student employees perform other activities
at UC to supplement their income, such as performing arts.
Because existing law does not provide a specific exemption for
student employees, UC must review payments to these students on
a case-by-case basis to determine if it is allowed by law.
"This review process, which occurs approximately 475-500 times
per year, can result in delayed payments to students of up to
three weeks. In addition to allowing more timely payment to
students, UC estimates that an exemption would result in
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additional administrative cost savings for UC upwards of
$175,000 annually."
Previous Legislation . AB 2037 (Portantino) of 2008 would have
increased: the expenditure threshold above which UC is required
to competitively bidding construction projects from $50,000 to
$100,000; the thresholds below which UC may use its own
employees rather than contract out for labor from $20,000 to
$100,000 for painting projects and from $50,000 to $100,000 for
all other projects; and, the threshold under which UC can use an
informal competitive bidding process from $100,000 to the
definition of minor capital outlay as determined by the
Department of General Services. This bill was amended to
address an unrelated subject matter.
SB 1596 (Yee) of 2008 would have limited the terms of all
contracts for goods, materials, and services awarded by UC to no
more than three years and would have limited any contract
extensions to one year. This bill was held in the Senate
Appropriations Committee.
SB 1467 (Bowen), Chapter 1122, Statutes of 2002, applies
standard PCC conflict of interest and penalty provisions to
procurement by UC.
Double-referred . This bill is double-referred to Assembly
Higher Education Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
University of California (sponsor)
Opposition
None on file.
Analysis Prepared by : Joanna Gin / B.,P. & C.P. / (916)
319-3301