BILL ANALYSIS �
AB 2022
Page 1
Date of Hearing: April 22, 2014
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT AND THE ECONOMY
Jose Medina, Chair
AB 2022 (Medina) - As Amended: April 9, 2014
SUBJECT : Public contracts: Target Area Contract Preference Act
SUMMARY : Makes changes to the Target Area Contract Preference Act
(TACPA), redefining what qualifies as an economically distressed area
and identifying those individuals or groups at a high risk of
unemployment. Specifically, this bill :
1)Redefines a distressed area to be in the top quartile of census
tracts for having the highest unemployment and poverty in the state
as defined by the Department of Finance (DOF).
2)Redefines a person with a high risk of unemployment to include, but
not be limited to:
a) A person who is currently unemployed and has been unemployed
for more than 200 days;
b) A person who has been unemployed for greater than 200 days
within the last 365 days;
c) Veterans who served on active duty since September 11, 2001;
d) A person who has been incarcerated; and
e) A person who receives benefits of the Supplemental Nutrition
Assistance Program.
EXISTING LAW:
1)Expresses Legislative intent that it is a benefit to the state to
encourage and facilitate job maintenance and development in
distressed and declining areas of cities and towns in California.
2)Authorizes the Department of General Services (DGS) to apply TACPA
to bids from businesses that agree to perform the contract work in
designated "distressed areas" by offering 5% worksite and 1% to 4%
workforce bidding preferences in specified state service and
commodity contracts valued in excess of $100,000.
3)Defines a distressed area to be determined by the Governor's Office
of Planning and Research (OPR) as an urban area with at least 3,000
people living in a cluster of census block groups with each meeting
at least five of eight criteria including that the census block
groups:
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a) Are in the upper quartile for having the least amount of
people over the age of 25 with a high school education;
b) Are in the upper quartile for highest unemployment rate;
c) Are in the lowest quartile for per capita income;
d) Are in the upper quartile for having the highest percentage of
female head of households with children that live in poverty;
e) Are in the upper quartile for having the greatest percentage
of people over the age of 65 living in poverty;
f) Are in the upper quartile for having the greatest percentage
of people under the age of 18 living in poverty; and
g) Are in the upper quartile for having the highest population of
nonwhites and Hispanics.
4)Defines eligible workforce groups to include:
a) Economically disadvantaged youth;
b) Economically disadvantaged Vietnam-era veterans;
c) Economically disadvantaged ex-convicts;
d) Vocational rehabilitation referrals;
e) Youth participating in a qualified cooperative education
program;
f) Recipients of supplemental security income benefits; and
g) General assistance recipients.
5)Specifies that preference only apply to bidders who are California
based firms.
6)Requires bidders to certify, under penalty of perjury, to perform
either 50% (for commodity contracts) or 90% (for labor service
contracts) of the labor hours in the eligible TACPA area
worksite(s). TACPA work sites may be in, directly adjacent to, or
within a directly adjoining census tract blocks that form a
contiguous boundary with the distressed area.
7)Limits TACPA preferences to 9% or a maximum of $50,000 per bid. In
combination with any other preferences, the maximum limit is 15% of
the lowest responsible bid; and, in no case more than $100,000 per
bid.
8)Provides that TACPA preferences do not apply to contracts, such as
construction, where the worksite is fixed by the contract terms.
FISCAL EFFECT : Unknown
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COMMENTS :
1)Author's Purpose : According to the author, "The Target Contract
Preference Act promotes employment and economic development at
designated distressed areas by offering workforce bidding
preferences in specified state contracts. When applying for TACPA
eligibility, bidders must identify specific criteria including
"census tract" and "block groups" to be eligible for the preference.
Changes in the type of information collected in the last Census have
not only made data collection more time consuming and expensive to
obtain, it has also rendered the existing TACPA unworkable,
therefore, the Department of General Services has stopped
considering TACP preference in evaluating bids."
