BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 975|
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THIRD READING
Bill No: SB 975
Author: Lieu (D)
Amended: 5/27/14
Vote: 21
SENATE GOVERNMENTAL ORGANIZATION COMMITTEE : 7-2, 4/8/14
AYES: Correa, Cannella, De Le�n, Galgiani, Lieu, Padilla,
Torres
NOES: Berryhill, Vidak
NO VOTE RECORDED: Hernandez, Vacancy
SENATE APPROPRIATIONS COMMITTEE : 5-2, 5/23/14
AYES: De Le�n, Hill, Lara, Padilla, Steinberg
NOES: Walters, Gaines
SUBJECT : Personal services contracts: legal compliance
SOURCE : AFSCME
DIGEST : This bill requires bidders for personal services
contracts to swear under penalty of perjury that the contractor
will comply with all applicable state laws and regulations.
ANALYSIS :
Existing law:
1.Requires a competitive bidding process for all contracts
entered into by any state agency for services to be rendered
to the state, whether or not the services involve the
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furnishing or use of equipment, materials, or supplies, or are
performed by an independent contractor.
2.The State Contract Act requires a state agency or department
to require a prospective bidder on a public works project to
answer questions inquiring whether, and if applicable explain
the circumstances, the prospective bidder has ever been
disqualified, removed, or otherwise prevented from bidding on,
or completing a federal, state, or local government project
because of a violation of law or a safety regulation. The
questionnaire must be completed under penalty of perjury.
3.Authorizes a state agency or department to reject the bid of a
bidder who has been disqualified, removed, or otherwise
prevented from bidding on, or completing a federal, state, or
local public works project because of a violation of law or a
safety regulation.
4.Establishes standards for the use of personal services
contracts by state agencies. Provides that personal services
contracting is permissible to achieve cost savings when
certain conditions are met.
This bill:
1.Directs state agencies or the Department of General Services
(DGS) to require a bidder for a personal services contract to
complete a standard form, on which the bidder must pledge
compliance, under penalty of perjury, with all applicable
state taxes, and all laws and regulations relating to health
and safety, labor and employment, and licensing relevant to
the bidder's employees, worksite, bid, and contract.
2.Prohibits a state agency or DGS from awarding a personal
services contract to a bidder who does not affirmatively
pledge, under penalty of perjury, compliance with all relevant
state laws and regulations, as specified above.
3.Prohibits a state agency or DGS from awarding a personal
services contract to a bidder with an adjudicated record of
repeated noncompliance with applicable state taxes, or with
laws and regulations relating to the health and safety, labor
and employment, and licensing relevant to the bidder's
employees, worksite, and bid.
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Comments
The author's office states that this bill will bring
transparency to the state contract bidding process by requiring
prospective contractors to disclose if they have ever violated
state laws or safety regulations. The author's office states
that, if taxpayers are going to trust a for-profit company to
provide vital services, the company should show it can be
trusted. It is important to know the track records of all
companies with which the state or a local agency is contracting,
to ensure that only law abiding companies receive taxpayer
dollars for public contracts. The author's office notes that
the federal Government Accountability Office estimates that
companies that do business with the federal government owe as
much as $5 billion in federal taxes. DGS lacks any form of a
central tracking system and allows any past violator to apply
for a state service contract, regardless of past violations.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee:
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 DGS and state contracting agencies related to
increased bid protests, to the extent this bill provides
grounds for challenges to bids and contracts (General Fund,
various special funds).
DGS will incur additional costs to conduct protest hearings, and
contracting agencies will incur costs to defend proposed awards.
The magnitude of these costs will 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
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indeterminable and will 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
one to three months, which could result in costs if the delayed
contract is projected to result in savings to the contracting
agency. 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.
SUPPORT : (Verified 5/27/14)
AFSCME (source)
California Labor Federation
In the Public Interest
Los Angeles Alliance for a New Economy
Working Partnerships, USA
OPPOSITION : (Verified 5/27/14)
Department of Finance
ARGUMENTS IN SUPPORT : The bill's sponsor, AFSCME, states that
the concept behind this bill is simple: a for-profit company
that receives taxpayer dollars to ensure that state agencies can
effectively execute the law should not be a tax dodger or a
lawbreaker. The agencies seeking the services have a right to
know the contractors' track records, and to receive a promise
that they will comply with the same rules expected of everyone
else.
Supporters also note that the underlying assumption driving
state contracts for services is that the private sector can
provide the service more effectively and efficiently at a better
price. However, low bids may be the result of contractors
cutting corners by not paying overtime, payroll taxes or
maintaining safe worksites.
ARGUMENTS IN OPPOSITION: The Department of Finance (DOF)
opposes this bill because state agencies already review tax
registries prior to the award of a contract and, depending on
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the scope of the contract, may require licensure and insurance,
which state agencies could request proof of prior to the
contract award. DOF states that DGS has cited various policy
concerns related to this bill's impact on competitive bidding
processes and the legal ramifications of violating its
provisions. DOF writes, "This bill would create a barrier for
businesses to win state personal services contracts based on an
adjudicated record of noncompliance, regardless of whether
remediation has been made. In addition, the prohibition would
penalize the bidder twice by forbidding the bidder from winning
a state personal services contract after a judge has rendered a
decision in a court of law or an administrative hearing.
Furthermore, 'adjudicated' is not defined. It can be presumed
to mean a decision rendered in an administrative hearing or a
court of law. However, according to DGS, there are unanswered
questions over its application as it applies to this bill." DOF
states that it would be challenging and time-consuming for a
state agency to investigate a bidder's adjudicated record of
repeated noncompliance. DOF additionally states that this bill
is silent on penalties.
MW:e 5/27/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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