BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 497|
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THIRD READING
Bill No: SB 497
Author: Rubio (D), et al.
Amended: 3/30/11
Vote: 21
SENATE GOVERNMENTAL ORG. COMMITTEE : 7-3, 3/22/11
AYES: Wright, Calderon, Corbett, De Le�n, Evans, Padilla,
Yee
NOES: Anderson, Strickland, Wyland
NO VOTE RECORDED: Berryhill, Cannella, Hernandez
SENATE APPROPRIATIONS COMMITTEE : 6-2, 5/26/11
AYES: Kehoe, Alquist, Lieu, Pavley, Price, Steinberg
NOES: Walters, Runner
NO VOTE RECORDED: Emmerson
SUBJECT : Public contracts: bid preferences
SOURCE : Author
DIGEST : This bill requires a state agency that accepts
bids or proposals for a contract for goods to provide a
preference of five percent to a California business meeting
specified criteria. This bill also requires the Department
of General Services to establish a process to verify that a
business meets the criteria for the preference.
ANALYSIS :
Chapter 2 of the State Contract Act governs acquisition by
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state agencies of goods and services, including the
approval of contracts, competitive bidding and other
contracting procedures.
Existing law establishes a preference for the use in public
contracts of supplies grown, manufactured, or produced in
California. Next in order of preference are supplies that
are partially manufactured in the state. Contract
advertising materials shall give notice that these
preferences will be applied.
Existing law provides that all contracts for construction,
alteration or repair of public works or for purchase of
materials shall contain provisions that substantially all
of the manufactured or unmanufactured materials made in the
United States are to be used in the performance of the
contract.
Existing law establishes a preference in awarding contracts
to companies certifying that labor will be performed in
part within a Local Agency Military Base Recovery Area.
This law also contains limits on the amount of the
preference, and small business bidders take precedence.
The Target Area Contract Preference Act provides a five
percent preference to California-based companies submitting
bids or proposals for state contracts over $100,000 where
at least 50 percent of the work to be performed will be at
worksites in distressed areas by persons with a high risk
of unemployment.
The Enterprise Zone Act gives a five percent preference to
California-based companies that demonstrate and certify
that at least 50 percent of the total labor hours required
to manufacture the goods and perform the contract shall be
performed at a worksite located in an enterprise zone.
The Small Business Procurement and Contract Act establishes
a five percent small business preference in state
contracts, and directs state agencies to establish small
business participation goals in the award of contracts for
goods, services, information technology and services to the
state.
This bill requires a state agency that accepts bids or
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proposals for a contract for goods to provide a preference
of five percent to a California business meeting specified
criteria. This bill also requires the Department of
General Services (DGS) to establish a process to verify
that a business meets the criteria for the preference.
Prior Legislation
SB 967 (Correa), Session of 2009-10, would have required
that a five percent bid preference be provided on specified
state contracts for goods and services to contractors who
demonstrate that 90 percent of their employees performing
work on the contract are residents of California. (Senate
Floor vote 23-14) The bill was vetoed by then Governor
Schwarzenegger whose veto message read in part,
"reciprocity statutes, enacted by at least 36 other states,
would add a percentage to bids submitted by California
businesses bidding on contracts with those states, making
it difficult for California businesses to contract with
other states."
SB 1249 (Ducheny), Session of 2009-10, would have
authorized DGS to use an additional criterion in the
contract bidding and procurement process that takes into
consideration the relative economic benefit to California
in considering bids for goods and/or services. The bill
passed the Senate Floor 23-12. (Held in the Assembly
Business, Professions and Consumer Protection Committee)
Background
In general, some form of resident preference is exercised
by a substantial majority of states. Most states have also
enacted some form of "buy American" legislation. Resident
bidder preference laws differ considerably from state to
state. Some require either that a non-resident's bid
amount be reduced by a certain percentage, or that a
resident's bid be increased by a certain percentage if a
non-resident bidder also bids on the project. Other states
require that a resident bidder's amount be increased only
to the same percentage as allowed in a non-resident's
state, if a non-resident bids on the contract. Still other
states have no bidder preference laws at all.
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FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
Bid preference Unknown, but significant annual
General/
state costs, potentially in the
millions Special
to tens of millions of dollars, to
the
extent state contracts areawarded to
other than the lowest bidder due to
the
preference. Also, to the extent the
residency requirement dissuades
contractors
from bidding on state contracts,
costs may
increase due to reduced competition.
Contract administration Unknown, but significant
costs to General/
determine compliance with the Special
residency requirement.
SUPPORT : (Verified 5/26/11)
American Federation of State County and Municipal
Employees, AFL-CIO
California Conference Board of the Almagated Transit Union
California Conference of Machinists
California Small Business Association
California State Pipe Trades Council
California Teamsters Public Affairs Council
Engineers and Scientists of California
International Longshore and Warehouse Union
Professional and Technical Engineers, Local 21
The Coalition of California Utility Employees
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The International Brotherhood of Electrical Workers
The International Union of Elevator Constructors
The Utility Workers Union of America
The Western States Council of Sheet Metal Workers
UNITE HERE!
United Food and Commercial Workers-Western States
Conference
Utility Workers Union of America, Local 132
OPPOSITION : (Verified 5/26/11)
California Chamber of Commerce
Construction Employers' Association
ARGUMENTS IN SUPPORT : The author states that California
is currently facing one of the most severe economic crises
since the Great Depression, with an average of six
applicants for every one position available. Additionally,
in the past decade, the manufacturing sector alone has lost
34 percent of its overall jobs. This bill creates the
incentive for contractors who wish to bid on state
contracts to hire California workers and bring much needed
job opportunities to the state's workforce.
ARGUMENTS IN OPPOSITION : California Chamber of Commerce
(CalChamber) opposes this bill and states, "The CalChamber
must regretfully OPPOSE SB 497 (Rubio) because bidding
preferences ultimately limit choice and drive up prices for
consumers and for the state. Protectionist legislation
like SB 497 also causes a net loss of jobs in related
industries, retaliation by our trading partners, and
violates provisions of the World Trade Organization and
bilateral free trade agreements."
PQ:kc 5/27/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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