BILL ANALYSIS �
Bill No: AB
1574
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Lou Correa, Chair
2013-2014 Regular Session
Staff Analysis
AB 1574 Author: Pan
As Amended: May 5, 2014
Hearing Date: May 13, 2014
Consultant: Paul Donahue
SUBJECT
Personal service contracts; State agencies; Prohibitions
DESCRIPTION
Prohibits state agencies from entering into personal
services contracts that contain guaranteed payments or
other specified provisions. Specifically, this bill:
1)Prohibits a state agency from entering into a contract
for personal services that guarantees payments for
services not provided.
2)Declares that a personal services contract for the
acquisition of goods and services shall not unduly
restrict a state agency from taking actions in the public
interest.
3)Specifies that a personal services contract shall not do
any of the following:
a) Provide for guaranteed occupancy rates for private
prisons, dormitories, or any other contracted
facility.
b) Prohibit a state agency from maintaining,
improving, or building public infrastructure.
c) Penalize a state agency if a contractor loses
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revenue as a result of natural or man-made
emergencies, including acts of terrorism or acts of
nature.
d) Allow for an increase in fees or charges without
approval by the state agency.
e) Allow for an increase in fees or charges to be made
in a nonpublic manner.
EXISTING LAW
1)The California Constitution requires civil service
appointment to be made under a general system based on
merit as determined by competitive examination.
2)The Constitution generally restricts contracting out by
state agencies to those services that cannot be performed
by civil service employees, subject to specified
statutory exceptions, including:
a) Cost savings
b) New state function
c) Services not available - highly specialized or
technical
d) Services are incidental to a purchase or lease
e) Conflict of Interest - need for unbiased findings
f) Emergency appointment
g) Private counsel, with AG's office approval and
notice to state bargaining unit
h) Contractor will provide things that are not
feasible for the state to provide
i) Training when civil service is not available
j) Urgent, temporary, or occasional services<1>
BACKGROUND
Purpose : According to the author, current law makes state
government agencies susceptible to entering into service
contracts that would legally obligate them to compensate
contractors for services which were never administered. AB
1574 would prohibit state agencies from entering into
contracts that include profit guarantees, non-competition
clauses, charges for acts of nature, and increased fees,
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<1> Government Code � 19130
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all without public approval.
Background : Each personal services contract entered into by
a state agency must identify the parties to the contract,
contain the length of time for the performance or
completion of the contract, and the like.
Importantly, the contract must clearly express the maximum
amount to be paid and the basis on which payment is to be
made - e.g., a fixed amount regardless of time spent,
billing based on time spent at a specified rate plus actual
expenses, or cost recovery. <2>
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
specified in the contract's "scope of work" section.
Additionally, the amounts specified in contracts are
stated, and these agreements are generally made available
to the public.
DGS reports 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, which is prohibited in the California
Constitution.
The sponsor is concerned that guaranteeing a minimum
occupancy rate for private prisons could create an
incentive to keep prisons full instead of reducing prison
populations. Minimum occupancy rate language did exist 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 these terms in future contracts.
Support : 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."
PRIOR/RELATED LEGISLATION
AB 1578 (Pan), 2013-2014 Session. Requires DGS to establish
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<2> State Contracts Manual � 2.05
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and maintain an online database of personal services
contracts, and to compile an annual Personal Services
Contractor Expenditure Budget to accompany the Governor's
Budget, detailing total expenditures for personal services
contracts for California state government. (Pending in
Assembly)
AB 906 (Pan), Chapter 744, Statutes of 2013. Prohibits
signing of a state contract for personal services until the
state agency proposing to execute the contract has notified
all bargaining units and organizations that represent state
employees who perform the type of work to be contracted.
SB 335 (Yee), Chapter 757, Statutes of 2013. Would require
the Governor, upon implementation of the Financial
Information System for California (FI$Cal), to submit an
annual report to the Legislature detailing specific
information on current and proposed contracts for services
awarded by the state that are valued at $5,000 or more.
SB 252 (Vargas), 2011-2012 Session. Would have required the
Department of General Services to compile and publish
reports detailing all "privatization contracts" let by
state agencies. Furthermore, the bill specifies that all
contracts and related subcontracts are public documents
subject California Public Records Act. (Held in Assembly)
AB 740 (Blumenfield), Chapter 684 Statutes of 2011.
Provides that if the SPB disapproves a state agency's
contract for personal services, the agency shall
immediately discontinue the contract unless otherwise
ordered by the SPB. It prohibits the state agency from
circumventing or disregarding the board's action by
entering into another contract for the same services, for
similar services, or to continue the services provided
under the disapproved contract.
AB 2494 (Blumenfield), 2009-2010 Session. Would have
specified that if the State Personnel Board disapproves a
state agency's contract for personal services, the agency
shall immediately discontinue the contract unless otherwise
ordered by the SPB. (Vetoed)
AB 756 (Eng), 2009-2010 Session. Would have required every
state agency to provide a link to a centrally located and
accessible state-run Internet website that includes a
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listing of personal services and consulting services
contracts that it entered into during the previous fiscal
year. (Vetoed)
SUPPORT:
AFSCME (sponsor)
California Association of Professional Scientists
California Labor Federation, AFL-CIO
Service Employees International Union
OPPOSE:
None on file
FISCAL COMMITTEE: Senate Appropriations Committee
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