BILL ANALYSIS �
AB 1574
Page 1
Date of Hearing: March 12, 2014
ASSEMBLY COMMITTEE ON ACCOUNTABILITY AND ADMINISTRATIVE REVIEW
Jim Frazier, Chair
AB 1574 (Pan) - As Introduced: January 30, 2014
SUBJECT : Service contracts: payment guarantees
SUMMARY : Prohibits a state agency from entering into a service
contract that guarantees payments for services not provided.
Specifically, this bill :
Prohibits contracts that:
1)Provide for guaranteed occupancy rates for private prisons,
dormitories, or any other contracted facility;
2)Prohibit a state agency from maintaining, improving, or
building public infrastructure;
3)Penalize a state agency if a contractor loses revenue as a
result of natural or man-made emergencies;
4)Allow for an increase in fees or charges without approval by
the state agency; and,
5)Allow for an increase in fees or charges to be made in a
nonpublic manner.
EXISTING LAW :
1)Specifies the various responsibilities of the Department of
General Services (DGS) and other state agencies in overseeing
and implementing state contracting procedures and policies.
2)Prohibits, under the California Constitution, gifts of public
funds.
FISCAL EFFECT : Unknown
COMMENTS : This bill would prohibit a state agency from
entering a service contract that guarantees payments for
services not provided and bans specific practices. According to
the sponsor, the American Federation of State, County and
Municipal Employees (AFSCME), this bill "would protect state
agencies from being overcharged by contractors."
According to DGS, the state generally contracts only for
services that are provided. When the state enters into a
service contract, the required work of the contractor is
AB 1574
Page 2
specified in the contract's "scope of work" section.
Additionally, the amounts specified in contracts are stated and
these agreements are generally publically available. DGS
indicates that the state does not typically enter agreements
that guarantee payments for services not provided because doing
so could potentially constitute a "gift of public funds." The
California Constitution prohibits the state from providing gifts
of public funds.
The sponsor is concerned that guaranteeing a minimum occupancy
rate for private prisons could incentivize keeping prisons full
instead of reducing prison populations. This type of language
was present in some past contracts between the California
Department of Corrections and Rehabilitation (CDCR) and private
prisons. However, According to CDCR, its recent contracts do
not include guaranteed minimum occupancy rates and CDCR does not
plan to agree to them in future contracts.
While it is unclear how often (if ever) the practices that this
bill would prohibit actually occur, codifying these prohibitions
could provide the state protections from paying for services not
provided.
REGISTERED SUPPORT / OPPOSITION :
Support
AFSCME (Sponsor)
California Labor Federation
Opposition
None on file
Analysis Prepared by : Scott Herbstman / A. & A.R. / (916)
319-3600