BILL ANALYSIS �
SB 252
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Date of Hearing: June 22, 2011
ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
Isadore Hall, Chair
SB 252 (Vargas) - As Amended: May 31, 2011
SENATE VOTE : 25-15
SUBJECT : Public contracts: personal services
SUMMARY : Establishes the Government Oversight and Fiscal
Accountability Review Act of 2011 and requires a state agency or
department that enters into a privatization contract, as
defined, to report to the Department of General Services (DGS)
regarding that privatization contract and requires DGS to make
that report available for public inspection pursuant to the
California Public Records Act (CPRA). Specifically, this bill :
1) Defines "agency" as any state agency or department.
2) Defines a "privatization contract" to mean an agreement or
combination or series of agreements, including, but not limited
to, a personal services contract, by which a privatization
contractor agrees with an agency to provide services valued at
$500,000 or more that are substantially similar to, and in lieu
of, services provided, in whole or in part, by civil service
employees of the agency.
3) Defines "privatization contract" to mean any contractor,
consultant, subcontractor, independent contractor, or private
business owner that contracts with an agency to perform services
that are substantially similar to, and in lieu of, services
provided, in whole or in part, by civil service employees of the
agency.
4) Requires an agency, as part of the budgetary process, to
provide an addendum to its submitted budget request that
includes 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, the services provided, the total cost of
each privatization contract for the prior year, the projected
number of privatization contracts for the current and upcoming
year, the estimated cost of each contract for the current and
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upcoming year, and 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 fiscal year. This measure provides that this
addendum shall be a public record.
5) Requires an agency that enters into a privatization contract
to prepare and submit an annual report containing a copy of each
privatization contract and a budget analysis of that contract,
as specified.
6) Provides that a subcontract performed under a privatization
contract is a public record pursuant to CPRA.
7) Requires DGS to compile, publish, and make available for
public inspection all contracting reports received pursuant to
the provisions of this bill.
EXISTING LAW :
1) Establishes standards for state agencies for the use of
personal services contracts.
2) Requires the contracting agency to clearly demonstrate that
the proposed contract will result in actual overall cost savings
to the state.
3) Provides that the contract cannot cause the displacement of
civil service employees.
4) Requires that personal services contracts entered into by
state agencies with private parties in an amount of $5,000 or
more, unless exempt, are required to be submitted to the
Department of General Services for approval.
4) CPRA governs the disclosure of governmental records to the
public upon request. Generally, all public records are open to
the public upon request unless the record requested is exempt
from public disclosure.
FISCAL EFFECT : Unknown
COMMENTS :
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Background : Under current California law, State agencies are
allowed to enter into personal services contracts with private
entities in order to reduce state costs. Before entering into a
private contract the contracting agency needs to demonstrate
that the proposed contract will result in overall savings to the
state. In addition, the agency must notify the State Personnel
Board and receive approval from DGS to enter into that contract.
Once the contract has been performed, the state agency must
electronically submit certain contract information to the State
Contract and Procurement Registration System (SCPRS) maintained
by DGS. The SCPRS was established in 2003 by DGS to provide a
centralized database of information on state contracts over
$5,000.
According to DGS, in Fiscal Year 2009-10, California spent $35.4
billion in private contracts. A study by the Service Employees
International Local 1000 estimated that the state could save
roughly $350 million annually by utilizing state workers instead
of privatization contracts; $100 million or more annually in IT
contracts, $144-$205 million or more annually in medical
registry contracts, and $50 million or more annually in
architectural and engineering contracts. According to this same
study, there are significant shortcomings to the SCPRS which
include: incomplete, inconsistent and inaccurate report contract
data, unreliable fiscal year costs, and inability for users to
search by state agency name and/or contractor.
Purpose of the bill : According to the author, in fiscal year
2009-2010, California spent $35.4 billion on private contracts.
However, much of this multi-billion expenditure occurred without
substantive government oversight; resulting in billions of
wasted dollars. In the Department of Corrections and
Rehabilitation alone, there is $1 billion in privatization
contracts for services that are identical or substantially
similar to services provided by civil service employees.
Taxpayers deserve to be given information about what option is
the best value. This measure will ensure increased
accountability, oversight and public transparency.
Arguments in support : The American Federation of State, County,
and Municipal Employees (AFSCME), AFL-CIO, the sponsor of the
bill, states that this measure increases legislative oversight
and public transparency by requiring state agencies to report
the cost and duration of goods and services contracts. In
addition, this measure ensures fiscal accountability by the
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Legislature by including the cost privatization contracts in the
same manner as other expenditure data in order to allow a
comparison and analysis of privatization costs versus the cost
of utilizing civil service employees.
Similarly the California Labor Federation and the Association of
California State Supervisors declare that "at a time of deep
budget cuts to all state agencies, it is particularly important
to evaluate the way that state services are contracted out.
Contracting out does not only means layoffs of longtime
employees, but it also results in reduced oversight and
accountability." In addition, "at a minimum, policy makers need
accurate and through information about state contracts to
determine whether they are good use of resources. Currently,
there is little data available to make such assessments."
In opposition : The California Chamber of Commerce, among others,
writes in opposition to the bill claiming that this measure
"creates a very real risk of financial and competitive damage to
public and private firms by requiring the disclosure of
confidential information. While we are generally supportive of
efforts to increase transparency across all sectors of
government, we believe SB 252 goes too far by seeking to make
details about private subcontracting arrangements and private
employee wage information available to the public at large." In
addition they claim that, "mandating this information be turned
over to state agencies (and in turn the public) would undermine
competition among these parties, drive many companies from the
market, and ultimately increase the cost of doing business with
the state, which would then be passed on to taxpayers."
Double-referral : This measure is double-referred to the Assembly
Committee on Business, Professions and Consumer Protection.
Related Legislation :
AB 172 (Eng). Would establish the Reporting Transparency in
Government Internet Web Site to provide audit and summary data
regarding contracts valued at $5,000 or more to the public.
(Pending in Senate Governmental Organization)
Prior Legislation :
AB 756 (Eng/Lieu), 2009-2010 Legislative Session. The bill
requires each state agency to provide a link to a centrally
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located and accessible state-run Internet Web site that includes
a list of personal and consulting services contracts. (Vetoed by
Governor)
AB 2603 (Eng), 2007-2008 Legislative Session. The bill requires
state agencies to prepare an annual report for the Department of
Finance listing personal services and consulting services
contracts, entered into by the agency in the previous fiscal
year. (Held in Senate Appropriations Committee)
SB 1331 (Oropeza), 2007-2008 Legislative Session. The bill
would have required the Governor to prepare and submit to the
Legislature, along with the Governor's Budget, a report that
contains information regarding current and proposed contracts
for services in the amount of $5,001. (Held in Senate Rules
Committee)
SB 1596 (Yee, 2008), 2007-2008 Legislative Session. The bill
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
require contractors to file a questionnaire with the Regents
regarding such information with civil penalties for filing
incorrect information. (Held in Senate Appropriations
Committee)
REGISTERED SUPPORT / OPPOSITION :
Support
American Federation of State, County and Municipal Employees,
AFL-CIO (Sponsor)
Association of California State Supervisors
California Labor Federation
California Nurses Association
California State Employees Association
Glendale City Employees Association
Organization of SMUD Employees
Professional Engineers in California Government
San Bernardino and Santa Rosa City Employees Association
San Luis Obispo County Employees Association
Opposition
American Council of Engineering Companies
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California Chamber of Commerce
TechAmerica
TechNet
Analysis Prepared by : Felipe Lopez / G. O. / (916) 319-2531