The Small Business Procurement and Contract Act requires the Director of General Services and the heads of other state agencies that enter into contracts for the provision of goods, services, and information technology and for the construction of state facilities to establish goals for the participation of small businesses in these contracts, to provide for small business preference in the award of these contracts, to give special consideration and special assistance to small businesses, and, whenever possible, to make awards to small businesses, as specified.

This bill would require all state agencies, departments, boards, and commissions to establish and achieve an annual goal of 25% small business participation in state procurements and contracts, to ensure that the states procurement and contract processes are administered in order to meet or exceed the goal, and to report to the director statistics regarding small business participation in the agencys procurements and contracts.

The bill would require the Department of General Services to monitor the progress of the agencies toward meeting the goal and to provide this information to the Office of Small Business Advocate.

The bill would also require a state agency, department, board, or commission that has not achieved the goal by the close of the fiscal year to submit a corrective action plan to the department within 45 days. The bill would require the department, in collaboration with the Office of Small Business Advocate, to undertake reasonable means to assist agencies in improving small business participation in their contracting.

The bill would require all state agencies, departments, boards, and commissions to use a contracting procedure established in the act for specified contracts with small businesses whenever possible.

The bill would also require the Office of Small Business Advocate to collaborate with the department to cooperatively enhance the states small business program by helping small businesses access capital and other financial resources necessary to successfully fulfill state contracts.

The bill would apply to all state public entities that receive state public funding, including the California State University, the University of California, and the California Community Colleges. In calculating the total amount of contracting covered by this bill, the California State University, the University of California, and the California Community Colleges would only be required to meet the 25% goal for state funding used in contracting.

Date of Hearing: May 13, 2015

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Jimmy Gomez, Chair

ABPCA Bill Id:AB 351

Author:(Jones-Sawyer) – As Introduced Ver:February 17, 2015

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill requires all state agencies, departments, boards, and commissions to establish and achieve an annual goal of 25% small business participation in state procurements and contracts. Specifically, this bill:

1. Requires heads of agencies, departments, boards and commissions to ensure the 25% annual goal is met and further requires them report to the Department of General Services (DGS) on their agency's progress.
   
   

2. Requires agencies that fail to meet the 25% annual goal to submit a corrective action plan to DGS within 45 days of the close of the fiscal year.
   
   

3. Requires DGS to regularly monitor agencies' progress in meeting the 25% annual goal and regularly share related information with the Office of the Small Business Advocate (OSBA), including corrective action plans.
   
   

4. Directs DGS and the OSBA to assist agencies in implementing their corrective action plans to the extent feasible.
   
   

5. Requires all state agencies to apply the existing streamlined small business state contracting option to contracts under $100,000 and construction contracts under $120,000.
   
   

6. Requires DGS to collaborate with the OSBA to provide outreach and actively promote small business certification.
   
   

7. Clarifies that the requirements of this bill apply to the University of California, the California State University, and the California Community Colleges when contracting with state funds.

FISCAL EFFECT:

1. Ongoing General Fund administrative costs to the DGS of approximately $292,000 for program staff to train departments, review reports and provide technical assistance plus approximately $10,000 for printing materials and webcasting. The DGS currently receives approximately 180 reports from state agencies, and would receive approximately 73 additional reports with UC and community college districts reporting.   

2. Unknown GF and SF costs, in excess of $500,000, for the workload associated with departments, including the California State University system, the University of California system, and community colleges, to prepare annual reports that include statistics regarding small business participation and preparing the required corrective action and implementation plans.

3. To the extent the 25% small business requirement increases the number of state contracts awarded to other than the low bidder, state contracting costs will increase. Given the thousands of state contracts, the cost impact of the bill could be in the tens of millions of dollars each year.

COMMENTS:

1. Purpose. Governors Arnold Schwarzenegger and Gray Davis issued executive orders calling for all state agencies to pursue an annual 25% small business participation level in state contracting. According to the author, codifying the executive order reinforces the state's support in small businesses.

According to the consolidated annual report on procurement for fiscal year (FY) 2013-14 by DGS, the state entered into nearly $9 billion in contracts, with approximately 26% awarded to small businesses. The report also indicates statewide departments achieved nearly 26% percent small business participation in contracts. However, in the last 15 report periods, the state has met the 25% small business participation goal five times.

