BILL ANALYSIS �
AB 1575
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Date of Hearing: March 12, 2014
ASSEMBLY COMMITTEE ON ACCOUNTABILITY AND ADMINISTRATIVE REVIEW
Jim Frazier, Chair
AB 1575 (Pan) - As Introduced: January 30, 2014
SUBJECT : Public contracts for services: reports: termination
of service contracts
SUMMARY : Requires contractors for services to provide the
state agency's contracting official with quarterly reports about
performance and expenses, and sets criteria for contract
termination. Specifically, this bill :
1)Requires service contracts to include performance criteria and
cost parameters;
2)Requires contractors to submit quarterly reports to the state
agency's contracting official on the contractor's compliance
with the performance criteria and actual costs incurred;
3)Allows for the service contract to be cancelled if the
contractor fails to comply with performance criteria and if
annual costs exceed those established by the contract; and
4)Allows for the cancellation of the contract if the contractor
fails to comply with all applicable local, state, and federal
laws, regulations, and statutes.
EXISTING LAW specifies the various responsibilities of the
Department of General Services (DGS) and other state agencies in
overseeing and implementing state contracting procedures and
policies.
FISCAL EFFECT : Unknown
COMMENTS : This bill sets additional requirements for service
contracts related to contract terms, reporting, and grounds for
cancellation. According to the sponsor, the American Federation
of State, County and Municipal Employees (AFSCME), this bill
"would hold outsourced public service providers accountable for
their actions" and protect state agencies.
For contract terms, this bill requires contracts to include
performance criteria and cost parameters. According to DGS,
such elements are generally already included in service
contracts as they specify the "scope of work" as well as the
"maximum dollar amount" of the agreement. The State Contracting
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Manual (SCM), which is created by DGS and serves as a resource
for state agencies that contract, notes the importance of
clearly defining the expected work and maximum amounts.
Additionally, these categories are part of the Standard
Agreement form used when state agencies and contractors enter
into agreements. This bill would codify these requirements in
the Public Contract Code.
This bill requires service contractors to report quarterly on
performance criteria and actual costs incurred. According to
DGS, some service contracts include reporting requirements while
others do not. Requiring such reporting is generally at the
discretion of the state agencies when they enter contracts.
While some of these quarterly reports may duplicate information
that is already included in contractors' invoices to state
agencies, the quarterly reports (especially for high-cost
contracts) could provide details that would allow state agencies
to better oversee their contractors.
In addition to terms and reporting changes, this bill specifies
grounds for contract cancellation. Specifically, it states that
the contract can be cancelled if the contractor fails to comply
with performance criteria, exceeds annual costs established by
the contract, or fails to comply with all applicable local,
state, and federal laws, regulations, and statutes. According
to DGS, agreements between state agencies and contractors
specify expectations and the state can generally terminate the
contract for cause if the contractor is not performing or if
illegal acts occur. The SCM specifies how state contract
managers should address problems concerning contractor's
performance. This process involves notifying a contractor in
writing about performance concerns with the explanation that if
the deficiency is not corrected, the agency will terminate the
contract. Additionally, the state can dispute invoices and not
pay for those billed beyond the maximum agreed upon contract
amount.
SUGGESTED AMENDMENTS :
The committee staff is suggesting minor clarifying amendments.
Specifically, staff recommends removing "costs incurred" on page
2, line 1, and replacing it with "amounts billed to the state
agency." This change is recommended since service contracts are
often structured to cover specified amounts for services and not
necessarily reimbursements for contractors' costs. In line with
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this change, staff recommends removing "costs" on page 2, line
3, and replacing it with "charges" instead.
Additionally, staff recommends adding "related to the contract"
on page 2, line 6, after the word "statutes." This would
clarify that the violation would have to be related to the
contract, and not some other instance of non-compliance by the
contractor.
REGISTERED SUPPORT / OPPOSITION :
Support
AFSCME (Sponsor)
California Labor Federation
Opposition
None on file
Analysis Prepared by : Scott Herbstman / A. & A.R. / (916)
319-3600