BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 67 (Price)
Hearing Date: 4/11/2011 Amended: As Introduced
Consultant: Bob Franzoia Policy Vote: G O 11-1
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BILL SUMMARY: SB 67 would, on and after July 1, 2012, authorize
the Department of General Services (DGS) to direct all state
agencies, departments, boards, and commissions to establish the
goal to achieve 25 percent small business participation in state
procurements and contracts annually. This bill would require
DGS to ensure that the state's procurement and contract
processes are administered in order to meet or exceed the goal,
and to report to DGS statistics regarding small business
participation in DGS procurements and contracts. This bill
would authorize DGS to establish policies and procedures to
monitor the progress of the agencies toward meeting the goal of
25 percent small business participation and to provide this
information to the Office of Small Business Advocate. This bill
would also authorize DGS to require a state agency, department,
board, or commission that has not achieved its fiscal year goal
to submit an implementation and corrective action plan and every
year thereafter as long as the agency fails to meet or exceed
the goal. This bill would authorize DGS to establish criteria
for such a plan and to assist agencies in improving small
business participation in their contracting.
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
Statutory small business Unknown, multi millions of
dollars in costs General/
contract participation annually various
Special
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
To the extent this bill sets forth, and maintains in statute, a
small business participation rate, this bill could result in
multi millions of dollars in contract preferences over an
Executive Order (EO), which may change to decrease participation
and reduce contracting costs. However, to the extent existing
EOs remains effective and DGS continues to administer contracts
consistent with those EOs, there are no costs above the current
level as the proposed statute and the EOs are nearly identical
in fiscal impact. Where contracting participation falls below
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EO goals, there would be contract savings but increased
administrative expenses to increase participation.
Since 2001, there have been four EOs specifying goals for small
business and disabled veteran business enterprises (DVBE)
participation in state procurement contracts. EO D-37-01 (2001)
and EO S-02-06 (2006) set 25 percent small business
participation goals. Under current law, contractors bidding on a
state contract can have the overall cost of their bid discounted
by five percent in order to make them more competitive as a low
bidder. The maximum amount provided for each qualifying bidding
preference is
$50,000 with a total bid maximum of $100,000. Therefore,
contractors with bids of up to $100,000 higher than the lowest
bid can be awarded the contract if they qualify for
two bidding preferences.
State agencies with annual expenditures over $100,000 have
available to small business and DVBE suppliers, a liaison to
help them resolve contracting issues with the state. The small
business/DVBE advocate's duties must at minimum, include the
following services:
- Make information regarding pending solicitations available to,
and consider offers from, California small business suppliers
capable of meeting the state's business need, and who have
registered with the state for this purpose.
- Ensure that payments due on a small business contract are made
promptly.
DGS maintains a directory of all Small Business Advocates and
contact information.
Government Code 11148.5 (a) requires that each state agency that
significantly regulates small business or that significantly
impacts small business shall designate at least one person who
shall serve as a small business liaison. The small business
liaison has the general responsibility of responding to small
business concerns relating to his or her agency's activities and
responsibilities.
From 2006-07 through 2008-09, the state directed 26.34 percent
of all its spending toward small business and 2.72 percent to
disabled veteran business. During this three-year timeframe, a
total of nearly $8 billion in contracts were awarded to small
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businesses and almost $600 million to DVBEs.
For 2006-07, the state spent 28.31 percent with small business
and 2.8 percent with DVBEs. This represented an improvement of
9 percent and .75 percent respectively from the previous year's
small business and DVBE numbers.
For 2007-08, state entities reported 23.84 percent of purchasing
with small business and 2.39 percent with disabled veteran
businesses. This marked a fall-off from the previous year, with
declines coming primarily in construction and information
technology contracting.
For 2008-09, state departments spent 26.88 percent with small
business and 2.96 percent with DVBEs. This represents the
highest DVBE participation level achieved. 2009-10 information
is not yet available.
The costs to administer the provisions of this bill are minor
and absorbable because DGS is currently administering similar
provisions. The cost calculation of the preference is harder to
determine as departments have many ways to achieve the
participation goal without using the preference. For example,
the small business option in Chapter 212/2009, AB 31(Price),
does not use the preference. Similarly, if only small
businesses are answering a solicitation, the preference is not
applied because it is only used to help a small business compete
against a non-small business.
Staff notes this bill is similar to SB 1108 (Price) 2010 which
was held on the Assembly Appropriations Committee's Suspense
File.