BILL ANALYSIS �
SB 175
Page 1
Date of Hearing: July 5, 2011
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Mary Hayashi, Chair
SB 175 (Corbett) - As Amended: June 27, 2011
SENATE VOTE : 27-11
SUBJECT : Public contracts: bid preferences: solar photovoltaic
system.
SUMMARY : Provides a 5% bid preference in state contracts for
the purchase or installation of solar panels that are
manufactured or assembled in the state. Specifically, this
bill :
1)Requires a state agency accepting bids or proposals for a
contract to purchase or install a solar photovoltaic (PV)
system through a power purchase agreement or through direct
purchase to provide a 5% bid preference to a business
certifying that all of the solar panels installed have been
manufactured or assembled in this state. Requires that the
preference shall be provided as follows:
a) For contracts to be awarded to the lowest responsible
bidder, the bid preference shall be 5% of the bid price of
the lowest responsible bidder meeting specifications; or,
b) For contracts to be awarded to the highest scored bidder
based on evaluation factors in addition to price (best
value), the bid preference shall be 5% of the total score
of the highest bidder.
2)Prohibits a non-compliant bidder from receiving a bid
preference.
3)Requires a business to submit specified documentation and
information to the state agency to be eligible for the 5% bid
preference.
4)Requires the Department of General Services (DGS) to establish
a process to verify that a business meets the criteria for the
5% bid preference.
SB 175
Page 2
5)Requires that if the bids are tied as the lowest responsible
bid or the highest scored bid, then the tie shall be resolved
in favor of the entity that has the higher number of full-time
assembly or manufacturing employees in California at the time
of the tie.
6)Creates the following definitions:
a) "Assemble," "assembled," or "assembler" means connecting
individual solar cells into larger groups whereby the solar
panel or module is the end product;
b) "Manufacture," "manufactured," or "manufacturing" means
the transformation of raw materials into a solar panel,
including the manufacture of solar wafers, the
postprocessing of solar cells, or the manufacture of solar
cells.
c) "Power purchase agreement" means a financial arrangement
in which a third-party developer owns, operates, and
maintains a solar PV system, and a state agency agrees to
site the system on its roof or elsewhere on its property
and purchases the system's electric output, not the system
itself, from the third-party developer for a predetermined
period of time;
d) "Solar cells" means the basic building block of PV
technologies. "Solar cells" are functional semiconductors,
made by processing and treating crystalline silicon or
other photosensitive materials to create a layered product
that generates electricity by absorbing light photons;
e) "Solar panels" means individual solar cells assembled
into larger groups whereby the solar panel or module is the
end product, and consists of a series of solar cells to
capture and transfer solar-generated electricity, a backing
surface, and a covering to protect the cells from weather
and other types of damage, and may include an affixed power
quality, product efficiency, power conversion, balance of
systems (BOS), and enhancements to the panel; and,
f) "Solar PV system" means a system created by installing
multiple solar panels in the same location to increase the
electrical generating capacity. In a "solar PV system" the
solar panels and solar cells represent the highest
SB 175
Page 3
intellectual content and dollar-value items associated with
solar PV energy generation.
7)Makes legislative findings and declarations.
EXISTING LAW :
1)Governs the solicitation, review and award of state contracts
and establishes various programs and preferences in public
contract law designed to serve a broad public purpose, such as
preference for small businesses, disabled veteran business
enterprises (DVBEs) and recycled products. Existing law
designates the DGS to administer the Small Business
Procurement and Contract Act (Small Business Act), including,
but not limited to, small business, microbusinesses and DVBE
certification processes.
2)Requires the DGS and state agencies entering into contracts
for goods, services, information technology, and construction,
to establish small business participation goals, provide for
small business bid preferences, and provide assistance to
small businesses, under the Small Business Act.
3)Establishes bid preferences for certified small businesses and
microbusinesses for the award of state procurement contracts
of at least 5% of solicitations made either on the basis of
lowest responsible dollar bid or on the basis of highest
score, with a single bid preference limit of $50,000.
Non-small businesses that subcontract at least 25% of their
contracts with certified small businesses also qualify for the
small business bidders' preference.
4)Defines a small business as independently owned, not dominant
in its field of operation, domiciled in California, employing
100 or fewer employees, and earning $10 million or less in
average annual gross revenues for the previous three years.
