BILL ANALYSIS �
Bill No: AB
1575
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Lou Correa, Chair
2013-2014 Regular Session
Staff Analysis
AB 1575 Author: Pan
As Amended: May 20, 2014
Hearing Date: June 24, 2014
Consultant: Paul Donahue
SUBJECT
Personal services contracts: reports and termination
DESCRIPTION
Requires state contracts for personal services to include
specific performance criteria and cost parameters, require
reports by the contractor, and provide for cancellation by
the contracting agency if the contractor fails to comply
with various requirements. Specifically, this bill :
1)Specifies that any personal services contract shall
incorporate specific performance criteria and cost
parameters, and the contractor shall submit quarterly
reports to the state agency's contracting official on the
contractor's compliance with the performance criteria and
actual amounts billed to the state agency.
2)Provides that the personal services contract may be
canceled if the contractor fails to comply with the
performance criteria and other requirements set out in
the contract and if annual charges exceed those
established by the contract.
3)Provides that the personal services contract may be
canceled at any time if the contractor fails to comply
with all applicable local, state, and federal laws,
regulations, and statutes related to the contract.
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EXISTING LAW
Existing law sets forth requirements for the acquisition of
goods and services by state agencies and agencies, sets
forth the various responsibilities of the Department of
General Services and other state agencies in overseeing and
implementing those state contracting procedures and
policies, and provides that a willful violation of its
provisions for which another punishment is not provided is
a misdemeanor.
BACKGROUND
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 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
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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.
PRIOR/RELATED LEGISLATION
AB 1578 (Pan), 2013-2014 Session. Requires DGS to establish
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. (On calendar
today in Committee)
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.
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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
listing of personal services and consulting services
contracts that it entered into during the previous fiscal
year. (Vetoed)
SUPPORT:
AFSCME
California Labor Federation, AFL-CIO
Professional Engineers in California Government
OPPOSE:
None on file
FISCAL COMMITTEE: Senate Appropriations Committee
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