BILL ANALYSIS �
SB 1510
Page 1
Date of Hearing: August 8, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 1510 (Wright) - As Amended: August 7, 2012
Policy Committee: JEDE Vote:6-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill tightens bidder requirements for demonstrating that a
small business, microbusiness and disabled veteran owned
business enterprise (DVBE) serves a commercially useful function
(CUF) in carrying out a state contract, thereby allowing the
bidder to claim a 5% bid preference on competitive state
contract awards.
FISCAL EFFECT
1)The Department of General Services (DGS) estimates one-time
costs of $175,000 for development of regulations, new policy
guidance for departments and new curriculum for training State
purchasing agents. DGS estimates annual costs of $250,000 for
training departments and compliance review and assistance to
department staff.
2)DGS also estimates additional annual costs, potentially
$50,000 plus contract implementation delays, will occur for
each protested award based on the new commercially useful
function test.
3)There will also be unknown, but potentially significant,
additional costs to all awarding agencies for compliance
monitoring of the new elements of the commercially useful
function. Depending upon how regulations will be finalized,
awarding departments may be required to have accounting
documents submitted during performance of each contract to
comply with the new tests established in this bill.
4)DGS will mitigate its costs through fees to contracting
departments. Currently, general funded programs account for
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60% of DGS fees.
5)Potentially significant savings could result if fewer
businesses qualify for the small-businesses preference when
competing for state contracts, which could result in more
awards going to the true lowest bidder.
COMMENTS
1)Purpose . According to the author, SB 1510 will codify and
strengthen existing laws pertaining to small businesses
bidding on state work in order to stop the practice of using
sham small businesses to get state contracts. The author
argues SB 1510 strengthens these existing policies by
providing DGS with clearly defined language to identify phony
small businesses. The author contends that DGS' ability to
enforce compliance is hindered, due to the very broad
definitions of compliance requirements. The author contends
the current statute sets a very low threshold, thereby
allowing certified small businesses (CSB) and a DVBE with
little or no employees or inventory to compete against
CSBs/DVBEs who do hire their own employees.
The author states SB 1510 clarifies that the small business
must be responsible for negotiating price, determining quality
and quantity and pay for the material itself. The author
concludes that SB 1510 provides a clear set of rules so
legitimate small and disabled veteran businesses can fairly
compete for state business.
2)Small Business Certification . DGS is responsible for the
certification of small businesses for purpose of the state's
small business preference. To become certified, DGS requires
small businesses and microbusinesses to submit a single
application, and supporting documentation.
3)State procurement and small businesses. The state has had a
small business preference within the state's procurement
process for over 30 years. In 1989, a DVBE component was
added. Since 2001, there have been four Executive Orders
specifying a 25% goal for small business and 3% DVBE
participation in state procurement contracts.
The state's success in achieving small business and DVBE
participation goals in state procurement contracts has been
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inconsistent. For only the third time since the small
business participation target was established in 2001, DGS
reported the state achieved its small business target by
awarding 27% of the value of all contracts to small businesses
in 2008-09. The state did not achieve its 3% DVBE
participation goal in 2008-09.
4)Related legislation.
a) AB 150 (Perea), 2011, directed DGS to ensure all state
entities achieve an annual goal of at least 25% small
business participation in state procurement contracts.
This bill was held on this committee's Suspense File.
b) SB 67 (Price), 2011, authorized DGS to direct all state
entities to establish an annual goal of achieving not less
than 25% small business participation in state procurement
contracts, as specified. This bill was held on this
committee's Suspense File.
c) AB 309 (Price) of 2010, among its provisions, required
the establishment of a 25% small business participation
goal for all state entities. This bill was held on this
committee's Suspense file.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081