BILL ANALYSIS �
AB 1568
Page 1
Date of Hearing: April 9, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 1568 (Grove) - As Amended: March 18, 2014
Policy Committee:
AccountabilityVote:11-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill:
1)Requires state agencies-prior to exercising existing authority
to award contracts for acquisition of goods, services, or
information technology estimated at between $5,000 and
$250,000-to obtain three instead of two quotations from
certified small businesses (SBs) or disabled veteran business
enterprises (DVBEs).
2)States that the bill intends to encourage a state agency to
award a contract to a business that has not previously
contracted with that agency in the prior 12 months.
FISCAL EFFECT
Additional costs up to several million dollars annually from the
General Fund and numerous special funds, offset in whole or part
by lower contract costs due to increased competition.
According to the Department of General Services (DGS), in
2011-12, an estimated 13,700 contracts for goods, services, or
information technology were awarded to SBs or DVBEs using the
process of obtaining two quotes. If up to eight additional hours
of staff time are required to select, solicit, and review the
quotation from an additional bidder, annual costs (all funds)
would be about $7.2 million. To the extent a third business is
solicited but does not respond, the costs of reviewing a bid
would not be incurred.
It is estimated that the total contract volume for the above
AB 1568
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contracts was $415 million. To the extent obtaining a third
quotation leads to lower contract costs, due to increased
competition, savings of just 1%-2% would reduce total contract
costs by $4.1 million to $8.3 million.
COMMENTS
1)Background . In a February 2014 report on the state's DVBE
Program, the Bureau of State Audits (BSA) found that, during
2012-13, just 30 DVBE firms were awarded 83% of the state
contracts awarded to DVBEs. The BSA, in part, recommended
legislation to increase the number of DVBEs participating in
the program. Specifically, the BSA recommended increasing the
amount of the DVBE incentive that awarding departments can
apply when considering bids on state contracts. The audit
suggested that such an incentive could include additional
preference points to certain bids if the bidder is a DVBE firm
that the department has not previously used, and when the DVBE
firm is the prime contractor.
2)Purpose . This bill seeks to increase DVBE participation by
another means, i.e. by increasing from two the three the
number of quotations obtained from small businesses or DVBEs
by state agencies on contracts valued between $5,000 and
$250,000.
3)Intent Language Inconsistent With State Contracting . The bill
encourages state agencies to award contracts to small
businesses or DVBEs that have not contracted with the state in
the prior 12 months. Such encouragement, however, could be
contrary to the general requirements to award state contracts
to the lowest responsible bidder.
4)Suggested Amendment . It appears that the bill would more
simply fulfill the author's intent by simply requiring that
three, rather than two, quotes be obtained.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081