BILL ANALYSIS �
Bill No: SB
252
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2011-2012 Regular Session
Bill Analysis
SB 252 Author: Vargas
Introduced: February 10, 2011
Hearing Date: April 12, 2011
Consultant: Paul Donahue
SUBJECT : Public contracts: Privatization contracts
SUMMARY : Requires a state agency that enters into a
privatization contract to report to the Secretary of State
regarding those contracts. Would make reports on the
contracts available for public inspection. Requires state
agencies to submit information relating these contracts as
part of the budget process.
Existing law :
1) Establishes in the California Constitution a system of
civil service employment for state government. The civil
service includes every officer and employee of the state
except as otherwise provided in the Constitution. (Const.,
art. VII, � 1(a)
2) Restricts, but does not prohibit, private contracting by
public agencies. Public agencies are authorized to engage
in private contracting in various instances:
a) When the "nature of the services" is such that the
services cannot be adequately rendered by an existing
agency of the public entity.<1>
b) If the state seeks to contract for private
assistance to perform "new functions" not previously
undertaken by the state or covered by an existing
----------------------
<1> State Compensation Ins. Fund v. Riley (1937) 9 Cal.2d
126
SB 252 (Vargas)
PageB
department.<2>
c) When the state, under specified conditions
contracts with private contractors to achieve cost
savings.<3>
3) Requires a state agency proposing to enter into a
personal services contract with a private contractor to
notify the State Personnel Board (SPB), which shall contact
employee organizations and allow a reasonable opportunity
for comment on the proposed contract.
4) Provides that an employee may request that SPB review
the proposed contract for compliance with applicable
exceptions to the restrictions on contracting out, and that
SPB shall upon request conduct a review of the contract for
compliance with the standards.
5) Authorizes public agencies to contract out for
architectural and engineering services on public works
projects.<4>
6) Requires each state and local agency to make its records
available for public inspection during office hours and,
upon request of any person, to make copies available upon
payment of fees, unless the records are exempt by law from
disclosure. (Public Records Act; Govt. Code � 6250 et seq.)
This bill :
1) Provides that a subcontract or amendment to a
subcontract that is executed under a privatization contract
is a public record, and requires the privatization
-------------------------
<2> Professional Engineers v. Department of Transportation
(1993) 13 Cal.App.4th 585
<3> Govt. Code � 19130; California State Employees' Assn.
v. State of California (1982) 199 Cal.App.3d 840
<4> Cal. Const., art. XXII; Govt. Code � 4529.10 et seq.;
enacted by Proposition 35 in 2000. See also Professional
Engineers in California Government v. Kempton (2007) 40
Cal.4th 1016
SB 252 (Vargas)
PageC
contractor<5> to submit these subcontracts to the
contracting public agency, which is required to make the
records available to the public pursuant to the Public
Records Act.
2) Requires state agencies, as part of the state budgetary
process, to prepare a document that contains specific
information relating to their use of private contractors,
including:
a) The name of each privatization contractor or
subcontractor that has entered into a privatization
contract with the agency during that year, the
duration of that privatization contract, and the
services provided pursuant to that contract.
b) The total cost of each privatization contract for
the prior year.
c) The projected number of privatization contracts for
the current and upcoming year and the estimated cost
of each contract for the current and upcoming year.
d) For each privatization contract, the number of
privatization contractor employees and consultants,
reflected as full-time equivalent positions, and their
hourly wage rates for the current and previous fiscal
year.
3) Makes privatization contracts subject to audit or review
by the Bureau of State Audits, at the discretion of the
State Auditor. An audit or review shall be conducted in
compliance with generally accepted auditing standards.
4) Requires a state agency that enters into a privatization
contract <6> to report to the Secretary of State regarding
those privatization contracts, and would require the
-------------------------
<5> A "privatization contractor" is any contractor,
consultant, subcontractor, independent contractor, or
private business owner that contracts with a public agency
to perform services that are substantially similar to, and
in lieu of, services provided by civil service employees of
the agency.
<6> A privatization contract is an agreement, including a
personal services contract, by which a contractor contracts
with a public agency to provide services valued at $100,000
or more, that are substantially similar to, and in lieu of,
services provided, in whole or in part, by civil service
employees of the public agency.
SB 252 (Vargas)
PageD
Secretary of State to compile, publish, and make these
reports available for public inspection.
COMMENTS :
1) Purpose and intent : The author states that this bill
would increase the ability of the Legislature to protect
taxpayer dollars by providing robust oversight on the
quantity and cost of privatization services. The author
notes that, in fiscal year 2009-2010, California spent
$35.4 billion on private contracts. However, much of this
multi-billion expenditure occurs without substantive
government oversight, which results in billions of wasted
dollars. In the Department of Corrections alone, there is
$1 billion in privatization contracts for services that are
identical or substantially similar to services provided by
civil service employees. The author believes that
taxpayers deserve to be given information about what option
is the best value. This cost does not include the billions
spent on IT projects, consulting, construction, design or
public works related services.
