Existing law creates the Los Angeles County Metropolitan Transportation Authority, with various powers and duties with respect to transportation planning, programming, construction, and operations. Existing law authorizes the authority to award contracts under certain circumstances to small business enterprises with respect to work that is set aside for competition among certified small business enterprises, as long as price quotations are obtained by the authority from 3 or more small business enterprises, and requires the authority to report to the Legislature by December 31, 2017, regarding any contracts awarded in this regard.

This bill would make inoperative, on January 1, 2024, the authoritys power to set aside work for competition among certified small businesses and award contracts under these circumstances.

This bill would similarly authorize LACMTA until January 1, 2024, to award no more than 20 contracts under similar circumstances to medium business enterprises with respect to work that is set aside for competition among medium business enterprises.

This bill would require LACMTA to report to the Legislature by December 31, 2020, and by December 31, 2023, regarding any contracts awarded to small business enterprises and medium business enterprises in this regard.

Existing law creates the Los Angeles County Metropolitan Transportation Authority, with various powers and duties with respect to transportation planning, programming, construction, and operations. Existing law authorizes the authority to award contracts under certain circumstances to small business enterprises with respect to work that is set aside for competition among certified small business enterprises, as long as price quotations are obtained by the authority from 3 or more small business enterprises, and requires the authority to report to the Legislature by December 31, 2017, regarding any contracts awarded in this regard.

This bill would make inoperative, on January 1, 2024, the authoritys power to set aside work for competition among certified small businesses and award contracts under these circumstances.

This bill would similarly authorize LACMTA until January 1, 2024, to award no more than 20 contracts under similar circumstances to medium business enterprises with respect to work that is set aside for competition among medium business enterprises.

This bill would require LACMTA to report to the Legislature by December 31, 2020, and by December 31, 2023, regarding any contracts awarded to small business enterprises and medium business enterprises in this regard.

Existing law creates the Los Angeles County Metropolitan Transportation Authority (LACMTA), with various powers and duties with respect to transportation planning, programming, construction, and operations. Existing law authorizes LACMTA to award contracts under certain circumstances to small business enterprises with respect to work that is set aside for competition among certified small business enterprises, as long as price quotations are obtained by LACMTA from 3 or more small business enterprises, and requires LACMTA to report to the Legislature by December 31, 2017, regarding any contracts awarded in this regard.

This bill would instead authorize LACMTA to award contracts in this manner as long as it solicits rather than obtains price quotations from 3 or more small business enterprises. make LACMTAs authority to set aside work for competition among certified small businesses under these circumstances inoperative on January 1, 2024.

This bill would similarly authorize LACMTA until January 1, 2024, to award no more than 20 contracts under similar circumstances to medium business enterprises with respect to work that is set aside for competition among medium business enterprises.

This bill would require LACMTA to report to the Legislature by December 31, 2020, and by December 31, 2023, regarding any contracts awarded to small business enterprises and medium business enterprises in this regard.

Existing law creates the Los Angeles County Metropolitan Transportation Authority (LACMTA), with various powers and duties with respect to transportation planning, programming, construction, and operations. Existing law authorizes LACMTA to award contracts under certain circumstances to small business enterprises with respect to work that is set aside for competition among certified small business enterprises, as long as price quotations are obtained by LACMTA from 3 or more small business enterprises, and requires LACMTA to report to the Legislature by December 31, 2017, regarding any contracts awarded in this regard.

This bill would instead authorize LACMTA to award contracts in this manner as long as it solicits rather than obtains price quotations from 3 or more small business enterprises. The bill would delete the requirement that LACMTA report to the Legislature regarding contracts awarded to small business enterprises in this regard.

This bill would similarly authorize LACMTA until January 1, 2024, to award no more than 20 contracts under similar circumstances to medium business enterprises with respect to work that is set aside for competition among medium business enterprises.

Existing law creates the Los Angeles County Metropolitan Transportation Authority (LACMTA), with various powers and duties with respect to transportation planning, programming, construction, and operations. Existing law authorizes LACMTA to award contracts under certain circumstances to small business enterprises with respect to work that is set aside for competition among certified small business enterprises, as long as price quotations are obtained by LACMTA from 3 or more small business enterprises, and requires LACMTA to report to the Legislature by December 31, 2017, regarding any contracts awarded in this regard.

This bill would instead authorize LACMTA to award contracts in this manner as long as it solicits rather than obtains price quotations from 3 or more small business enterprises. The bill would delete the requirement that LACMTA report to the Legislature regarding contracts awarded to small business enterprises in this regard.

This bill would similarly authorize LACMTA to award contracts under similar circumstances to medium business enterprises with respect to work that is set aside for competition among medium business enterprises.

The Cigarette and Tobacco Products Tax Law requires distributors of cigarette and tobacco products to be licensed by the State Board of Equalization and requires a distributor that desires to defer payments for stamps or meter register settings to furnish a security deposit, subject to certain requirements, to the board. Existing law, upon authorization by the board, provides that no additional security shall be required for a distributor that desires to defer payments for stamps or meter register settings, as provided, if the distributors average monthly purchase of stamps or meter register settings for the previous 12 months does not exceed a specified amount and if the distributor meets certain requirements, including, among others, a requirement that the distributor has not been delinquent in the filing of any reports or returns, as specified, for the preceding 3 consecutive years.

This bill would extend the period of time in which a distributor must not be delinquent in the filing of reports or returns from 3 years to 4 years.

Date of Hearing: August 31, 2018

ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT

Cecilia Aguiar-Curry, Chair

ABPCA Bill Id:AB 1205 (

Author:Jones-Sawyer) – As Amended Ver:August 20, 2018

SUBJECT: Los Angeles County Metropolitan Transportation Authority: contracting.

SUMMARY: Allows the Los Angeles County Metropolitan Transportation Authority (LA Metro) to facilitate contract awards with medium business enterprises (MBEs) and makes changes to LA Metro's authority to facilitate contract awards with small business enterprises (SBEs) and disabled veteran business enterprises (DVBEs).

The Senate amendments delete the Assembly version of this bill, and instead:

1. Add MBEs to the statutes that allow LA Metro to facilitate contract awards with SBEs and DVBEs.
2. Limit LA Metro's authority to set aside work for competition among SBEs until January 1, 2024, and make the following additional changes to LA Metro's SBE set-aside program:
   1. Remove a requirement that LA Metro obtain three or more price quotations from SBEs, and instead, require LA Metro to solicit these quotations;
   2. Remove a requirement that LA Metro report to the Legislature by December 31, 2017,
      if it awards contracts under its SBE set-aside program and, instead, require LA Metro to report to the Legislature as follows:
      1. By December 31, 2020, for contracts issued between January 1, 2019, and December 31, 2020; and,
      2. By December 31, 2023, for contracts issued between January 1, 2019, and December 31, 2023.
3. Allow, until January 1, 2024, LA Metro to set aside work for competition among MBEs for no more than 20 contracts and award each contract to the lowest responsible bidder whenever the expected expenditure required exceeds $3 million but is less than $30 million, as long as LA Metro solicits price quotations from three or more MBEs.
4. Require LA Metro, if it awards contracts under its MBE set-aside program, to report to the Legislature in accordance with the requirements of 2) b), above.
5. Require an MBE recommended for a contract award through use of a set aside to be performing a commercially useful function, which is presumed to be the case if the MBE performs and exercises responsibility of at least 30% of the total cost of the contract work with its own workforce.
6. Define "medium business enterprise" to mean a company that is not a subsidiary of another company and that has a maximum of 250 employees and a maximum of $250 million in gross annual receipts averaged over three years.

