BILL ANALYSIS �
AB 1791
Page 1
Date of Hearing: May 16, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1791 (Buchanan) - As Amended: April 26, 2012
Policy Committee: Business and
Professions Vote: 5-1
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill requires bidders on state contracts to certify
compliance with computer software copyright laws. Specifically,
this bill:
1)Requires that all state contracts include a provision
requiring the contractor to certify it has appropriate systems
and controls to ensure that its use of computer software
complies with applicable copyright laws.
2)Requires that all contracts between state agencies and
contractors include a provision requiring the contractor to
certify it has appropriate systems and controls to ensure that
state funds will not be used for the acquisition, operation,
or maintenance of computer software in violation of copyright
laws.
3)Provides that a certification per (1) or (2) shall not be
considered false to the extent a violation of copyright laws
arises from causes beyond the control and without the fault or
negligence of the contractor.
4)Stipulates that the sole means of challenging a certification
made per (1) or (2) are the dispute provisions of the state
contract.
FISCAL EFFECT
One-time costs to DGS in excess of $1 million to establish terms
and conditions for all contracting agreements. In particular,
DGS notes that (1) above applies not just to private
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contractors, but to interagency, University of California,
federal government and local government contracts with the
state. DGS indicates this process will involve vetting with all
these parties and the vendor community.
One-time costs to DGS exceeding $500,000 to define "appropriate
systems and controls" in regulations and to draft dispute
resolution language for use in state contracts. State
departments could incur costs to establish "appropriate systems
and controls" in order to conduct interagency agreements.
DGS also identified multi-million dollar ongoing costs for bid
evaluation-to review prior to contract award that appropriate
systems and controls are in place-and for compliance monitoring
(auditing) of contractors. Arguably these costs would not be
necessary to a great extent if instead it is assumed that a
contractor's certification demonstrates compliance until
successfully challenged through the dispute resolution process.
DGS contends, however, that it would not prevail if an entity
sued the state for writ of mandate to "ensure" no state money
was used improperly in a contract. Regardless, the bill's
requirements are likely to lead to additional contract disputes,
with resulting costs related to that process and to contract
delays.
COMMENTS
1)Background . Pursuant to a 1999 Executive Order by Governor
Davis, DGS developed language for inclusion in state contracts
to prohibit the use of state funds for the acquisition,
operation or maintenance of computer software in violation of
copyright laws. This language is required in all state
contracts involving the purchase or utilization of computer
software in the performance of such contracts.
2)Purpose . According to the author's office, "AB 1791 promotes
lawful computer use by state contractors and suppliers by
affirming that it is state policy that contractors and
suppliers use only lawful computer software in their business
operations and establishing contracting provisions to ensure
lawful software use.
The bill essentially codifies the requirement embodied in the
1999 Executive Order, and adds a broader certification
requirement, i.e. that the contractor's entire use of computer
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software, not just that associated with the state contract,
comply with copyright laws.
3)In support , the sponsor (Microsoft) states that "Theft of
computer software by businesses reduces the profitability of
California's IT industry and its ability to create jobs and
generate tax revenues for the State. The State of California
procures billions in goods and services and awards hundreds of
contracts annually. AB 1791 requires a small change in DGS
contracts that save thousands of California jobs.
"AB 1791 would stimulate job growth in California's IT sector
by helping to combat one of the principal threats confronting
the industry, namely the widespread use of stolen software.
In a 2011 study, the Business Software Alliance reported that
an estimated 42% of the software used throughout the world in
2010 was stolen, with a commercial value of $59 billion.
These high rates of IT theft translate into fewer California
jobs, reduced tax revenues, and a slower economy recovery."
4)Opposition . In a joint letter of opposition, Apple, Cisco,
Dell, IBM, Google, HP, Motorola, Xerox, the Consumer
Electronics Retailers Association, and the California
Manufacturers and Technology Association contend the
certification in the bill is overbroad and cost prohibitive
and impractical for contractors. The opponents note that
technology contractors license hundreds of individual software
components and programs from third party developers, and that
even with extensive controls in place to comply with copyright
laws, "inadvertent mistakes and disputes can sometimes occur."
Opponents argue that third-party software developers and
contractors have existing means to resolve licensing disputes
through contractual mechanisms or the courts, if necessary.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081