BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 450|
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THIRD READING
Bill No: AB 450
Author: Wieckowski (D), et al.
Amended: 8/15/11 in Senate
Vote: 21
SENATE EDUCATION COMMITTEE : 7-2, 7/6/11
AYES: Lowenthal, Alquist, Blakeslee, Hancock, Price,
Simitian, Vargas
NOES: Runner, Huff
NO VOTE RECORDED: Liu, Vacancy
SENATE APPROPRIATIONS COMMITTEE : 6-2, 8/15/11
AYES: Kehoe, Alquist, Lieu, Pavley, Price, Steinberg
NOES: Walters, Emmerson
NO VOTE RECORDED: Runner
ASSEMBLY FLOOR : 51-27, 6/1/11 - See last page for vote
SUBJECT : California State University: food service
contracts
SOURCE : Author
DIGEST : This bill (1) requires that the California State
University (CSU) Trustees policies and procedures for the
acquisition of specified services ensure that the service
contractor fully discloses to the CSU campus, auxiliary
organization, or other unit of the CSU unit all discounts,
rebates, allowances and incentives received from suppliers,
and that the contractor pay the full amount of these to the
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AB 450
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CSU campus, and (2) requires that these requirements be
placed in agreements upon their renewal, extension, or
amendment, or be part of any new service agreement.
ANALYSIS : Existing law authorizes the Trustees of the
CSU to enter into agreements with any public or private
agency, officer, person, or institution, corporation,
association, or foundation for the furnishing of services,
facilities, materials, goods, supplies, or equipment by or
for the trustees.
Existing law requires the Trustees to prescribe policies
and procedures for the acquisition of services, facilities,
materials, goods, supplies, or equipment.
This bill:
1. Requires that the policies and procedures for the
acquisition of food services to ensure that a service
contractor fully discloses to the campus, auxiliary
organization, or other unit of the CSU all discounts,
rebates, allowances, and incentives received by the
service contractor from its suppliers.
2. Requires a service contractor that receives a discount,
rebate, allowance, or other incentive from any supplier,
to disclose and pay to the campus, auxiliary
organization, or other unit of the CSU, the full amount
of the discount, rebate, or applicable credit, as
specified.
3. Requires that language stating this requirement be
included in agreements covered by this bill.
4. Requires the policies and procedures for the acquisition
of services be available for review as part of any audit
conducted pursuant to specified law.
5. Requires any necessary changes to the policies and
procedures for the acquisitions of services be
implemented upon the renewal, extension or amendment of
an existing agreement or as part of any new service
agreement.
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6. Defines "auxiliary organization" and "rebate" for
purposes of this bill.
Comments
Source of this bill . According to the author's office, the
New York Attorney General reached an out of court
settlement of $20 million with a third party
food services contractor on behalf of the State University
of New York and local school districts. The Attorney
General found that contractors had adopted a business model
that involved overcharging for food by not disclosing that
part of the food costs paid for rebates back to them from
the suppliers. The author's office is concerned that there
is no specific law or policy that relates to the disclosure
or crediting of rebates on service contracts and that some
of the CSU campuses have contracts with food service
companies similar to those in the State University of New
York. According to information provided by the author,
these "add-ons" increase the cost ultimately borne by the
public sector for these contracts.
Is there a problem ? It is unclear whether similar
practices are a part of food service contracting within the
CSU. According to information provided by the author's
office, CSU currently relies on contract food service
providers, including some involved in the New York Attorney
General lawsuit, to operate the cafeterias and/or
concessions on at least seven campuses statewide. This
bill requires the CSU policies and procedures for
acquisition of various services to ensure disclosure of any
rebates, etc., and to require that those be paid to the
affected CSU campus.
Too far reaching ? This bill's provisions are based upon
model contract language which the California Department of
Education provides to school districts that participate in
the National School Lunch Program. The United States
Department of Agriculture has issued regulations and
provided the prototype language to assist districts in
ensuring that costs under the program (and allowed use of
federal dollars) must be net of all discounts, rebates and
applicable credits.
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Related Legislation
SB 736 (Cannella), 2011-12 Session, deletes some of the
existing auditing requirements which the CSU must meet and
will reduce auditing requirements in an effort to save the
CSU approximately $1.6 million. (In Assembly Higher
Education Committee)
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13
2013-14 Fund
Disclose and refund Unknown; potentially
significant revenue General
rebates
Contract requirements Likely minor,
one-time costs General
SUPPORT : (Verified 8/17/11)
California School Employees Association, AFL-CIO
California State University Employees Union
Service Employees International Union
OPPOSITION : (Verified 8/17/11)
California State University
ARGUMENTS IN SUPPORT : In support, the Service Employees
International Union is concerned that "CSU contracts do not
include the protections necessary to ensure contractors
doing business with the university disclose and credit back
savings and discounts obtained through purchases made on
the university's behalf. AB 450 creates a level of
transparency and accountability, which we believe will save
money for CSU and its students."
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ARGUMENTS IN OPPOSITION : The CSU believes that the
possibility of more audits and forced rebates refunds based
on contractor downstream volume will add unidentifiable
risk to the contractors and cause contractors to increase
contract bid costs to mitigate such risks. As such the
competitive bidding and evaluation process would be
substantially complicated and could discourage California
Small and Disabled Veteran businesses from participating in
the bidding process for prime CSU contracts.
ASSEMBLY FLOOR : 51-27, 6/1/11
AYES: Alejo, Allen, Ammiano, Atkins, Beall, Block,
Blumenfield, Bonilla, Bradford, Brownley, Buchanan,
Butler, Charles Calderon, Campos, Carter, Cedillo,
Chesbro, Davis, Dickinson, Eng, Feuer, Fong, Fuentes,
Furutani, Galgiani, Gatto, Gordon, Hall, Hayashi, Roger
Hern�ndez, Hill, Huber, Hueso, Huffman, Lara, Bonnie
Lowenthal, Ma, Mendoza, Mitchell, Monning, Pan, Perea,
Portantino, Skinner, Solorio, Swanson, Torres,
Wieckowski, Williams, Yamada, John A. P�rez
NOES: Achadjian, Bill Berryhill, Conway, Cook, Donnelly,
Fletcher, Beth Gaines, Garrick, Grove, Hagman, Halderman,
Harkey, Jeffries, Jones, Knight, Logue, Mansoor, Miller,
Morrell, Nestande, Nielsen, Norby, Olsen, Silva, Smyth,
Valadao, Wagner
NO VOTE RECORDED: Gorell, V. Manuel P�rez
CPM:kc 8/17/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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