To provide more consistency in achieving the small business procurement participation goal, this bill places the goal in statute; charges DGS with regularly monitoring agencies' progress in meeting the goal; and, requires mitigation plans from poor performing departments.

2. Prior legislation. AB 1734 (Jones-Sawyer) of 2014, similar to this bill, required each state agency to establish and achieve a goal of 25 % small business (SB) participation and an annual phased-in goal of 5 % disabled veteran business enterprises (DVBE) participation in state contracting. This bill was held on Suspense in this committee.

AB 550 (Brown) of 2013, similar to this bill, codified the executive order establishing the 25% small business participation goal. The bill also made changes to state procurement procedures for small business, including microbusiness and DVBE participation rates. This bill was held on Suspense in this committee.

Analysis Prepared by: Misty Feusahrens / APPR. / (916) 319-2081

Date of Hearing: April 29, 2015

ASSEMBLY COMMITTEE ON ACCOUNTABILITY AND ADMINISTRATIVE REVIEW

Rudy Salas, Chair

ABPCA Bill Id:AB 351

Author:(Jones-Sawyer) – As Introduced Ver:February 17, 2015

SUBJECT: Public contracts: small business participation

SUMMARY: Requires each state agency to establish and achieve a goal of 25% small business (SB) participation. Specifically, this bill:

1. Requires all state agencies to establish and achieve an annual goal of 25% SB participation.
   
   

2. Makes heads of agencies responsible for meeting the 25% annual goal and reporting to the Department of General Services (DGS) on their agency's progress.
   
   

3. Requires agencies that fail to meet the 25% annual goal to submit a corrective action plan to DGS within 45 days of the close of any fiscal year.
   
   

4. Requires DGS to regularly monitor agencies' progress in meeting the 25% annual goal and regularly share related information with the Office of the Small Business Advocate (OSBA), including corrective action plans.
   
   

5. Directs DGS and the OSBA to assist agencies in implementing their corrective action plans to the extent feasible.
   
   

6. Requires all state agencies to apply the existing streamlined SB state contracting option to contracts under $100,000 and construction contracts under $120,000.
   
   

7. Requires DGS to collaborate with the OSBA to provide outreach and actively promote SB certification.
   
   

8. Clarifies that the requirements of this bill apply to the University of California, the California State University, and the California Community Colleges when contracting with state funds.

EXISTING LAW:

1. Designates the DGS as the lead purchasing and procurement agency for the State of California tasked with administering the SB certification programs.
   
   

2. Requires, through executive order, various state contracts to have annual statewide participation goals of at least 25%.
   
   
   

3. Establishes the streamlined SB state contracting option, which allows state agencies to award a contract valued between $5,000 and $250,000 to a SB if quotes are obtained from two or more certified firms.

FISCAL EFFECT: Unknown

COMMENTS: According to the author, this bill would "codify a statewide procurement goal of 25% SB participation in statute, only to be removed by the Legislature, and in doing so, send a strong message to potential investors that the state supports small businesses."

According to the consolidated annual report on procurement for fiscal year (FY) 2013-14 by DGS, the state entered into nearly $9 billion in contracts, with approximately 26% awarded to small businesses. The report also indicates statewide departments achieved nearly 26% percent SB participation in contracts. However, in the last 15 report periods, the state has only met the 25% SB participation goal five times.

To provide more consistency in achieving the SB procurement participation goal, this bill places the goal in statute; charges DGS with regularly monitoring agencies' progress in meeting the goal; and, requires mitigation plans from poor performing departments.

PRIOR LEGISLATION: AB 1734 (Jones-Sawyer) of 2014 was substantially similar to this bill and would have additionally required an annual phased-in goal of 5% participation by disabled veteran business enterprises in state contracting. AB 1734 was held in the Assembly Appropriations Committee.

DOUBLE REFERRAL: This measure was previously heard in the Assembly Jobs, Economic Development and the Economy Committee on April 21, 2015, with a vote of 8-0.

REGISTERED SUPPORT / OPPOSITION:

Support

California Black Chamber of Commerce (sponsor)

California Asian Pacific Chamber of Commerce

Opposition

None on file

Analysis Prepared by: Cassie Royce / A. & A.R. / (916) 319-3600