EXISTING LAW:

1. Allows LA Metro, except as to contracts for professional services involving private architectural, landscape architectural, engineering, environmental, land surveying, or construction management, to do any of the following in facilitating contract awards with SBEs and DVBEs:
   1. Provide for a small business preference in construction, the construction component of a design-build team, the procurement of goods, or the delivery of services. The preference to a small business shall be 5% of the lowest responsible bidder meeting specifications that provides for small business participation;
   2. Establish a subcontracting participation goal for SBEs on contracts financed with nonfederal funds and grant a preference of 5% to the lowest responsible bidders who meet the goal;
   3. Require bidders, prior to the time bids are opened, to comply with the SBE and DVBE goals and requirements established by LA Metro on contracts financed with nonfederal funds;
   4. In awarding contracts to the lowest responsible bidder, award the contract to the lowest responsible bidder meeting the SBE and DVBE goals; and,
   5. Set aside work for competition among certified SBEs and award a contract to the lowest responsible bidder whenever the expected expenditure required exceeds $5,000 but is less than $3 million, as long as price quotations are obtained by LA Metro from three or more certified SBEs.
2. Requires LA Metro, if it awards contracts under its authority to set aside work for SBEs, to prepare and submit a report regarding such contracts to the Legislature by December 31, 2017.
3. Requires an SBE recommended for a contract award through use of a set aside to be performing a commercially useful function, which is presumed to be the case if the SBE performs and exercises responsibility of at least 30% of the total cost of the contract work with its own workforce.
4. Defines “small business enterprise” to mean a business enterprise that is classified as a small business under United States Small Business Administration rules and meets the current SBE size standards found in Part 121 of Title 13 of the Code of Federal Regulations appropriate to the type of work the enterprise seeks to perform.
5. Allows LA Metro to establish limitations regarding the average annual gross receipts of a small business over the previous three fiscal years and limitations regarding the personal net worth of the owner of the small business, exclusive of the value of the owner’s personal residence.
6. Defines "disabled veteran business enterprise" to have the meaning as defined in California's DVBE Program pursuant to the Military and Veterans Code.
7. Defines "goal" as used in the statutes governing LA Metro's authority to facilitate contract awards with SBEs and DVBEs to mean a numerically expressed objective that bidders are required to achieve.
8. Allows, pursuant to the Small Business Procurement and Contract Act (Act), state agencies to award contracts for goods, services, or information technology to a certified small business or a DVBE without complying with formal advertising and bidding requirements if the following conditions are met:
   1. The estimated contract value is greater than $5,000 but less than $250,000; and,
   2. Quotes are obtained from two or more small businesses or DVBEs.
9. Allows, pursuant to the Act, state agencies to award contracts for construction to a certified small business or a DVBE without complying with formal advertising and bidding requirements if the following conditions are met:
   1. The contract award is greater than $5,000 but less than $250,000, adjusted for inflation, as specified; and,
   2. Written bids are obtained from two or more small businesses or from two or more DVBEs.

FISCAL EFFECT: None

COMMENTS:

1. Background. Small business set-asides help small businesses win government contracts by "setting aside" specific government purchases exclusively for participation by small business concerns. The contracts are still competitive, but the competition is narrowed to small businesses only.

California has had a small business preference within the state’s procurement process for more than 30 years, and a DVBE component for more than 15 years. Some cities have programs that grant preference to local or regional small businesses. These may be in lieu of, or in addition to, preferences for small businesses in general. These current programs are governed by a combination of state law and city charter provisions.

1. Small and Medium-Sized Enterprises. According to the Organization for Economic Co-operation and Development, "Small and medium-sized enterprises (SMEs) are non-subsidiary, independent firms which employ fewer than a given number of employees. This number varies across countries. The most frequent upper limit designating an SME is 250 employees, as in the European Union. However, some countries set the limit at 200 employees, while the United States considers SMEs to include firms with fewer than 500 employees. Small firms are generally those with fewer than 50 employees, while micro-enterprises have at most 10, or in some cases 5, workers.

"Financial assets are also used to define SMEs. In the European Union, a new definition came into force on 1 January 2005 applying to all Community acts and funding programmes as well as in the field of State aid where SMEs can be granted higher intensity of national and regional aid than large companies. The new definition provides for an increase in the financial ceilings: the turnover of medium-sized enterprises (50-249 employees) should not exceed EUR 50 million; that of small enterprises (10-49 employees) should not exceed EUR 10 million while that of micro firms (less than 10 employees) should not exceed EUR 2 million. Alternatively, balance sheets for medium, small and micro enterprises should not exceed EUR 43 million, EUR 10 million and EUR 2 million, respectively."

In this country, the United States Small Business Administration designates SMEs. The primary metrics used to determine if a U.S. company is an SME is the amount of revenue the company earns per year and the size of its workforce. The North American Industry Classification System creates size standards for SMEs.

1. LA Metro's SBE and DVBE Contracting Authority. AB 1341 (Price), Chapter 494, Statutes of 2010, authorized LA Metro to facilitate contract awards to small businesses on contracts over $100,000. AB 2440 (Lowenthal), Chapter 703, Statutes of 2012, eliminated the $100,000 limitation on LA Metro's authority to facilitate contract awards to small businesses. In facilitating SBE contracts, LA Metro may provide a bid preference of 5% to the lowest responsible bidder. LA Metro can also establish a subcontracting participation goal for SBEs on certain contracts financed with nonfederal funds and give a preference of 5% to the lowest responsible bidders that meet that goal.

AB 2690 (Ridley-Thomas), Chapter 204, Statutes of 2016, significantly strengthened LA Metro's authority to facilitate contracting with SBEs and DVBEs. AB 2690 expanded the 5% bid preference for SBEs to also include DVBEs, required bidders to meet (rather than make a good faith effort to meet) SBE and DVBE goals, and required these goals to carry a numerically expressed objective that bidders must achieve. In awarding contracts to the lowest responsible bidder, LA Metro was allowed to award the contract to the lowest responsible bidder who meets the SBE and DVBE goals.

AB 2690 also allowed LA Metro to set aside contracts for competition by certified SBEs, as long as LA Metro obtains quotes from three or more certified SBEs. These SBEs must perform and exercise responsibility for at least 30% of the total cost of the contract work with their own workforce.

1. Author's Statement. According to the author, "LA Metro serves approximately 32,371,640 riders in Los Angeles County, and these riders are predominately minorities and low-income individuals. To ensure that all of these riders receive adequate access to reliable public transportation, LA Metro has focused on new construction projects for rail and bus lines. These projects present an opportunity for small and medium sized businesses to develop new partnerships with one of the largest transportation authorities in the state. However, current law limits LA Metro’s ability to contract with medium sized businesses, and bid requirements for small businesses resulted in 13 out 19 projects having to return to the general applicant pool in 2017. Removing the bid requirement in current law would help minority owned businesses compete against larger firms, and would allow for increased economic prosperity for all of Los Angeles. Finally, providing for a separate medium business set aside would provide a pathway for these businesses to grow and further contribute to their communities."
2. Bill Summary. This bill establishes a pilot program for LA Metro to set aside work for competition among MBEs, and makes changes to LA Metro's set-aside program for SBEs.
   1. MBE Provisions. This bill allows LA Metro to set aside work for competition among MBEs for contracts between $3 million and $30 million. This pilot is limited to no more than 20 contracts and ends January 1, 2024. LA Metro must solicit price quotations from at least three MBEs and award contracts on a low-bid basis. The bill requires an MBE recommended for a contract award through use of a set aside to be performing a commercially useful function, which means the MBE must perform and exercise responsibility for at least 30% of the total cost of the contract with its own workforce.

If LA Metro elects to use this authority, it must report to the Legislature, as follows:

• • 1. By December 31, 2020, for contracts issued between January 1, 2019, and December 31, 2020; and,
    2. By December 31, 2023, for contracts issued between January 1, 2019, and December 31, 2023.

The bill defines "medium business enterprise" to mean a company that is not a subsidiary of another company and that has a maximum of 250 employees and a maximum of $250 million in gross annual receipts averaged over three years.