2)Framing the Policy Issue : This bill updates the TACPA geographic
regions to those areas that the DOF designates as having the highest
combined levels of poverty and unemployment in the state. This is
similar to those areas designated last year for the New Hire Credit
[AB 93 (Assembly Budget), Chapter 69, Statutes of 2013]. The bill
also updates the categories of targeted workers to reflect among
other groups, veterans who have served on active duty since
September 11, 2001.
In considering the merits of the measure, Members may wish to
consider that, as currently defined in statute, the TACPA geographic
regions cannot be updated from the 2000 Census and that with the
elimination of enterprise zones in 2013, TACPA is the only remaining
procurement preference that incentivizes contracts in lower income
neighborhoods. Comment 5 includes information on an amendment the
author will be offering in committee.
3)Background on the Target Area Procurement Preference : TACPA was
enacted in 1983 as an effort by the Legislature and the Governor to
stimulate business development in economically disadvantaged areas.
TACPA is primarily administered by DGS with help from OPR. Under
TACPA, a 5% extra credit is awarded in the contract bid evaluation
phase to California firms that agree to undertake the work in
distressed areas and an additional 1% to 4% may be included for
committing to employ certain individuals in completing the contract.
[TACPA, Ch. 323, Statutes of 1983].
The geographic boundaries of the distressed areas are determined by
OPR based on eight statutorily defined criteria, as reported at the
census block level. Recently, the availability of this data has
changed. In 2003, the U.S. Census Bureau switched from gathering
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socioeconomic data in the "long form" survey component of the
decennial census to an annual survey effort called the American
Community Survey (ACS).
In addition to the change in how the data was collected, the U.S.
Census Bureau no longer releases socioeconomic data for two of the
eight TACPA criteria at the block group level, although it is
released at the larger-scale census-tract level. In evaluating
whether to simply change statute from census block group to census
tract level, OPR and others, questioned whether the current criteria
was best suited for an employment incentive. As an example, the
existing locations include the poverty level of people over 65 and
children under the age of 18.
AB 2022 proposes to determine distressed areas based on a
comprehensive poverty and unemployment rate. The formula is simpler
and already being prepared by DOF for use in the New Hire Credit.
4)How State Procurement Preferences Work : In order to assist agencies
in reaching state participation goals, bidders for state contracts
may include procurement preferences. The value of any single
preference is limited to $50,000 and the combined value of one or
more preference cannot exceed $100,000.
The state currently recognizes three preferences based on the type
of business and one preference based on the location of the
business. Business type preferences include small business,
microbusiness and DVBE, which each have a maximum preference value
of 5%. The bidder can either be one of these targeted business
types or commit to subcontracting with one. The
geographically-based TACPA provides a 5% preference for completing
the contract in the location and up to an additional 4% for hiring
local workers.
It is not uncommon for a single contract bid to include more than
one preference, i.e. a small business owned by a DVBE would be
entitled to submit a bid using two 5% preferences. The value of the
preference is applied to either the bidders score or the contact
amount of the submitted bid.
As an example, there are two qualified bidders, each being a
large-size business and each having bid a job for $250,000. If one
of the companies committed to using a subcontractor that was both a
small business and a DVBE, their bid would be scored as if it was
$225,000 after the 10% bid preference was applied. The state would
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still pay the $250,000 amount, but it would be scored at the lower
amount for competitive reasons. Since contracts are awarded to
lowest responsible bidder, the business subcontracting with the DVBE
small business would be awarded the contract.
If that same business was also located in a TACPA area, it could
receive up to another 5% in preferences, regardless of who the
business employed because the current state percentage cap is 15% in
total. This would allow the business's bid to be evaluated at
$217,500.
5)Amendments : Staff understands the author will offer an amendment to
remove the language that stated that the TACPA could not be used in
conjunction with the Small Business and Disabled Veteran Owned
Business (DVBE) option.
6)Related Legislation : Legislation related to this measure includes
the following:
a) AB 93 (Assembly Committee on Budget) California Competes Tax
Credit and State Sales and Use Tax Exemption: This bill
instituted three new tax programs, a Sales and Use Tax exemption
for manufacturing and bio-tech equipment and similar purchases; a
California Competes tax credit for attracting and retaining major
employers; and a hiring credit under the Personal Income Tax and
Corporation Tax for employment in specified geographic areas.
