BILL ANALYSIS �
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: SB 733
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: PRICE
VERSION: 4/14/11
Analysis by: Michelle Leinfelder
FISCAL:YES
Hearing date: May 3, 2011
SUBJECT:
High-speed rail small business participation
DESCRIPTION:
This bill requires the California High-Speed Rail Authority
(HSRA) to include in its January 1, 2012 business plan a
strategy for ensuring California-certified small business
participation in contracts awarded with state and federal funds
during all phases of the high-speed rail project. It also
requires the HSRA to have a strategy for working with the
Employment Development Department to ensure that at least 25
percent of the project workforce at each worksite is from the
local workforce.
ANALYSIS:
SB 1420 (Kopp), Chapter 796, Statutes of 1996, created the HSRA
with a nine-member governing board, including five members
appointed by the governor, two members appointed by the Senate
Rules Committee, and two members appointed by the Speaker of the
Assembly.
AB 3034 (Galgiani), Chapter 267, Statutes of 2008, authorized
the Safe, Reliable High-Speed Passenger Train Bond Act for the
21st Century (Proposition 1A), which allowed the HSRA to develop
a high-speed rail system extending from San Diego to Sacramento
with Phase I connecting Anaheim-Los Angeles Union
Station-Bakersfield-Fresno-San Jose-San Francisco Transbay
Terminal, authorized $9.95 billion in general obligation bonds
to support the project, and required the HSRA to prepare a draft
business plan by October 1, 2011 and a final plan by January 1,
2012, with updated plans due every two years. The bill also
authorized the HSRA to enter into contracts with private or
public entities for the design, construction, and operation of
high-speed trains. In November 2008, the people passed
Proposition 1A.
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Existing law defines a California-certified small business, and
the Department of General Services Office of Small Business and
Disabled Veteran Business Enterprise Services (DGS-OSDS)
oversees their certification. Under the code, a
California-certified small business cannot be dominant in its
field. Furthermore, regulation establishes that a certified
small business is one that meets each of the following
requirements:
is independently-owned and operated;
has its principal office located in California;
has owners or officers who are domiciled in California;
and
is either a business with 100 or fewer employees and an
average annual gross receipts of $14 million or less over
the last three tax years, a manufacturer with 100 or fewer
employees, or a microbusiness, defined as a small business
with gross annual receipts less than $3,500,000 or a
manufacturer with 25 or fewer employees.
This bill:
1) Requires the HSRA to include in its January 1, 2012
business plan, or in an addendum to that plan to be
submitted as soon as possible after that date, a strategy
for ensuring participation of California-certified small
businesses in contracts awarded with state and federal
funds during all phases of the project.
2) Requires the HSRA to work with the Employment
Development Department (EDD) to develop a strategy for
ensuring that at least 25 percent of the project workforce
at each worksite is from the local workforce. The HSRA
shall also report in their January 1, 2012 business plan
their local workforce strategy pursuant to this addition.
3) Defines "local workforce" as residents of the local
workforce development area in which the worksite is located
and "local workforce development area" as one of 49 areas
in the state with a local board currently designated by the
Governor.
COMMENTS:
1. Purpose . According to the author, the California High-Speed
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Rail project is the most expensive single
infrastructure project in U.S. history, and there is a need to
ensure that eligible California businesses benefit from, and
are given priority to work on, the undertaking of such a massive
project. The author also states that it is important that the
HSRA outline specifically its outreach efforts that assist
small, local, and emerging businesses in securing contracts to
participate in this critical project.
2. Advantages to being a California-certified small business .
Certified small businesses are entitled to the following
benefits: a five percent bid preference on applicable state
solicitations; eligibility for the state's Small Business
Participation Program, which sets a goal for the use of small
businesses in at least 25 percent of the state's overall annual
contract dollars; higher interest penalties for late state
payment of an undisputed invoice; a streamlined process for
contracting with state agencies; and in certain cases,
administrative fee
waivers and bid preferences. According to DGS-OSDS, the
application for small business certification is available and
may be submitted online, and it only takes about 10
minutes to complete.
3. Deadline to report on a strategy for ensuring certified
small business participation . This bill requires the HSRA to
include a strategy for ensuring certified small business project
participation in their January 1, 2012 business plan, or as an
addendum to that plan to be submitted as soon as
possible after that date. A draft of the business plan is due
on October 1, 2011 for public and legislative review. Because
this bill would not take effect until January 1, 2012, the
requirements of this bill would have to be presented as an
addendum to the January 1, 2012 business
plan and would, therefore, not be available during the public
and legislative review period. The committee may wish to
consider an amendment that names March 1, 2012 as
the date by which time the addendum would be due.
4. Definitions for local workforce and local workforce
development area . In many cases, the local workforce
development area, or local workforce investment area (LWIA), is
defined by county lines. In the Bay Area and Los Angeles
regions, the LWIAs may be smaller in area than the counties
themselves, and in the northern and eastern regions of the
state, the LWIAs may be defined by multiple counties combined.
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The provisions of this bill will require that at least 25
percent of the high-speed rail project workforce for each
worksite be from the LWIA may pose a problem if a workforce of
necessary size and skill is not available for each worksite.
5. Working with EDD . The provision requiring the HSRA to work in
conjunction with EDD to ensure a 25 percent local
workforce raises the question of what would be the role of EDD.
Currently, EDD's primary involvement with local workforces is to
allocate and monitor the use of Workforce
Investment Act (WIA) funds to the LWIAs. The EDD administers
WIA funds allotted to the state and distributes allotments to
the LWIAs, which are responsible for administering WIA
services. EDD also has Regional Advisors who provide guidance
and technical assistance to LWIAs. Thus, if a LWIA indicated
it would be helpful to have more funding allocated to
hiring and recruitment efforts to ensure the 25 percent local
workforce requirement of this bill is met, then conforming with
federal requirements and formulae, EDD could facilitate the
reallocation of funding for that purpose. The EDD does not,
however, track the residences of individual workers and is not
involved in hiring and recruitment activities.
Therefore, EDD's role and value in developing the required
strategy appears to be limited.
6. Technical amendments . The author may wish to consider the
following technical amendments: a) define a
local workforce by a "Local Workforce Investment Area" (LWIA) to
conform with terminology used by EDD; b) correct grammatical
mistakes in the bill language.
POSITIONS: (Communicated to the Committee before noon on
Wednesday, April 27,
2011)
SUPPORT: Asian Business Association
California Black Chamber of Commerce
California Small Business Association
Latin Business Association
National Black Contractors Association
Sacramento Black Chamber of Commerce
SCI Pavement Services, LP
OPPOSED: None received
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