• 1. SBE Provisions. This bill eliminates a requirement that LA Metro obtain three or more price quotations from SBEs, and instead requires LA Metro to solicit these quotations. The bill also removes a requirement that LA Metro report to the Legislature on its SBE program by December 31, 2017, and applies instead the same reporting requirements outlined above for its MBE program. This bill adds a time limit of January 1, 2024, to LA Metro's SBE set-aside program.

This bill is sponsored by LA Metro.

1. Arguments in Support. LA Metro, sponsor of this bill, writes, "AB 1205…seeks to make a small change to the process by which LA Metro awards contracts under the Small Business 'set-aside' program. Specifically, LA Metro is seeking to change the requirements to be consistent with Federal procurement processes by requiring that 3 bids be solicited by the agency. LA Metro also seeks to expand the set-aside program to create a similar program for Medium Size businesses. This change is in response to businesses that do not meet most small business requirements, however are too small to be considered a 'Prime' contractor. This bill will allow LA Metro to effective(ly) promote and facilitate increased participation and opportunities of SBEs and Medium Size Business enterprises in public contracting with LA Metro."
2. Arguments in Opposition. None on file.
3. Substantially Amended. The provisions of this bill have not been heard in an Assembly policy committee this legislative session.
   

REGISTERED SUPPORT / OPPOSITION:

Support

Los Angeles County Metropolitan Transportation Authority [SPONSOR]

Opposition

None on file

Analysis Prepared by: Angela Mapp / L. GOV. / (916) 319-3958

CONCURRENCE IN SENATE AMENDMENTS

CSA2 Bill Id:AB 1205

Author:(Jones-Sawyer)

As Amended Ver:August 20, 2018

Majority vote

(vote not relevant)

(L. Gov. )

Original Committee Reference: REV. & TAX.

SUMMARY: Allows the Los Angeles County Metropolitan Transportation Authority (LA Metro) to facilitate contract awards with medium business enterprises (MBEs) and makes changes to LA Metro's authority to facilitate contract awards with small business enterprises (SBEs) and disabled veteran business enterprises (DVBEs).

The Senate amendments delete the Assembly version of this bill, and instead:

1. Add MBEs to the statutes that allow LA Metro to facilitate contract awards with SBEs and DVBEs.
2. Limit LA Metro's authority to set aside work for competition among SBEs until January 1, 2024, and make the following additional changes to LA Metro's SBE set-aside program:
   1. Remove a requirement that LA Metro obtain three or more price quotations from SBEs, and instead, require LA Metro to solicit these quotations;
   2. Remove a requirement that LA Metro report to the Legislature by December 31, 2017,
      if it awards contracts under its SBE set-aside program and, instead, require LA Metro to report to the Legislature as follows:
      1. By December 31, 2020, for contracts issued between January 1, 2019, and December 31, 2020; and,
      2. By December 31, 2023, for contracts issued between January 1, 2019, and December 31, 2023.
3. Allow, until January 1, 2024, LA Metro to set aside work for competition among MBEs for no more than 20 contracts and award each contract to the lowest responsible bidder whenever the expected expenditure required exceeds $3 million but is less than $30 million, as long as LA Metro solicits price quotations from three or more MBEs.
4. Require LA Metro, if it awards contracts under its MBE set-aside program, to report to the Legislature in accordance with the requirements of 2) b), above.
5. Require an MBE recommended for a contract award through use of a set aside to be performing a commercially useful function, which is presumed to be the case if the MBE performs and exercises responsibility of at least 30% of the total cost of the contract work with its own workforce.
6. Define "medium business enterprise" to mean a company that is not a subsidiary of another company and that has a maximum of 250 employees and a maximum of $250 million in gross annual receipts averaged over three years.

FISCAL EFFECT: None

COMMENTS:

1. Background. Small business set-asides help small businesses win government contracts by "setting aside" specific government purchases exclusively for participation by small business concerns. The contracts are still competitive, but the competition is narrowed to small businesses only.

California has had a small business preference within the state's procurement process for more than 30 years, and a DVBE component for more than 15 years. Some cities have programs that grant preference to local or regional small businesses. These may be in lieu of, or in addition to, preferences for small businesses in general. These current programs are governed by a combination of state law and city charter provisions.

1. Small and Medium-Sized Enterprises. According to the Organization for Economic Co-operation and Development, "Small and medium-sized enterprises (SMEs) are non-subsidiary, independent firms which employ fewer than a given number of employees. This number varies across countries. The most frequent upper limit designating an SME is 250 employees, as in the European Union. However, some countries set the limit at 200 employees, while the United States considers SMEs to include firms with fewer than 500 employees. Small firms are generally those with fewer than 50 employees, while micro-enterprises have at most 10, or in some cases 5, workers.

"Financial assets are also used to define SMEs. In the European Union, a new definition came into force on 1 January 2005 applying to all Community acts and funding programmes as well as in the field of State aid where SMEs can be granted higher intensity of national and regional aid than large companies. The new definition provides for an increase in the financial ceilings: the turnover of medium-sized enterprises (50-249 employees) should not exceed EUR 50 million; that of small enterprises (10-49 employees) should not exceed EUR 10 million while that of micro firms (less than 10 employees) should not exceed EUR 2 million. Alternatively, balance sheets for medium, small and micro enterprises should not exceed EUR 43 million, EUR 10 million and EUR 2 million, respectively."

In this country, the United States Small Business Administration designates SMEs. The primary metrics used to determine if a U.S. company is an SME is the amount of revenue the company earns per year and the size of its workforce. The North American Industry Classification System creates size standards for SMEs.

1. LA Metro's SBE and DVBE Contracting Authority. AB 1341 (Price), Chapter 494, Statutes of 2010, authorized LA Metro to facilitate contract awards to small businesses on contracts over $100,000. AB 2440 (Lowenthal), Chapter 703, Statutes of 2012, eliminated the $100,000 limitation on LA Metro's authority to facilitate contract awards to small businesses. In facilitating SBE contracts, LA Metro may provide a bid preference of 5% to the lowest responsible bidder. LA Metro can also establish a subcontracting participation goal for SBEs on certain contracts financed with nonfederal funds and give a preference of 5% to the lowest responsible bidders that meet that goal.

AB 2690 (Ridley-Thomas), Chapter 204, Statutes of 2016, significantly strengthened LA Metro's authority to facilitate contracting with SBEs and DVBEs. AB 2690 expanded the 5% bid preference for SBEs to also include DVBEs, required bidders to meet (rather than make a good faith effort to meet) SBE and DVBE goals, and required these goals to carry a numerically expressed objective that bidders must achieve. In awarding contracts to the lowest responsible bidder, LA Metro was allowed to award the contract to the lowest responsible bidder who meets the SBE and DVBE goals.

AB 2690 also allowed LA Metro to set aside contracts for competition by certified SBEs, as long as LA Metro obtains quotes from three or more certified SBEs. These SBEs must perform and exercise responsibility for at least 30% of the total cost of the contract work with their own workforce.

1. Author's Statement. According to the author, "LA Metro serves approximately 32,371,640 riders in Los Angeles County, and these riders are predominately minorities and low-income individuals. To ensure that all of these riders receive adequate access to reliable public transportation, LA Metro has focused on new construction projects for rail and bus lines. These projects present an opportunity for small and medium sized businesses to develop new partnerships with one of the largest transportation authorities in the state. However, current law limits LA Metro's ability to contract with medium sized businesses, and bid requirements for small businesses resulted in 13 out 19 projects having to return to the general applicant pool in 2017. Removing the bid requirement in current law would help minority owned businesses compete against larger firms, and would allow for increased economic prosperity for all of Los Angeles. Finally, providing for a separate medium business set aside would provide a pathway for these businesses to grow and further contribute to their communities."
2. Bill Summary. This bill establishes a pilot program for LA Metro to set aside work for competition among MBEs, and makes changes to LA Metro's set-aside program for SBEs.
   1. MBE Provisions. This bill allows LA Metro to set aside work for competition among MBEs for contracts between $3 million and $30 million. This pilot is limited to no more than 20 contracts and ends January 1, 2024. LA Metro must solicit price quotations from at least three MBEs and award contracts on a low-bid basis. The bill requires an MBE recommended for a contract award through use of a set aside to be performing a commercially useful function, which means the MBE must perform and exercise responsibility for at least 30% of the total cost of the contract with its own workforce.