Additionally, the bill results in the phasing-out and ending of
certain tax provisions related to Enterprise Zones and similar
tax incentive areas, and ending the current Small Business New
Jobs Credit tax incentive program. The bill also provides for
allocating the California Competes tax credit through the
Governor's Office of Business and Economic Development to assist
in retaining existing and attracting new business activity in the
state. Status: Signed by the Governor, Chapter 69, Statutes of
2013.
b) AB 172 (Weber) State Contracting Microbusiness: This bill
would have increased the microbusiness procurement preference
from 5% to 7% for state contracts to purchase goods, services,
information technology, and construction of state facilities, and
allowed the preference to be awarded to either a microbusiness
bidder or a non-microbusiness bidder that uses a microbusiness
subcontractor. Status: Held on the Suspense File of the
Assembly Committee on Appropriations, 2013.
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c) AB 366 (Holden) Women, Minority, and Disabled Veteran Business
Enterprises: This bill modifies the definitions for minority
owned business, women owned business, and disabled veteran owned
business enterprise to encourage contracting with publicly held
companies. Status: Pending in the Assembly Committee on
Appropriations.
d) AB 550 (Brown) State Procurement Procedures for Small
Businesses: This bill would have made key changes to state
procurement procedures for the purpose of increasing small
business, including microbusiness, and disabled veteran-owned
business enterprise participation rates. Status: Held on the
Suspense File of the Assembly Committee on Appropriations, 2013.
e) AB 1586 (Holden) Service Contract Hiring Priority: This bill
requires service contracts for over $200,000 include a provision
requiring the contractor give priority consideration in filling
vacancies with individuals that have exhausted their
unemployment, are a veteran, on parole or were formally
incarcerated, or a resident of a targeted employment area, as
defined under enterprise zone law. Status: Pending in the
Assembly Committee on Accountability and Administrative Review.
f) AB 1783 (Perea) Streamlining Small Business Certification:
This bill required the Department of General Services to publish
on the department's website, and make available to local
agencies, a list of small businesses and microbusinesses that
have been certified as such by the department. Status: Signed
by the Governor, Chapter 114, Statutes of 2012.
g) AB 2630 (Hueso) Procurement Reporting of Targeted Populations:
This bill would have required the Department of General
Services, in preparing its report on state contracting activity,
to include a list of activities each state agency used to inform
small businesses of each of the existing preferences available
under state law, and provide the number of preferences used in
bidding packages for the year. Status: Held in Senate
Appropriations Committee, 2012.
h) SB 67 (Price) Small Business Participation in Public
Contracts: This bill would have authorized the Department of
General Services to direct all state entities to establish an
annual goal of achieving no less than 25% small business
participation in state procurement contracts, as specified.
Status: Held on the Suspense File of the Assembly Committee on
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Appropriations, 2011.
i) SB 297 (Roth) Public Contracts and Disabled Veterans: This
bill increases the annual statewide participation goal for
disabled veteran business enterprises applicable to certain state
contracts, from 3% to 5%. Status: Pending in the Assembly
Committee on Jobs, Economic Development, and the Economy.
j) SB 733 (Block) Disabled Veteran Business Enterprise
Participation Goals: This bill deletes provisions of law allowing
an awarding department to accept submission of a disabled veteran
business enterprise utilization plan to meet the 3% statewide
participation goal for awarded contracts. The bill authorizes,
instead, a new review process for demonstrating a business's
long-term commitment to using veteran-owned businesses. Status:
Pending in the Assembly Committee on Jobs, Economic Development,
and the Economy.
7)Double Referral : The Assembly Committee on Rules referred this
measure to two policy committees for review. AB 2022 was previously
heard in the Assembly Committee on Accountability and Administrative
Review and received an 8-1 vote.
REGISTERED SUPPORT / OPPOSITION :
Support
Small Business California
The American Federation of State, County, and Municipal Employees
The California Asian Pacific Chamber of Commerce
The Veterans Caucus of the Democratic Party
Opposition
None received
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916) 319-2090