BILL ANALYSIS �
AB 1575
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ASSEMBLY THIRD READING
AB 1575 (Pan)
As Amended March 20, 2014
Majority vote
ADMINISTRATIVE REVIEW 10-0
APPROPRIATIONS 14-1
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|Ayes:|Frazier, Achadjian, |Ayes:|Gatto, Bocanegra, |
| |Buchanan, Ian | |Bradford, Ian |
| |Calderon, Cooley, Medina, | |Calderon, Campos, Eggman, |
| |Olsen, Quirk-Silva, | |Gomez, Holden, Linder, |
| |Salas, Wagner | |Pan, Quirk, |
| | | |Ridley-Thomas, Wagner, |
| | | |Weber |
| | | | |
|-----+--------------------------+-----+--------------------------|
| | |Nays:|Donnelly |
| | | | |
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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 amounts billed to
state agencies;
3)Allows for the service contract to be cancelled if the
contractor fails to comply with performance criteria and if
annual charges 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 related to the contract.
EXISTING LAW specifies the various responsibilities of the
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Department of General Services (DGS) and other state agencies in
overseeing and implementing state contracting procedures and
policies.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, there is no significant cost impact. This bill is
generally consistent with current state contracting practices.
Any costs to review quarterly reports submitted by contractors
would be minor and absorbable, and could result in better
contract management and commensurate cost savings.
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
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 amounts billed. 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
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the contract can be cancelled if the contractor fails to comply
with performance criteria, exceeds annual charges established by
the contract, or fails to comply with all applicable local,
state, and federal laws, regulations, and statutes related to
the contract.
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.
Analysis Prepared by : Scott Herbstman / A. & A.R. / (916)
319-3600
FN: 0003153