BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 861 (Corbett)
Hearing Date: 5/26/2011 Amended: 4/25/2011
Consultant: Bob Franzoia Policy Vote: G O 9-1
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BILL SUMMARY: SB 861 would prohibit a scrutinized company, as
defined, from entering into a contract with a state agency for
goods or services.
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
State contract prohibition Unknown, potentially increased
costs for General/
specific state goods and services. To
the Special
extent restrictions prohibit companies
from bidding, costs may increase due to
reduced competition
State contract oversight Unknown costs ongoing to
administer General/
a potentially more complex
contracting Special
process, including costs to
determine if
a bidder is a scrutinized
company;
increased protests and
rebidding
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STAFF COMMENTS: SUSPENSE FILE. AS PROPOSED TO BE AMENDED.
Preliminary information indicates the Securities and Exchange
Commission (SEC) will not issue implementing regulations before
August-December, 2011. Absent a full understanding of the
federal directive, state bidding and administrative costs are
difficult to estimate.
This bill defines a scrutinized company as a person that is
required by federal law to disclose information relating to
specific conflict minerals originating in the Democratic
Republic of the Congo, or adjoining countries, and the company
has:
(1) Filed an "unreliable determination" as defined by federal
SB 861 (Corbett)
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law.
(2) Reported false information in its report required by federal
law.
(3) Failed to file a report as required by federal law.
(4) The SEC has taken civil action by filing a complaint with a
US District Court, or has taken administrative action through
the administrative proceeding process, or both, against a person
for violations of the reporting requirements.
It is unknown how many SEC regulated companies might be
restricted from bidding on state contracts, whether any of those
companies might be low bid awardees, how
companies and the state will respond to the provisions of the
bill and so forth. Implementing a potentially more complex bid
process may result in new costs ongoing.
To the extent the Department of General Services (DGS) is able
to utilize actions taken by the SEC to identify a scrutinized
company, the number of scrutinized companies and goods and
services offered, administrative costs may be minor. Likely,
DGS would determine a company is ineligible to bid if the
company meets criteria in paragraphs (1), (2) and (3) of
subdivision (b) of Public Contract Code 10490, as added by this
bill. Costs of goods and services may increase to the extent a
smaller bidding pool reduces competition. Also, this bill may
render a company ineligible to bid on services if the company is
a scrutinized company because of the goods it sells.
Existing law contains similar provisions. Chapter 272/2008
requires a company that bids or submits a proposal for a
contract for goods and services with a state agency to
self-certify that it is not a scrutinized company engaged in
specified activities in Sudan. Chapter 671/2007 requires
CalPERS and CalSTRS to sell or transfer any investments in a
company with business operations in Iran. Chapter 573/2010
prohibits persons engaging in investment activities in Iran's
energy sector from bidding or entering into contracts with a
public entity for goods or services.
The Dodd-Frank Wall Street Reform and Consumer Protection Act,
among other things, requires those who file with the SEC and use
minerals originating in the Democratic Republic of Congo in
manufacturing to disclose measures taken to exercise due
diligence on the source and chain of custody of the materials
and the products manufactured. It does not appear that act or
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the proposed regulations provide for a scrutinized company or
restrict eligibility to bid on contracts.
The proposed amendments are:
(1) On page 5, line 5, after "services" insert:
related to products or services that are the reason the company
must comply with Section 13 (p) of the Securities Exchange Act
of 1934.
(2) On page 5, line 23, strike out "to which all
of the following apply and insert:
that has been found to be in violation of Section 13 (p) of the
Securities Exchange Act of 1934 by final judgment or settlement
entered in a civil of administrative action brought by the
Securities and Exchange Commission and the person has not
remedied or cured the violation in a manner accepted by the
commission on or before final judgment or settlement.
(c) A person shall cease to be regarded as a scrutinized company
when the person is no longer deemed to be in violation of
Section 13(p) of the Securities and Exchange Act of 1934, or
after three years from the date of final judgment or settlement,
whichever is earlier.
(3) On page 5, strike out lines 24 to 39,
inclusive, and on page 6, strike out lines 1 to 11 inclusive.