BILL ANALYSIS �
SB 467
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Date of Hearing: August 8, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 467 (Pavley) - As Amended: June 11, 2012
Policy Committee: B&P Vote:7-1
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill requires the Department of General Services (DGS) to
issue a master services agreement (MSA) allowing state agencies
to purchase an "energy efficiency information technology (IT)
product or service"-a software- or hardware-based product or
service that analyzes the energy use of a building in order to
generate energy cost savings that, within 48 months of
deployment, are projected to exceed the state's cost of that
product or service. Specifically, this bill:
1)Requires DGS to deem a contract for purchase of an energy
efficiency IT product or service to be a no-bid or cost
neutral contract if either:
a) The state, for the life of the contract, pays the vendor
less than the amount of projected energy cost savings,
including the amount the state was paying to maintain the
electrical and mechanical systems that provide a building's
energy.
b) The vendor pays the state a lump sum amount at the
execution of the contract in exchange for the state making
incremental payments to the vendor equal to the energy cost
savings over the life of the contract.
2)Requires DGS, by April 1, 2013, to issue an MSA permitting
state building owners, operators and tenants to procure energy
efficiency information technology products and services from
approved companies, each of which must have a record of
providing such products or services to other public or private
entities for at least two years prior to January 1, 2013.
SB 467
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3)Requires those state entities using the MSA, at least 10 days
prior to executing a contract, to provide the following to
DGS: (a) a document demonstrating bids from at least two
approved companies; (b) a document forecasting the projected
net savings from the contract; and (c) a document describing
how a record of the actual energy cost savings will be
tracked, recorded and retained.
4)Requires the MSA to include pilot or demonstration contracts
allowing participation of companies that have been in business
less than two years, or the use of an emerging technology or
service that could become commercially viable based on its
performance under prototypical or limited production.
FISCAL EFFECT
1)One-time cost of around $500,000 to DGS to develop and oversee
the MSA, to develop policies and guidance for state
departments, and to define technical and legal parameters for
the contracts �Service Revolving Fund].
2)Ongoing costs to DGS of $200,000 for two positions to manage
the MSA �Service Revolving Fund].
3)To the extent use of the MSA leads to expanded applications of
energy efficiency products and services in state facilities,
the state should realize long-term energy cost savings.
COMMENTS
1)Background . DGS utilizes the MSA procurement process when the
majority of state agencies demand a particular product. For
example, all state agencies use office supplies. Therefore,
there is a sole vendor under the MSA from which all state
agencies must order their office supplies. Without having to
go out to bid, state agencies select the products and services
to be ordered and send the purchase order directly to the
contractor. Currently, DGS adds vendors to the MSA every two
years through competitive bidding. SB 467 allows state
agencies to procure energy efficiency products and services by
selecting a provider from the MSA list and entering into a "no
cost" or "cost-neutral" contract instead of competitive
bidding, though at least two bids would have to be obtained
from vendors on the MSA list of approved vendors.
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2)Purpose . According to the author's office, "Federal and local
governments and an increasing number of private entities have
been able to take advantage of "performance-based" energy
efficiency contracts. These contracts either require the
vendor to be paid from the savings generated by the contract,
such that there is no upfront cost to the state, or provide
assurances that the cost of the product or service will be
less than the money saved in reduced energy consumption. In
addition to providing immediate or near-term cash savings to
the purchaser, the contracts have the additional environmental
benefit of reducing greenhouse gases, reducing energy
consumption, and aiding the environment.
"Unfortunately, despite the urgent need to save General Fund
money, reduce energy consumption, and emissions, it is
generally understood that the state is not on track to meet
that target. A significant part of the reason for this
presumed failure is that DGS has not provided state building
owners, operators, and tenants with an effective contracting
process for the procurement of performance-based or otherwise
energy saving technologies or services."
3)Opposition . Several construction trades associations argue,
among other concerns, that the bill will lead to the award of
state contracts without competitive bidding.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081