If LA Metro elects to use this authority, it must report to the Legislature, as follows:

• • 1. By December 31, 2020, for contracts issued between January 1, 2019, and December 31, 2020; and,
    2. By December 31, 2023, for contracts issued between January 1, 2019, and December 31, 2023.

The bill defines "medium business enterprise" to mean a company that is not a subsidiary of another company and that has a maximum of 250 employees and a maximum of $250 million in gross annual receipts averaged over three years.

• 1. SBE Provisions. This bill eliminates a requirement that LA Metro obtain three or more price quotations from SBEs, and instead requires LA Metro to solicit these quotations. The bill also removes a requirement that LA Metro report to the Legislature on its SBE program by December 31, 2017, and applies instead the same reporting requirements outlined above for its MBE program. This bill adds a time limit of January 1, 2024, to LA Metro's SBE set-aside program.

This bill is sponsored by LA Metro.

1. Arguments in Support. LA Metro, sponsor of this bill, writes, "AB 1205…seeks to make a small change to the process by which LA Metro awards contracts under the Small Business 'set-aside' program. Specifically, LA Metro is seeking to change the requirements to be consistent with Federal procurement processes by requiring that 3 bids be solicited by the agency. LA Metro also seeks to expand the set-aside program to create a similar program for Medium Size businesses. This change is in response to businesses that do not meet most small business requirements, however are too small to be considered a 'Prime' contractor. This bill will allow LA Metro to effective(ly) promote and facilitate increased participation and opportunities of SBEs and Medium Size Business enterprises in public contracting with LA Metro."
2. Arguments in Opposition. None on file.

Analysis Prepared by: Angela Mapp / L. GOV. / (916) 319-3958 FN: 0005216

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 1205

Author:(Jones-Sawyer)

As Amended Ver:August 20, 2018

Majority vote

(Vote not relevant)

Original Committee Reference: REV. & TAX

SUMMARY: Allows the Los Angeles County Metropolitan Transportation Authority (LA Metro) to facilitate contract awards with medium business enterprises (MBEs) and makes changes to LA Metro's authority to facilitate contract awards with small business enterprises (SBEs) and disabled veteran business enterprises (DVBEs).

The Senate amendments delete the Assembly version of this bill, and instead:

1. Add MBEs to the statutes that allow LA Metro to facilitate contract awards with SBEs and DVBEs.
2. Limit LA Metro's authority to set aside work for competition among SBEs until January 1, 2024, and make the following additional changes to LA Metro's SBE set-aside program:
   1. Remove a requirement that LA Metro obtain three or more price quotations from SBEs, and instead require LA Metro to solicit these quotations;
   2. Remove a requirement that LA Metro report to the Legislature by December 31, 2017, if it awards contracts under its SBE set-aside program and, instead, require LA Metro to report to the Legislature as follows:
      1. By December 31, 2020, for contracts issued between January 1, 2019, and December 31, 2020; and,
      2. By December 31, 2023, for contracts issued between January 1, 2019, and December 31, 2023.
3. Allow, until January 1, 2024, LA Metro to set aside work for competition among MBEs for no more than 20 contracts and award each contract to the lowest responsible bidder whenever the expected expenditure required exceeds $3 million but is less than $30 million, as long as LA Metro solicits price quotations from three or more MBEs.
4. Require LA Metro, if it awards contracts under its MBE set-aside program, to report to the Legislature in accordance with the requirements of 2)b), above.
5. Require a MBE recommended for a contract award through use of a set aside to be performing a commercially useful function, which is presumed to be the case if the MBE performs and exercises responsibility of at least 30% of the total cost of the contract work with its own workforce.
6. Define "medium business enterprise" to mean a company that is not a subsidiary of another company and that has a maximum of 250 employees and a maximum of $250 million in gross annual receipts averaged over three years.

EXISTING LAW:

1. Allows LA Metro, except as to contracts for professional services involving private architectural, landscape architectural, engineering, environmental, land surveying, or construction management, to do any of the following in facilitating contract awards with SBEs and DVBEs:
   1. Provide for a small business preference in construction, the construction component of a design-build team, the procurement of goods, or the delivery of services. The preference to a small business shall be 5% of the lowest responsible bidder meeting specifications that provides for small business participation;
   2. Establish a subcontracting participation goal for SBEs on contracts financed with nonfederal funds and grant a preference of 5% to the lowest responsible bidders who meet the goal;
   3. Require bidders, prior to the time bids are opened, to comply with the SBE and DVBE goals and requirements established by LA Metro on contracts financed with nonfederal funds;
   4. In awarding contracts to the lowest responsible bidder, award the contract to the lowest responsible bidder meeting the SBE and DVBE goals;
   5. Set aside work for competition among certified SBEs and award a contract to the lowest responsible bidder whenever the expected expenditure required exceeds $5,000 but is less than $3 million, as long as price quotations are obtained by LA Metro from three or more certified SBEs.
2. Requires LA Metro, if it awards contracts under its authority to set aside work for SBEs, to prepare and submit a report regarding such contracts to the Legislature by December 31, 2017.
3. Requires a SBE recommended for a contract award through use of a set aside to be performing a commercially useful function, which is presumed to be the case if the SBE performs and exercises responsibility of at least 30% of the total cost of the contract work with its own workforce.
4. Defines "small business enterprise" to mean a business enterprise that is classified as a small business under United States Small Business Administration rules and meets the current SBE size standards found in Code of Federal Regulations Title 13, Part 121, appropriate to the type of work the enterprise seeks to perform.
5. Allows LA Metro to establish limitations regarding the average annual gross receipts of a small business over the previous three fiscal years and limitations regarding the personal net worth of the owner of the small business, exclusive of the value of the owner's personal residence.
6. Defines "disabled veteran business enterprise" to have the meaning as defined in California's DVBE Program pursuant to the Military and Veterans Code.
7. Defines "goal" as used in the statutes governing LA Metro's authority to facilitate contract awards with SBEs and DVBEs to mean a numerically expressed objective that bidders are required to achieve.
8. Allows, pursuant to the Small Business and Procurement and Contract Act (Act), state agencies to award contracts for goods, services, or information technology to a certified small business or a DVBE without complying with formal advertising and bidding requirements if the following conditions are met:
   1. The contract award is greater than $5,000 and less than $250,000; and,
   2. Quotes are obtained from two or more SBs or from two or more DVBEs.
9. Allows state agencies to award contracts for construction to a certified small business or a DVBE without complying with formal advertising and bidding requirements if the following conditions are met:
   1. The contract award is greater than $5,000 and less than $250,000, as specified; and,
   2. Quotes are obtained from two or more SBs or from two or more DVBEs.

FISCAL EFFECT: None

COMMENTS:

1. Background. Small business set-asides help small businesses win government contracts by "setting aside" specific government purchases exclusively for participation by small business concerns. The contracts are still competitive, but the competition is narrowed to small businesses only.

California has had a small business preference within the state's procurement process for more than 30 years, and a DVBE component for more than 15 years. Some cities have programs that grant preference to local or regional small businesses. These may be in lieu of, or in addition to, preferences for small businesses in general. These current programs are governed by a combination of state law and city charter provisions.