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of this bill . According to the author's office,
"Executive Order S-20-04 mandated that state agencies evaluate
the merits of using clean and renewable onsite energy generation
technologies in all new buildings or large renovation projects.
SB 175
Page 4
"California has installed PV solar systems on state property,
including land controlled by the Department of Corrections and
Rehabilitation, the Department of Mental Health, and several
California State Universities. However, DGS does not know if
any of the solar panels on state property were made in
California. There are at least ten companies that assemble or
manufacture solar panels in California. Solar manufacturing is
a growing business and many companies are deciding to locate in
California."
"California-made panels create important manufacturing jobs in
our state causes significant investment in our communities, are
made with cleaner energy than foreign-made panels, and will
demonstrate California's innovative technology. Other states
and countries are using tax incentives, low-interest loans,
cheap labor, and cheap, dirty energy to lure California
clean-technology manufacturers away from California. Many other
states have preferences for state-manufactured goods, such as
Alaska, Idaho, Montana, and West Virginia. If California is
going to install solar panels on state property, it should
attempt to support California manufacturers. "
Background . Current law provides certain circumstances where
contractors bidding on a state contract can have the overall
cost of their bid discounted by 5% in order to make them more
competitive as a low bidder. Preferences can currently be given
for small businesses, businesses in economically distressed
areas, and DVBEs. The maximum amount provided for each
qualifying bid preference is $50,000.
This bill would allow companies that manufacture solar panels
out-of-state or in different countries, to assembly the solar
panels in California, to receive the 5% bid preference. This
bill would also allow eligible small businesses and DVBEs to
additionally receive a 5% bid preference for
California-manufactured or assembled solar panels. This bill
does cap the maximum cost or the bid percentages as is done with
the other state bid preferences.
Related Legislation . SB 497 (Rubio) of 2011, requires that a 5%
bid preference be given to a California business in state goods
contracts.
Previous Legislation . SB 967 (Correa) of 2010, would have
SB 175
Page 5
requires a 5% bid preference be provided on state contracts for
goods and services exceeding $1 million, including contracts
funded by the federal American Recovery and Reinvestment Act of
2009, to contractors who substantiate that 90% of their
employees performing work on the contract are California
residents, by July 1, 2011. This bill was vetoed.
Support . According to the Fremont Chamber of Commerce, "Fremont
is home to Solyndra, Solaria, Greenvolts, and a new Tesla plant,
to name a few of the green technology companies that are
locating operations here. We are excited about becoming a hub
for green technology, but we also know the tremendous loss of
jobs our state has experienced in this current economic
downturn. We ourselves experienced the closure of the New
United Motor Manufacturing, Inc. (NUMMI) plant and the entire
state experienced the ripple effect of �NUMMI]. Particularly
considering the current unemployment rate in California and the
need to generate and maintain well-paid manufacturing jobs in
our state, we believe that the state should invest its money in
businesses that are located here and generating jobs and income
for the State of California. State purchases should be used to
stimulate the State's economy and put people back to work in
California."
Opposition . According to the California Chamber of Commerce and
the California Manufacturers & Technology Association, "By
limiting the bidders, competition will be reduced, resulting in
less choice and higher prices on the resulting contracts, making
the advancement of energy efficiency goals less attainable.
Furthermore, state costs in bid preferences, especially at a
time of fiscal crisis, negates the measure's intended purpose of
job creation and economic stimulation. A potential result of
protectionism legislation is retaliation from our trade partners
- other states and international trade partners. To the extent
that California limits bidders, California companies could be
penalized in trade with other states and nations. This practice
creates a patchwork of reciprocity and retaliation that makes it
difficult for California businesses to contract with other
states. We believe that this will have a net negative effect on
California businesses and their employees."
REGISTERED SUPPORT / OPPOSITION :
Support
SB 175
Page 6
California Labor Federation
City of Fremont
Clean Economy Network
Fremont Chamber of Commerce
Nanosolar
Petra Solar
Sierra Club California
Solaria
Solyndra LLC
State Building and Construction Trades Council
Opposition
California Chamber of Commerce
California Manufacturers & Technology Association
Analysis Prepared by : Joanna Gin / B.,P. & C.P. / (916)
319-3301