BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 734 (Price)
Hearing Date: 05/26/2011 Amended: 04/26/2011
Consultant: Mark McKenzie Policy Vote: T&H 6-3
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BILL SUMMARY: SB 734 would require the High Speed Rail Authority
(HSRA) to prepare a small business, microbusiness, and disabled
veteran business enterprise outreach and retention plan with the
Department of General Services (DGS) to ensure high speed rail
projects achieve the specified 25 percent small business
participation goal. The bill would require HSRA to form a
nine-member small business advisory committee to initiate the
small business outreach and retention planning process, adopt
the plan by July 31, 2012, include the plan in all procurement
documents and on its website, and implement the outreach
strategy. HSRA would also include a presentation of the plan at
all bidders' conferences and request that a DGS representative
attend all conferences and answer all questions regarding small
business procurement laws. The bill would also require the HSRA
to grant all contracting preferences specified in the Small
Business Procurement and Contract Act and grant an additional
bid preference of 2.5 percent for microbusinesses.
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
HSRA small business outreach $50 $100
$100Bond*
plan, and ongoing admin.
Small business strategy$25-$50 Bond*
DGS administrative assistance minor costs to assist HSRA
prepare General
outreach and retention plan, minor costs
to attend bidders' conferences
Microbusiness bid preference unknown, potentially
significant increased Bond*/
costs to the extent that contracts are
award- Federal
____________ ed to other than lowest bidder due to
preference
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* High-Speed Passenger Train Bond Fund
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STAFF COMMENTS: SUSPENSE FILE. AS PROPOSED TO BE AMENDED.
Existing law establishes the High-Speed Rail Authority to plan,
design, construct, operate, and maintain a high-speed train
system in California. The voters have authorized the issuance
of $9 billion in general obligation bonds to partially fund the
development and construction of the project (Proposition 1A,
2008), and the federal government has allocated an additional $3
billion to the state for the costs of construction. The
remaining funding for project, the total costs of which are
expected to exceed $43 billion, are anticipated to come from the
federal and local governments, as well as the private sector.
The HSRA recently approved plans to begin construction in 2012
on a portion of the system between Fresno and Bakersfield. The
total procurement costs of this segment are expected to be $5.5
billion through 2017.
Existing law, the Small Business Procurement and Contract Act,
provides for certification of small businesses, microbusinesses,
and disabled veteran business enterprises (DVBEs) by the
Department of General Services (DGS). A small business is
defined as an independently owned and operated California-based
business with 100 or fewer employees and average annual gross
receipts of $14 million or less over the last three years. A
microbusiness is defined as a small business with 25 or fewer
employees and average gross receipts of $3.5 million or less.
The Small Business Act also establishes a small business
preference within the state's procurement process designed to
increase small business participation in state contracts. One
key incentive is the provision for a 5 percent bid preference
for small businesses or for contractors that commit 25 percent
of the bid price to eligible small business subcontractors.
Executive Order (EO) S-02-06 establishes a goal of 25 percent
small business participation goal for all state contracts.
SB 734 would require the HSRA to form a small business advisory
committee and prepare a small business, microbusiness, and DVBE
outreach and retention plan with the assistance of DGS to ensure
that the percentage of contracts awarded for all aspects of the
high-speed rail project meets the 25 percent participation goals
established in EO S-02-06. While it appears that formation of
the advisory committee is intended to ensure a voice for small
SB 734 (Price)
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business in the planning process, the bill provides no clear
direction for inclusion of the advisory committee in the
process, or in the ongoing implementation of the strategy.
Staff recommends that the bill be amended to delete this
provision, or to specify the role of the advisory committee more
clearly.
DGS indicates that the department is currently working with the
HSRA on the development of a small business outreach plan, but
there is currently no provision for ongoing administration of
such a plan to ensure that participation goals are met. Since
the HSRA and DGS are currently working towards a strategy to
include small business participation, costs to adopt an outreach
and retention plan by July 1, 2012 would be relatively minor,
probably less than $50,000 in 2011-12. For ongoing
administration of small business participation efforts, most
state departments have a dedicated Small Business/DVBE advocate
on staff, but the HSRA currently has a very small staff that
does not include such a position. It is likely that this bill
would require HSRA to add staff, or fund a contract for outside
resources or an interagency agreement to handle the
implementation and ongoing administration of an outreach
strategy. Staff estimates the cost for this position would be
approximately $100,000 annually, beginning in 2012-13.
SB 734 also provides an enhanced bid preference of 2.5 percent
for microbusinesses, on top of the existing price preference or
score of five percent that is granted to small businesses under
current law. As such, microbusinesses would receive a total bid
preference of 7.5 percent if the lowest bidder is not a small
business. Depending on how this preference is implemented, this
additional preference could increase HSRA contracting costs by
up to several million dollars annually (assuming $5.5 billion in
total contract costs through 2017, 25 percent overall small
business participation, 40 percent of which is microbusiness,
and a 2.5 percent preference).
Proposed committee amendments would delete provisions creating
a small business advisory committee and add a requirement that a
small business participation strategy be included in the HSRA
business plan.
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