1. LA Metro's SBE and DVBE Contracting Authority. SB 1341 (Price), Chapter 494, Statutes of 2010, authorized LA Metro to facilitate contract awards to small businesses on contracts over $100,000. AB 2440 (Lowenthal), Chapter 703, Statutes of 2012, eliminated the $100,000 limitation on LA Metro's authority to facilitate contract awards to small businesses. In facilitating SBE contracts, LA Metro may provide a bid preference of 5% to the lowest responsible bidder. LA Metro can also establish a subcontracting participation goal for SBEs on certain contracts financed with nonfederal funds and give a preference of 5% to the lowest responsible bidders that meet that goal.

AB 2690 (Ridley-Thomas), Chapter 204, Statutes of 2016, significantly strengthened LA Metro's authority to facilitate contracting with SBEs and DVBEs. AB 2690 expanded the 5% bid preference for SBEs to also include DVBEs, required bidders to meet (rather than make a good faith effort to meet) SBE and DVBE goals, and required these goals to carry a numerically expressed objective that bidders must achieve. In awarding contracts to the lowest responsible bidder, LA Metro was allowed to award the contract to the lowest responsible bidder who meets the SBE and DVBE goals.

AB 2690 also allowed LA Metro to set aside contracts for competition by certified SBEs, as long as LA Metro obtains quotes from three or more certified SBEs. These SBEs must perform and exercise responsibility for at least 30% of the total cost of the contract work with their own workforce.

1. Author's Statement. According to the author, "LA Metro serves approximately 32,371,640 riders in Los Angeles County, and these riders are predominately minorities and low-income individuals. To ensure that all of these riders receive adequate access to reliable public transportation, LA Metro has focused on new construction projects for rail and bus lines. These projects present an opportunity for small and medium sized business to develop new partnerships with one of the largest transportation authorities in the state. However, current law limits LA Metro's ability to contract with medium sized businesses, and bid requirements for small businesses resulted in 13 out 19 projects having to return to the general applicant pool in 2017. Removing the bid requirement in current law would help minority owned businesses compete against larger firms, and would allow for increased economic prosperity for all of Los Angeles. Finally, providing for a separate medium business set aside would provide a pathway for these businesses to grow and further contribute to their communities."
2. Bill Summary. This bill establishes a pilot program for LA Metro to set aside work for competition among MBEs, and makes changes to LA Metro's set-aside program for SBEs.
   1. MBE Provisions. This bill allows LA Metro to set aside work for competition among MBEs for contracts between $3 million and $30 million. This pilot is limited to no more than 20 contracts and ends January 1, 2024. LA Metro must solicit price quotations from at least three MBEs and award contracts on a low-bid basis. This bill requires a MBE recommended for a contract award through use of a set aside to be performing a commercially useful function, which means the MBE must perform and exercise responsibility for at least 30% of the total cost of the contract with its own workforce.

If LA Metro elects to use this authority, it must report to the Legislature as follows:

• • 1. By December 31, 2020, for contracts issued between January 1, 2019, and December 31, 2020; and,
    2. By December 31, 2023, for contracts issued between January 1, 2019, and December 31, 2023.

The bill defines "medium business enterprise" to mean a company that is not a subsidiary of another company and that has a maximum of 250 employees and a maximum of $250 million in gross annual receipts averaged over three years.

• 1. SBE Provisions. This bill eliminates a requirement that LA Metro obtain three or more price quotations from SBEs, and instead requires LA Metro to solicit these quotations. The bill also removes a requirement that LA Metro report to the Legislature on its SBE program by December 31, 2017, and applies instead the same reporting requirements outlined above for its MBE program. This bill adds a time limit of January 1, 2024, to LA Metro's SBE set-aside program.

This bill is sponsored by LA Metro.

1. Arguments in Support. LA Metro, sponsor of this bill, writes, "AB 1205…seeks to make a small change to the process by which LA Metro awards contracts under the Small Business 'set-aside' program. Specifically, LA Metro is seeking to change the requirements to be consistent with Federal procurement processes by requiring that 3 bids be solicited by the agency. LA Metro also seeks to expand the set-aside program to create a similar program for Medium Size businesses. This change is in response to businesses that do not meet most small business requirements, however are too small to be considered a 'Prime' contractor. This bill will allow LA Metro to effective(ly) promote and facilitate increased participation and opportunities of SBEs and Medium Size Business enterprises in public contracting with LA Metro."
2. Arguments in Opposition. None on file.
3. Substantially Amended. The provisions of this bill have not been heard in an Assembly policy committee this legislative session.

Analysis Prepared by: Angela Mapp / L. GOV. / (916) 319-3958 FN: 0004549

 THIRD READING  

Bill No: AB 1205

Author:

:

Vote:

PRIOR VOTES NOT RELEVANT

SENATE TRANS. & HOUSING COMMITTEE: 11-1, 5/15/18 (Pursuant to Senate Rule 29.10)

AYES: Beall, Allen, Dodd, Gaines, Galgiani, McGuire, Roth, Skinner, Vidak, Wieckowski, Wiener

NOES: Morrell

NO VOTE RECORDED: Cannella

SUBJECT: Los Angeles County Metropolitan Transportation Authority: contracting

SOURCE: Los Angeles County Metropolitan Transportation Authority

DIGEST:

This bill makes changes to the Los Angeles County Metropolitan Transportation Authority’s (METRO) contracting requirements for small business enterprises (SBE) and establishes a medium business enterprise (MBE) program, as specified.

Senate Floor Amendments of 8/20/18 provide a sunset provision to the contracting process for METRO’s SBE program.

Senate Floor Amendments of 8/13/18 provide additional program description and requirements to the medium-sized enterprise program as established by this bill.

ANALYSIS:

Existing law:

1. Establishes county transportation commissions and designates specific powers and duties.
2. Creates METRO and designates various powers and duties with respect to transportation planning, programming, construction, and operations.
3. Establishes contracting requirements for METRO and provides specified authorization to award contracts under certain circumstances to SBEs if certain criteria are met.
4. Requires METRO, for contracts that are set aside for competition among certified SBEs, to obtain three price quotations from certified SBEs prior to awarding to the lowest responsible bidder.
5. Requires METRO to report to the Legislature by December 31, 2017, regarding any contracts awarded under the abovementioned process.
6. Defines “small business enterprise” to mean a business enterprise that is classified as a small business under United States Small Business Administration rules and meets the current SBE size standards found in Part 121 of Title 13 of the Code of Federal Regulations appropriate to the type of work the enterprise seeks to perform.
7. Allows METRO to establish limitations regarding the average annual gross receipts of a small business over the previous three fiscal years and establish limitations regarding the personal net worth of the owner of the small business, exclusive of the value of the owner’s personal residence.

This bill:

1. Changes METRO’s process to award contracts to SBEs by authorizing METRO, until January 1, 2024, to award a contract after soliciting three bids from SBEs, rather than obtaining three bids prior to awarding a contract to an SBE.
2. Establishes, similar to METRO’s SBE program, an MBE category with project costs ranging from $3 million to $30 million. Further authorizes METRO to award a contract to the lowest responsible bidder if METRO solicits for three or more price quotes from MBEs for the project out for bid.
3. Defines, further, medium-sized business enterprise as a company that is not a subsidiary of another company, has a maximum of 250 employees, and has a maximum of $250 million in gross annual receipts, as specified.
4. Authorizes METRO until January 1, 2024, to issue up to 20 contracts in total to medium-sized business under the provisions specified in this bill.
5. Requires METRO to submit reports to the Legislature related to the contracts issued to medium-sized businesses under this program, as specified.
6. Makes technical conforming changes.

Background

METRO is a multimodal transportation agency providing a variety of transportation-related services and functions for Los Angeles County. These services/functions include transportation planning, transit services (both bus and light rail), capital construction projects, and administering several local sales tax measures.

