BILL ANALYSIS �
SB 734
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Date of Hearing: August 17, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 734 (Price) - As Amended: August 15, 2011
Policy Committee:
TransportationVote:10-3
Jobs 4-2
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill requires High-Speed Rail Authority (HSRA) contracting
to meet state small business participation goals and provides a
bid preference to microbusinesses on high-speed rail contracts.
Specifically, this bill:
1)Adds the 2008 high-speed rail bond measure to the list of bond
measures for which the implementing department, in this case
the HSRA, must establish a 25% small business participation
goal on bond-funded contracts and perform associated
activities, including annually reporting on actual small
business participation.
2)Requires the HSRA, with the assistance of the Department of
General Services (DGS), to prepare a small business,
microbusiness, and disabled veteran business outreach plan and
to adopt the plan by July 31, 2012.
3)Requires the HSRA, at all bidders' conferences convened by the
authority, to present the plan and the state's small business
participation goals, and to request that a DGS representative
attend the bidders' conferences.
4)Requires the HSRA to grant a 2.5% bid preference to qualified
state-certified microbusinesses, i.e. businesses located in
California with 25 or fewer employees and annual gross
receipts of $3.5 million or less.
5)Requires the HSRA, in the business plan to be submitted in
2012, to include a strategy for ensuring contract
SB 734
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participation by California-certified small businesses.
FISCAL EFFECT
1)Project costs will increase to the extent contracts are
awarded to other than the lowest bidder, due to the 2.5% bid
preference provided to microbusinesses. These additional costs
are unknown, but given the massive scale of the high-speed
project, costs could be in the hundreds of thousands to a
millions of dollars annually.
�Voters have authorized $9 billion in state general obligation
bonds and the federal government has allocated an additional
$3 billion to the state for the high-speed rail project. The
initial phase of the project-from Fresno to Bakersfield-was
estimated to cost $5.5 billion through 2017. The entire system
was estimated to cost around $43 billion, with funding
anticipated from the federal and local governments, as well as
the private sector. Recently, however, the estimated cost for
the first phase increased by several billion dollars.]
2)Annual administrative costs of around $100,000 for the HSRA to
prepare and then implement the outreach plan and to report
annually on meeting the contracting goals. Costs to DGS will
be minor and absorbable.
COMMENTS
1)Purpose . According to the author, "SB 734 ensures that small
businesses get a slice of the multi-billion dollar High Speed
Rail Economic pie?SB 734 �also] addresses the importance and
challenges of California microbusinesses and grants them an
additional contract preference of 2.5 percent. Although these
smaller businesses comprise over 80 percent of California's
certified small businesses, they are disadvantaged when
competing against their larger small-business counterparts.
"Given the depressed economy, high unemployment rates and the
positive impact the High Speed Rail project will have
throughout the state, it is important that we ensure that the
Authority operates with a clearly defined program that will
provide opportunities for California small businesses,
including its microbusinesses. SB 734 accomplishes these
objectives."
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2)Background . The Small Business Procurement and Contract Act,
administered by DGS, provides for certification of small
businesses, microbusinesses, and disabled veteran business
enterprises. The Act also establishes a small business
preference designed to increase small business participation
in state contracts. One incentive is a 5% bid preference for
small businesses or for contractors that commit 25% of the bid
price to eligible small business subcontractors. Executive
Order (EO) S-02-06 establishes a goal of 25% small business
participation goal for all state contracts.
3)Related Legislation .
a) AB 365 (Galgiani), which enacted penalties and sanctions
relative to the HSRA certification of businesses as a small
emerging business enterprise, microbusiness, or disabled
veteran business enterprise (DVBE), was held on this
committee's Suspense file.
b) AB 1206 (Galgiani), which directed the HSRA to adopt and
administer a small business enterprise program, was held on
this committee's Suspense file.
c) SB 733 (Price), which in part required the HSRA to work
with the Employment Development Department to develop a
strategy to ensure that at least 25% of the workforce on
any high-speed rail work site is from the local workforce,
was held on Suspense in Senate Appropriations.
4)Prior Legislation . In 2010, SB 1108 (Price), which required
all state agencies and departments to establish and achieve a
25% small business participation rate for state contracts, was
held on Suspense in Senate Appropriations.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081