BILL ANALYSIS �
AB 633
Page 1
Date of Hearing: March 22, 2011
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Mary Hayashi, Chair
AB 633 (Olsen) - As Introduced: February 16, 2011
SUBJECT : California State University: acquisition or
replacement of motor vehicles.
SUMMARY : Removes the California State University (CSU) from
the definition of "state agency" for the purposes of state fleet
purchasing requirements and oversight by the Department of
General Services (DGS).
EXISTING LAW :
1)Defines "state agency" to include every state office, officer,
department, division, bureau, board, and commission.
2)Defines "state agency" to include each campus of the CSU, as
of July 1, 2012, and subjects CSU to DGS acquisition and
replacement of motor vehicles.
3)Requires CSU, by June 30, 2008, and by June 30th of each year
thereafter until July 1, 2012, to report to the Legislature on
its motor vehicle procurement, including the following:
a) An inventory of motor vehicles by campus and type,
consistent with the fleet report to DGS;
b) The number of vehicles purchased during the prior fiscal
year (FY), by campus and type;
c) The average time taken to complete procurement of each
motor vehicle purchased during the prior FY;
d) Any changes in policies or procedures made during the
prior FY relative to motor vehicle procurement and
contracts, and the identification of any vehicles procured
pursuant to the new policy or procedure; and,
e) The estimated cost savings associated with management by
CSU of motor vehicle procurement, including average time to
complete procurements, reduced administrative costs,
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reduced charges paid to DGS, and competitive or reduced
market prices obtained for vehicles.
4)Provides that no surplus mobile equipment may be acquired from
any source by any state agency for program support until DGS
has investigated and established its need.
5)Prohibits a state agency or department, including DGS, from
purchasing new vehicles without the approval of the Department
of Finance (DOF) and the secretary or director of the agency
or department requesting the purchase.
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of this bill . According to the author's office, "SB
1757 (Denham), Chapter 926, Statute of 2004, inadvertently
included CSU under a new and duplicative process for purchasing
vehicles. For several years, this legislation cost CSU over
$240,000 per year to support the DGS Fleet Management Program
despite the fact that CSU is less than two percent of DGS's
total purchases statewide.
"In 2007, AB 262 (Coto), Chapter 679, Statutes of 2007,
suspended �provisions of SB 1757 related to] DGS approval for
vehicle purchasing and required the CSU Board of Trustees to
report annually to the Legislature until June 30, 2012, certain
information regarding motor vehicle procurement.
"These reports show how CSU was able to procure their vehicles
in a more timely and cost-saving manner. AB 633 will allow the
CSU to continue to procure vehicles cost effectively."
Background . DGS serves as the state's motor vehicle fleet
manager. While some state departments have delegated vehicle
purchasing authority, others must request vehicle purchases
through DGS. This bill, AB 633, eliminates the requirement that
CSU obtain approval from DGS prior to purchasing vehicles and
excludes CSU from the requirements of Executive Order (EO)
B-2-11 by redefining "state agency" to exclude CSU for vehicle
purchases. This bill takes a different direction than recent
legislation relating to CSU and the state fleet. AB 262 (Coto),
Chapter 679, Statutes of 2007, required CSU to purchase cars
through DGS and be subject to DGS oversight as part of the state
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fleet by redefining "state agency" to include each campus of the
CSU for vehicle purchases, as of July 1, 2012. If this bill
passes, the statutory provision requiring DGS approval and
oversight of CSU for fleet purchases approved in AB 262 will not
take effect.
In the past few years, due to the budget deficit, there have
been several pieces of legislation and executive orders seeking
to reduce the size of the state fleet. In July 2009, Executive
Order (EO) S-14-09 was signed, prohibiting all state agencies
and departments from ordering or purchasing new vehicles for
non-emergency use. Exemptions could still be approved by the
Director of DGS, subject to review by the Consumer Services
Agency Secretary, and only when the purchase was necessary to
protect public health and safety, provide critical services and
functions, utilize federal stimulus funding, or achieve cost
savings.
In October 2009, the DGS deputy director overseeing the state
fleet resigned over the controversy that DGS and the Department
of Transportation spent $5.5 million on new vehicles left idle
during a budget deficit. In response, the Assembly Committee on
Accountability and Administrative Review held an oversight
hearing in February 2010 on state expenditures for vehicle
purchases. As a result, AB 2031 (Evans), Chapter 247, Statutes
of 2010, prohibited a state agency or department, including DGS,
from purchasing new vehicles without the approval of DOF and the
secretary or director of the agency or department requesting the
purchase.
On January 27, 2011, upon assuming office and facing a $25
billion budget deficit, Governor Jerry Brown issued EO B-2-11,
which requires agencies and departments to review home-storage
permits and fleet usage and submit a plan to DGS to withdraw
vehicles that are non-essential or cost-ineffective to be later
sold. Like its predecessor, EO B-2-11 also prohibits the
purchase of non-emergency vehicles, unless the vehicle is
essential for health and safety purposes or realizes cost
savings.