In 2010, AB 1341 (Price, Chapter 494, Statutes of 2010) authorized METRO to facilitate contract awards to small businesses on contracts over $100,000. Several years later, AB 2440 (Lowenthal, Chapter 703, Statutes of 2012) eliminated the $100,000 limitation on METRO’s authority to facilitate contract awards to small businesses. In facilitating SBE contracts, METRO may provide a bid preference of 5% to the lowest responsible bidder. METRO can also establish a subcontracting participation goal for SBEs on certain contracts financed with nonfederal funds and give a preference of 5% to the lowest responsible bidders that meet that goal. In 2016, AB 2690 (Chapter 204, Statutes of 2016, Ridley-Thomas) further clarified that project bidders are required to meet METRO-established SBE goals, rather than bidders just making a good-faith effort, with the contract then going to the lowest responsible bidder that meets SBE goals. AB 2690 also authorized METRO to side aside work for competition among certified SBEs for projects ranging from $5,000 to $3 million. For these projects, METRO is required to obtain three quotes for each SBE project that goes out to bid with the award going to the lowest responsible bidder.

Comments

1. Purpose. According to the author, “the Los Angeles County Metropolitan Transportation Authority (LA METRO) serves approximately 32,371,640, riders in Los Angeles County, and these riders are predominately minorities and low-income individuals. To ensure that all of these riders receive adequate access to reliable public transportation LA METRO has focused on new construction projects for rail and bus lines. These projects present an opportunity for small and medium sized business to develop new partnerships with one of the largest transportation authorities in the state. However, current law limits LA Metro’s ability to contract with medium sized businesses, and bid requirement for small businesses resulted in 13 out 19 projects having to return to the general applicant pool in 2017. Removing the bid requirement in current law would help minority owned businesses compete against larger firms, and would allow for increased economic prosperity for all of Los Angeles. Finally, providing for a separate medium business set aside would provide a pathway for these businesses to grow and further contribute to their communities.”
2. Various state and local programs. California has had a small business preference within the state’s procurement process for more than 30 years. Some cities have programs that grant preference to local or regional small businesses. These may be in lieu of or in addition to preferences for small businesses in general. These programs are governed by a combination of state law and city charter provisions. Ultimately, small business programs assist various types of businesses in obtaining government contracts by “setting aside” specific government purchases exclusively for participation by these particular types of businesses. It is important to note that the contracts are still competitive; however, the competition is narrowed.
3. SBE report. As mentioned, AB 2690 required METRO to submit a report to the Legislature by December 31, 2017, providing an overview of the contracts awarded through the SBE set-aside process. The report notes that the since the inception of the SBE program until the end of 2017, METRO has awarded more than $52 million in SBE contracts. Specifically, for the 2017 calendar year, METRO awarded over $3.5 million to six SBE prime contractors. The report further noted that out of the 19 contracts that were solicited for SBE participants, 13 contracts failed to obtain the required three price quotes, in turn, requiring METRO to solicit bids from a general pool of bidders as opposed to only SBE participants. METRO estimated that the total loss to SBEs due to lack of sufficient bid quotes was $14.5 million in 2017.
4. MBE. Similar to METRO’s SBE program, this bill proposes to establish the first-of-its-kind MBE program. The sponsor and author of this bill assert that creating a set-aside program for medium sized businesses, METRO could create a path for growth and development that help communities they serve. Currently, no known medium sized business program exists in the United States and the federal Small Business Administration does not have any certified MBE programs or guidelines. Therefore, it is unclear whether the MBE criteria established in this bill sets the appropriate program parameters. Furthermore, small business programs are typically designed to assist minority and women-owned businesses obtain government contracts. To that end, the Small Business Administration provides detailed policies for small business programs to meet these guidelines and requirements. With no federal policies established for MBEs, it is unclear whether an MBE program created under this bill will similarly assist minority or women-owned medium sized businesses obtain government contracts.

However, other countries do in fact have medium sized business programs. For example, the European Union’s criteria for a medium sized business include a business having less than 250 employees, and generate less than €50 million euro or have a balance sheet of less than €43 million euro. In Switzerland, medium sized enterprises are businesses with between 50 and 249 employees.

This bill aims to provide METRO with greater flexibility to assist existing small businesses in the Los Angeles region and those businesses growing but cannot yet competitively compete with larger corporations. Amendments were taken to further define MBEs similar to how MBEs are defined in European countries, limit the total number of contracts that may be executed over a five year period, and establish reporting requirements to the Legislature.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 8/20/18)

Los Angeles County Metropolitan Transportation Authority (source)

OPPOSITION: (Verified 8/20/18)

None received

Prepared by:

8/21/18 18:55:47

**** END ****

 THIRD READING  

Bill No: AB 1205

Author:

:

Vote:

PRIOR VOTES NOT RELEVANT

SENATE TRANS. & HOUSING COMMITTEE: 11-1, 5/15/18 (Pursuant to Senate Rule 29.10)

AYES: Beall, Allen, Dodd, Gaines, Galgiani, McGuire, Roth, Skinner, Vidak, Wieckowski, Wiener

NOES: Morrell

NO VOTE RECORDED: Cannella

SUBJECT: Los Angeles County Metropolitan Transportation Authority: contracting

SOURCE: Los Angeles County Metropolitan Transportation Authority

DIGEST:

This bill makes changes to the Los Angeles County Metropolitan Transportation Authority’s (METRO) contracting requirements for small business enterprises (SBE) and establishes a medium business enterprise (MBE) program, as specified.

Senate Floor Amendments of 8/13/18 provide additional program description and requirements to the medium-sized enterprise program as established by this bill.

ANALYSIS:

Existing law:

1. Establishes county transportation commissions and designates specific powers and duties.
2. Creates METRO and designates various powers and duties with respect to transportation planning, programming, construction, and operations.
3. Establishes contracting requirements for METRO and provides specified authorization to award contracts under certain circumstances to SBEs if certain criteria are met.
4. Requires METRO, for contracts that are set aside for competition among certified SBEs, to obtain three price quotations from certified SBEs prior to awarding to the lowest responsible bidder.
5. Requires METRO to report to the Legislature by December 31, 2017, regarding any contracts awarded under the abovementioned process.
6. Defines “small business enterprise” to mean a business enterprise that is classified as a small business under United States Small Business Administration rules and meets the current SBE size standards found in Part 121 of Title 13 of the Code of Federal Regulations appropriate to the type of work the enterprise seeks to perform.
7. Allows METRO to establish limitations regarding the average annual gross receipts of a small business over the previous three fiscal years and establish limitations regarding the personal net worth of the owner of the small business, exclusive of the value of the owner’s personal residence.

This bill:

1. Changes METRO’s process to award contracts to SBEs by authorizing METRO to award a contract after soliciting three bids from SBEs, rather than obtaining three bids prior to awarding a contract to an SBE.
2. Establishes, similar to METRO’s SBE program, an MBE category with project costs ranging from $3 million to $30 million. Further authorizes METRO to award a contract to the lowest responsible bidder if METRO solicits for three or more price quotes from MBEs for the project out for bid.
3. Makes technical conforming changes.

Background

METRO is a multimodal transportation agency providing a variety of transportation-related services and functions for Los Angeles County. These services/functions include transportation planning, transit services (both bus and light rail), capital construction projects, and administering several local sales tax measures.

In 2010, AB 1341 (Price, Chapter 494, Statutes of 2010) authorized METRO to facilitate contract awards to small businesses on contracts over $100,000. Several years later, AB 2440 (Lowenthal, Chapter 703, Statutes of 2012) eliminated the $100,000 limitation on METRO’s authority to facilitate contract awards to small businesses. In facilitating SBE contracts, METRO may provide a bid preference of 5% to the lowest responsible bidder. METRO can also establish a subcontracting participation goal for SBEs on certain contracts financed with nonfederal funds and give a preference of 5% to the lowest responsible bidders that meet that goal. In 2016, AB 2690 (Chapter 204, Statutes of 2016, Ridley-Thomas) further clarified that project bidders are required to meet METRO-established SBE goals, rather than bidders just making a good-faith effort, with the contract then going to the lowest responsible bidder that meets SBE goals. AB 2690 also authorized METRO to side aside work for competition among certified SBEs for projects ranging from $5,000 to $3 million. For these projects, METRO is required to obtain three quotes for each SBE project that goes out to bid with the award going to the lowest responsible bidder.

