BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
SB 975 (Lieu) - Service contracts: legal compliance.
Amended: March 17, 2014 Policy Vote: GO 7-2
Urgency: No Mandate: Yes
Hearing Date: May 23, 2014 Consultant: Mark McKenzie
SUSPENSE FILE. AS AMENDED.
Bill Summary: SB 975 would require bidders on state contracts
for services to affirmatively pledge compliance with applicable
state taxes, and laws and regulations related to health and
safety, labor and employment, and licensing, under penalty of
perjury.
Fiscal Impact: (As approved May 23, 2014)
Likely minor costs to include a standard form in bid
documents for bidders to affirmatively pledge compliance
with state laws and regulations (General Fund).
Unknown costs to the Department of General Services (DGS)
and state contracting agencies related to increased bid
protests, to the extent bill provides grounds for challenges
to bids and contracts (General Fund, various special funds).
See staff comments.
Background: Existing law establishes rules governing procurement
and contracting by state agencies, including general
requirements for competitive bidding on contracts for
construction projects, goods, services, and information
technology. Government Code 19130 provides that personal
service contracting is permissible to achieve cost savings if
the contracting agency clearly demonstrates that the proposed
contract will result in actual overall cost savings to the state
after considering specified conditions.
Government Code 19131 provides that any state agency proposing
to execute a contract shall notify the State Personnel Board.
All organizations that represent state employees who perform the
type of work to be contracted, and any person or organization
which has filed a request for notice with the board, shall be
contacted immediately and given a reasonable opportunity to
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comment on the proposed contract. Any employee organization may
request that the board review any contract proposed or executed
pursuant to the Government Code noted above within ten days of
notification.
Proposed Law: SB 975 would require bidders for state services
contracts to complete a form, signed under penalty of perjury,
pledging compliance with applicable state taxes, all laws and
regulations relating to health and safety, labor and employment,
and licensing relevant to the bidder's employees, worksite, bid,
and contract. The bill would also prohibit DGS and state
agencies from awarding a contract to either of the following:
A bidder that fails to complete the specified form
pledging compliance with applicable laws and regulations.
A bidder with an adjudicated record of repeated
noncompliance with those applicable state laws and
regulations.
Staff Comments: By requiring bidders to sign a pledge of
compliance, under penalty of perjury, with applicable state
taxes, laws, and regulations, and prohibiting DGS and state
agencies from contracting with bidders with an adjudicated
record of repeated noncompliance with those laws and
regulations, this bill is likely to result in an increase in bid
protests. DGS would incur additional costs to conduct protest
hearings, and contracting agencies would incur costs to defend
proposed awards. The magnitude of these costs would depend on
the number and complexity of protests. Recent data indicates
that current estimated costs for DGS to administer the protest
process are in the range of $150,000 to $200,000 per year.
Costs incurred by contracting agencies to research and defend
bid awards in protest proceedings vary widely among individual
cases. Additional costs related to this bill are unknown, but
likely minor (less than $50,000) for DGS to conduct additional
protest hearings. Additional costs incurred by contracting
agencies are indeterminable and would depend upon the complexity
and factors of an individual case. Time that a contracting
agency's staff spends on a bid protest (research, analysis,
argument, and testimony) may substantially exceed the time that
DGS staff dedicates to the conduct of proceedings.
Additional bid protests could delay the award of contracts by
1-3 months, which could result in costs if the delayed contract
is projected to result in savings to the contracting agency.
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Also, if there is a bid protest, and the winning bidder is
disqualified, the contract would likely be awarded to another
bidder at a higher cost to the state.
Although the bill prohibits DGS and state agencies from awarding
contracts to a bidder with an adjudicated record of repeated
noncompliance with specified laws and regulations, it would be
difficult and time-consuming for a state agency to investigate a
bidder's record. It is more likely that an agency would require
bidders to certify in bid documents that there is no record of
repeated noncompliance.
Author's amendments would move the contents of the bill from the
Public Contract Code to the Government Code, relating to
personal services contracts.