The sponsors of this bill, the CSU Board of Trustees, contend
that CSU previously was authorized to independently purchase
goods and services, and did so more efficiently than purchasing
through DGS. AB 1191 (Aguiar), Chapter 1097, Statutes of 1997,
authorized the CSU Board of Trustees to lease any real property
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for use by CSU and procure goods and services, including
telecommunications goods and services, without going through the
DGS approval process.
CSU's procurement of its own vehicles ended in 2005, with the
passage of SB 1757 (Denham), Chapter 926, Statutes of 2004,
which established requirements for the acquisition of motor
vehicles under the supervision of DGS. SB 1757 authorized DGS
to collect a fee from CSU to offset the cost of services
provided. CSU contends DGS charged CSU $80 per vehicle per year
for service costs. AB 262 (Coto), Chapter 679, Statutes of
2007, afforded CSU the opportunity to purchase their own
vehicles under their own policies, and subject to annual
reporting requirements to both the Legislature and DGS, until
July 1, 2012. CSU maintains that this sunset date was
negotiated to allow enough time for CSU to collect data and
prove that their vehicle procurement was more cost effective
than vehicle procurement through DGS.
CSU began reporting its vehicle procurements to the Legislature
in 2008 by providing two reports. The first report was split
between the period July 1, 2007 to December 31, 2007 when DGS
was controlling CSU vehicle purchases and the second report was
split between the period January 1, 2008 to June 30, 2008, when
CSU was controlling its own vehicle purchases. CSU writes that
it "was charged approximately $153,000 in DGS Fleet
Administration fees. Although DGS was only servicing CSU for
the first six months of the fiscal year, CSU was refused
reimbursement for the last six months when DGS was not providing
services. CSU also paid approximately $10,400 in DGS
procurement fees for the 22 vehicle 'approvals' from DGS. CSU
still issued all purchase orders and made payment directly to
the vendors.
"It is very difficult to associate any estimate to savings in
actual vehicle costs resulting from CSU processing vehicle
procurement without DGS involvement? CSU experienced an average
DGS approval processing time for a 'passenger' vehicle of 63
days for 20 vehicles versus 13 days for the 37 vehicles
purchased directly by CSU without DGS involvement. Due to the
nature of CSU campus vehicle fleets, when a campus requires a
vehicle, it is typically an immediate requirement where the
additional time to procure a vehicle means substantive loss of
program productivity."
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CSU claims that it has been fiscally responsible in managing its
fleet and was never intended to be captured under DGS vehicle
procurement in SB 1757. CSU purchased 86 vehicles for
FY2007-08, 81 vehicles for FY 2008-09, and 43 vehicles for FY
2009-10. The decline in purchase of vehicles has been
attributed to recent budget reductions, with a steady purchase
of vehicles for campus police. CSU states that while recent
budget reductions have decreased its number of vehicle
purchases, CSU could still acquire vehicles at a cost savings of
approximately $500 per vehicle and 50 days earlier than if CSU
were to utilize DGS to procure its vehicles.
Staff notes that deleting CSU from the definition of state
agency would remove CSU from the requirements of EO B-2-11 and
would delete CSU's annual reporting requirements to the
Legislature and DGS.
Support . According to the sponsor, CSU, AB 633 would "eliminate
duplicative administrative processes by making permanent �CSU's]
ability to purchase vehicles for academic programs and
personnel. Since 1986, the CSU has had the authority to make
all procurements, including purchasing vehicles within state
law. The CSU was awarded this authority after successfully
demonstrating �the] ability to be more responsive to the unique
needs of �their] campuses and their faculty, staff, and
students. �It was] also demonstrated that the CSU can be more
efficient in the use of taxpayer dollars without unnecessary and
duplicative work by the DGS."
Prior Legislation . AB 2031 (Evans), Chapter 247, Statutes of
2010, prohibited a state agency or department, including DGS,
from purchasing new vehicles without the approval of DOF and the
secretary or director of the agency or department requesting the
purchase.
AB 262 (Coto), Chapter 679, Statutes of 2007, required CSU to
purchase cars through DGS and be subject to DGS oversight as
part of the state fleet by redefining "state agency" to include
each campus of the CSU for vehicle purchases, commencing January
1, 2012. AB 262 also deleted mandatory annual fleet reporting
requirements and cost savings information from CSU to DGS.
SB 1757 (Denham), Chapter 926, Statute of 2004, established
requirements for the acquisition of motor vehicles under the
supervision of DGS, and encouraged the University of California
to follow these requirements.
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AB 1191 (Aguiar), Chapter 1097, Statutes of 1997, authorized the
CSU Board of Trustees to lease any real property for use by CSU,
and procure goods and services, including telecommunications
goods and services, without going through the DGS approval
process.
REGISTERED SUPPORT / OPPOSITION :
Support
California State University (sponsor)
Opposition
None on file.
Analysis Prepared by : Joanna Gin / B.,P. & C.P. / (916)
319-3301