Comments

1. Purpose. According to the author, “the Los Angeles County Metropolitan Transportation Authority (LA METRO) serves approximately 32,371,640, riders in Los Angeles County, and these riders are predominately minorities and low-income individuals. To ensure that all of these riders receive adequate access to reliable public transportation LA METRO has focused on new construction projects for rail and bus lines. These projects present an opportunity for small and medium sized business to develop new partnerships with one of the largest transportation authorities in the state. However, current law limits LA Metro’s ability to contract with medium sized businesses, and bid requirement for small businesses resulted in 13 out 19 projects having to return to the general applicant pool in 2017. Removing the bid requirement in current law would help minority owned businesses compete against larger firms, and would allow for increased economic prosperity for all of Los Angeles. Finally, providing for a separate medium business set aside would provide a pathway for these businesses to grow and further contribute to their communities.”
2. Various state and local programs. California has had a small business preference within the state’s procurement process for more than 30 years. Some cities have programs that grant preference to local or regional small businesses. These may be in lieu of or in addition to preferences for small businesses in general. These programs are governed by a combination of state law and city charter provisions. Ultimately, small business programs assist various types of businesses in obtaining government contracts by “setting aside” specific government purchases exclusively for participation by these particular types of businesses. It is important to note that the contracts are still competitive; however, the competition is narrowed.
3. SBE report. As mentioned, AB 2690 required METRO to submit a report to the Legislature by December 31, 2017, providing an overview of the contracts awarded through the SBE set-aside process. The report notes that the since the inception of the SBE program until the end of 2017, METRO has awarded more than $52 million in SBE contracts. Specifically, for the 2017 calendar year, METRO awarded over $3.5 million to six SBE prime contractors. The report further noted that out of the 19 contracts that were solicited for SBE participants, 13 contracts failed to obtain the required three price quotes, in turn, requiring METRO to solicit bids from a general pool of bidders as opposed to only SBE participants. METRO estimated that the total loss to SBEs due to lack of sufficient bid quotes was $14.5 million in 2017.
4. MBE. Similar to METRO’s SBE program, this bill proposes to establish the first-of-its-kind MBE program. The sponsor and author of this bill assert that creating a set-aside program for medium sized businesses, METRO could create a path for growth and development that help communities they serve. Currently, no known medium sized business program exists in the United States and the federal Small Business Administration does not have any certified MBE programs or guidelines. Therefore, it is unclear whether the MBE criteria established in this bill sets the appropriate program parameters. Furthermore, small business programs are typically designed to assist minority and women-owned businesses obtain government contracts. To that end, the Small Business Administration provides detailed policies for small business programs to meet these guidelines and requirements. With no federal policies established for MBEs, it is unclear whether an MBE program created under this bill will similarly assist minority or women-owned medium sized businesses obtain government contracts.

However, other countries do in fact have medium sized business programs. For example, the European Union’s criteria for a medium sized business include a business having less than 250 employees, and generate less than €50 million euro or have a balance sheet of less than €43 million euro. In Switzerland, medium sized enterprises are businesses with between 50 and 249 employees.

This bill aims to provide METRO with greater flexibility to assist existing small businesses in the Los Angeles region and those businesses growing but cannot yet competitively compete with larger corporations. It’s important to note that AB 2690 included a reporting requirement for METRO’s SBE program. If this bill is approved by this committee, the author may wish to consider including reporting requirements for METRO’s MBE program as the bill moves forward. A reporting requirement will allow the Legislature to evaluate the program’s effectiveness similar to METRO’s SBE program.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 8/14/18)

Los Angeles County Metropolitan Transportation Authority (source)

OPPOSITION: (Verified 8/14/18)

None received

Prepared by:

8/15/18 15:42:58

**** END ****

 THIRD READING  

Bill No: AB 1205

Author:

:

Vote:

PRIOR VOTES NOT RELEVANT

SENATE TRANS. & HOUSING COMMITTEE: 11-1, 5/15/18 (Pursuant to Senate Rule 29.10)

AYES: Beall, Allen, Dodd, Gaines, Galgiani, McGuire, Roth, Skinner, Vidak, Wieckowski, Wiener

NOES: Morrell

NO VOTE RECORDED: Cannella

SUBJECT:

SOURCE: Los Angeles County Metropolitan Transportation Authority

DIGEST:

This bill makes changes to the Los Angeles County Metropolitan Transportation Authority’s (METRO) contracting requirements for small business enterprises (SBE) and establishes a medium business enterprise (MBE) program, as specified.

ANALYSIS:

Existing law:

1. Establishes county transportation commissions and designates specific powers and duties.
2. Creates METRO and designates various powers and duties with respect to transportation planning, programming, construction, and operations.
3. Establishes contracting requirements for METRO and provides specified authorization to award contracts under certain circumstances to SBEs if certain criteria are met.
4. Requires METRO, for contracts that are set aside for competition among certified SBEs, to obtain three price quotations from certified SBEs prior to awarding to the lowest responsible bidder.
5. Requires METRO to report to the Legislature by December 31, 2017, regarding any contracts awarded under the abovementioned process.
6. Defines “small business enterprise” to mean a business enterprise that is classified as a small business under United States Small Business Administration rules and meets the current SBE size standards found in Part 121 of Title 13 of the Code of Federal Regulations appropriate to the type of work the enterprise seeks to perform.
7. Allows METRO to establish limitations regarding the average annual gross receipts of a small business over the previous three fiscal years and establish limitations regarding the personal net worth of the owner of the small business, exclusive of the value of the owner’s personal residence.

This bill:

1. Changes METRO’s process to award contracts to SBEs by authorizing METRO to award a contract after soliciting three bids from SBEs, rather than obtaining three bids prior to awarding a contract to an SBE.
2. Similar to METRO’s SBE program, establishes an MBE category with project costs ranging from $3 million to $30 million. Further authorizes METRO to award a contract to the lowest responsible bidder if METRO solicits for three or more price quotes from MBEs for the project out for bid.
3. Makes technical conforming changes.

Background

METRO is a multimodal transportation agency providing a variety of transportation-related services and functions for Los Angeles County. These services/functions include transportation planning, transit services (both bus and light rail), capital construction projects, and administering several local sales tax measures.

In 2010, AB 1341 (Price, Chapter 494, Statutes of 2010) authorized METRO to facilitate contract awards to small businesses on contracts over $100,000. Several years later, AB 2440 (Lowenthal, Chapter 703, Statutes of 2012) eliminated the $100,000 limitation on METRO’s authority to facilitate contract awards to small businesses. In facilitating SBE contracts, METRO may provide a bid preference of 5% to the lowest responsible bidder. METRO can also establish a subcontracting participation goal for SBEs on certain contracts financed with nonfederal funds and give a preference of 5% to the lowest responsible bidders that meet that goal. In 2016, AB 2690 (Chapter 204, Statutes of 2016, Ridley-Thomas) further clarified that project bidders are required to meet METRO-established SBE goals, rather than bidders just making a good-faith effort, with the contract then going to the lowest responsible bidder that meets SBE goals. AB 2690 also authorized METRO to side aside work for competition among certified SBEs for projects ranging from $5,000 to $3 million. For these projects, METRO is required to obtain three quotes for each SBE project that goes out to bid with the award going to the lowest responsible bidder.