2) Architectural and engineering contracts : In
Professional Engineers in California Government v. Kempton
(2007) 40 Cal.4th 1016, the California Supreme Court held
that Proposition 35, passed by the electorate in 2000,
authorizes public agencies to contract out for
architectural and engineering services without legislative
restrictions. The Court stated that the initiative
represents a comprehensive regulation of the entire subject
of private contracting for those services, that it prevails
over conflicting acts of the Legislature, and also that it
must be construed liberally to achieve its goal of
encouraging and authorizing private contracting of
architectural and engineering services.
The Court also held that, while authorizing the Legislature
to amend the initiative by statute, the initiative
restricts that power to such amendments as will "further
its purposes."
In a later case,<7> the California Supreme Court held that
a provision of a memorandum of understanding (MOU) between
-------------------------
<7> Consulting Engineers & Land Surveyors of California,
Inc. v. Professional Engineers in California Government
(2007) 42 Cal.4th 578
SB 252 (Vargas)
PageE
the state and a state employee union that restricts the use
of private contractors for architectural and engineering
services by public agencies fatally conflicts with
Proposition 35. Among other things, the Court rejected
attempts by the state employee union to characterize the
purpose of the MOU as "merely an innocuous mechanism for
gathering and analyzing data on private contracting."
Despite the fact this bill directs the state to gather and
analyze data on private contracting after the contracts
have already been awarded, an argument could be made that
it does not "further the purposes" of Proposition 35, which
is to eliminate restrictions on the state's prerogative to
contract out for architectural and engineering services.
For example, a requirement in this bill that an agency
entering into a privatization contract to submit detailed
information on any person who performs engineering services
under the contract could be regarded as establishing a
"state policy that civil service employees should be
preferred over the use of private architectural and
engineering contractors," which the Court has disallowed
.<8>
In light of the foregoing, the Committee may wish to
consider an amendment that deletes the legislative findings
and declarations in Section 1 of the bill, which among
other things states that using private contractors to
provide public services does not always promote the public
interest.
3) Secretary of State versus Department of General Services
(DGS) : The bill imposes on the Secretary of State several
custodial, compilation and report publishing duties
pertaining to state contracting. The Secretary of State is
a separate constitutional officer who is not part of the
Governor's Administration. The DGS is the state control
agency charged with responsibility for supervising all
-------------------------
<8> The California Supreme Court also noted that what the
state may not do is to "impair an individual agency's
choice to engage in private contracting in derogation of
the authority conferred on it by Proposition 35. Neither
the Governor nor the Legislature, separately or jointly,
can undo ? what the electorate enacted through Proposition
35." Consulting Engineers, 42 Cal.4th at 591, fn. 4
SB 252 (Vargas)
PageF
aspects of contracting by state agencies. In addition, DGS
regularly compiles and publishes information concerning
state contracting activities.
The Committee may wish to consider amendments to this bill
that would place these reporting and publishing
responsibilities with DGS instead of the Secretary of
State.
4) Technical amendment : On page 2, line 21, strike out
"2010" and insert: "2011"
5) Note : This bill is double referred to Senate Judiciary
Committee.
6) Related legislation :
AB 756 (Eng, 2009) . Would have required a state agency to
provide a link to a centrally located and accessible state
Internet website that includes a list of the personal
services and consulting services entered into by the
agency. (Vetoed)
SB 1596 (Yee, 2008) . Would have required the Regents of the
University of California to establish a contractor
responsibility program and to establish a centralized
contract information data warehouse and would have required
contractors to file a questionnaire with the Regents
regarding such information with civil penalties for filing
incorrect information. (Held on the Senate Appropriations
Suspense File)
SB 1331 (Oropeza, 2008) . Would have required the Governor,
as part of the state budget, to submit to the Legislature
information regarding current and proposed service
contracts with a value of $5000 or more. (Held in Senate
Rules Committee)
AB 2603 (Eng, 2008). Would have required state agencies to
prepare an annual report for the Department of Finance
listing personal services and consulting services contracts
entered into during the previous fiscal year. (Vetoed)
AB 239 (Horton, 2005) . Would have required the Governor to
submit to the Legislature a report that contains specified
information regarding current and proposed contracts for
SB 252 (Vargas)
PageG
services, including the name of the contractor and a
description of the contract, the amount of funds involved,
and whether the contract was non-competitively bid.
(Vetoed)
SUPPORT:
American Federation of State, County and Municipal
Employees (AFSCME) �Source]
California Labor Federation
California Nurses Association
Professional Engineers in California Government (PECG)
OPPOSE: None on file as of April 7, 2011
FISCAL COMMITTEE: Yes
**********