Comments

1. Purpose. According to the author, “the Los Angeles County Metropolitan Transportation Authority (LA METRO) serves approximately 32,371,640, riders in Los Angeles County, and these riders are predominately minorities and low-income individuals. To ensure that all of these riders receive adequate access to reliable public transportation LA METRO has focused on new construction projects for rail and bus lines. These projects present an opportunity for small and medium sized business to develop new partnerships with one of the largest transportation authorities in the state. However, current law limits LA Metro’s ability to contract with medium sized businesses, and bid requirement for small businesses resulted in 13 out 19 projects having to return to the general applicant pool in 2017. Removing the bid requirement in current law would help minority owned businesses compete against larger firms, and would allow for increased economic prosperity for all of Los Angeles. Finally, providing for a separate medium business set aside would provide a pathway for these businesses to grow and further contribute to their communities.”
2. Various state and local programs. California has had a small business preference within the state’s procurement process for more than 30 years. Some cities have programs that grant preference to local or regional small businesses. These may be in lieu of or in addition to preferences for small businesses in general. These programs are governed by a combination of state law and city charter provisions. Ultimately, small business programs assist various types of businesses in obtaining government contracts by “setting aside” specific government purchases exclusively for participation by these particular types of businesses. It is important to note that the contracts are still competitive; however, the competition is narrowed.
3. SBE report. As mentioned, AB 2690 required METRO to submit a report to the Legislature by December 31, 2017, providing an overview of the contracts awarded through the SBE set-aside process. The report notes that the since the inception of the SBE program until the end of 2017, METRO has awarded more than $52 million in SBE contracts. Specifically, for the 2017 calendar year, METRO awarded over $3.5 million to six SBE prime contractors. The report further noted that out of the 19 contracts that were solicited for SBE participants, 13 contracts failed to obtain the required three price quotes, in turn, requiring METRO to solicit bids from a general pool of bidders as opposed to only SBE participants. METRO estimated that the total loss to SBEs due to lack of sufficient bid quotes was $14.5 million in 2017.
4. MBE. Similar to METRO’s SBE program, this bill proposes to establish the first-of-its-kind MBE program. The sponsor and author of this bill assert that creating a set-aside program for medium sized businesses, METRO could create a path for growth and development that help communities they serve. Currently, no known medium sized business program exists in the United States and the federal Small Business Administration does not have any certified MBE programs or guidelines. Therefore, it is unclear whether the MBE criteria established in this bill sets the appropriate program parameters. Furthermore, small business programs are typically designed to assist minority and women-owned businesses obtain government contracts. To that end, the Small Business Administration provides detailed policies for small business programs to meet these guidelines and requirements. With no federal policies established for MBEs, it is unclear whether an MBE program created under this bill will similarly assist minority or women-owned medium sized businesses obtain government contracts.

However, other countries do in fact have medium sized business programs. For example, the European Union’s criteria for a medium sized business include a business having less than 250 employees, and generate less than €50 million euro or have a balance sheet of less than €43 million euro. In Switzerland, medium sized enterprises are businesses with between 50 and 249 employees.

This bill aims to provide METRO with greater flexibility to assist existing small businesses in the Los Angeles region and those businesses growing but cannot yet competitively compete with larger corporations. It’s important to note that AB 2690 included a reporting requirement for METRO’s SBE program. If this bill is approved by this committee, the author may wish to consider including reporting requirements for METRO’s MBE program as the bill moves forward. A reporting requirement will allow the Legislature to evaluate the program’s effectiveness similar to METRO’s SBE program.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 5/16/18)

Los Angeles County Metropolitan Transportation Authority (source)

OPPOSITION: (Verified 5/16/18)

None received

Prepared by:

5/16/18 15:52:21

**** END ****

SENATE COMMITTEE ON TRANSPORTATION AND HOUSING

Senator Jim Beall, Chair

2017 - 2018 Regular

Bill No: Hearing Date: 5/15/2018

SUBJECT:

DIGEST: This bill makes changes to the Los Angeles County Metropolitan Transportation Authority’s (METRO) contracting requirements for small business enterprises (SBE) and establishes a medium business enterprise program, as specified.

ANALYSIS:

METRO is a multimodal transportation agency providing a variety of transportation-related services and functions for Los Angeles County. These services/functions include transportation planning, transit services (both bus and light rail), capital construction projects, and administering several local sales tax measures.

In 2010, AB 1341 (Price, Chapter 494, Statutes of 2010) authorized METRO to facilitate contract awards to small businesses on contracts over $100,000. Several years later, AB 2440 (Lowenthal, Chapter 703, Statutes of 2012) eliminated the $100,000 limitation on METRO’s authority to facilitate contract awards to small businesses. In facilitating SBE contracts, METRO may provide a bid preference of 5% to the lowest responsible bidder. METRO can also establish a subcontracting participation goal for SBEs on certain contracts financed with nonfederal funds and give a preference of 5% to the lowest responsible bidders that meet that goal. In 2016, AB 2690 (Chapter 204, Statutes of 2016, Ridley-Thomas) further clarified that project bidders are required to meet METRO-established SBE goals, rather than bidders just making a good-faith effort, with the contract then going to the lowest responsible bidder that meets SBE goals. AB 2690 also authorized METRO to side aside work for competition among certified SBEs for projects ranging from $5,000 to $3 million. For these projects, METRO is required to obtain three quotes for each SBE project that goes out to bid with the award going to the lowest responsible bidder.

Existing law:

1. Establishes County Transportation Commissions and designates specific powers and duties.
2. Creates METRO and designates various powers and duties with respect to transportation planning, programming, construction, and operations.
3. Establishes contracting requirements for METRO and provides specified authorization to award contracts under certain circumstances to SBEs if certain criteria are met.
4. For contracts that are set aside for competition among certified SBEs, requires METRO to obtain three price quotations from certified SBEs prior to awarding to the lowest responsible bidder.
5. Requires METRO to report to the Legislature by December 31, 2017, regarding any contracts awarded under the abovementioned process.
6. Defines “small business enterprise” to mean a business enterprise that is classified as a small business under United States Small Business Administration rules and meets the current SBE size standards found in part 121 of Title 13 of the Code of Federal Regulations appropriate to the type of work the enterprise seeks to perform.
7. Allows METRO to establish limitations regarding the average annual gross receipts of a small business over the previous three fiscal years and establish limitations regarding the personal net worth of the owner of the small business, exclusive of the value of the owner’s personal residence.

This bill:

1. Changes METRO’s process to award contracts to SBEs by authorizing METRO to award a contract after soliciting three bids from SBEs, rather than obtaining three bids prior to awarding a contract to a SBE.
2. Similar to METRO’s SBE program, establishes a medium business enterprise (MBE) category with project costs ranging from $3 million to $30 million. Further authorizes METRO to award a contract to the lowest responsible bidder if METRO solicits for three or more price quotes from MBE’s for the project out for bid.
3. Makes technical conforming changes.

COMMENTS

1. Purpose. According to the author, “the Los Angeles County Metropolitan Transportation Authority (LA METRO) serves approximately 32,371,640, riders in Los Angeles County, and these riders are predominately minorities and low-income individuals. To ensure that all of these riders receive adequate access to reliable public transportation LA METRO has focused on new construction projects for rail and bus lines. These projects present an opportunity for small and medium sized business to develop new partnerships with one of the largest transportation authorities in the state. However, current law limits LA Metro’s ability to contract with medium sized businesses, and bid requirement for small businesses resulted in 13 out 19 projects having to return to the general applicant pool in 2017. Removing the bid requirement in current law would help minority owned businesses compete against larger firms, and would allow for increased economic prosperity for all of Los Angeles. Finally, providing for a separate medium business set aside would provide a pathway for these businesses to grow and further contribute to their communities.”
2. Various state and local programs. California has had a small business preference within the state’s procurement process for more than 30 years. Some cities have programs that grant preference to local or regional small businesses. These may be in lieu of or in addition to preferences for small businesses in general. These programs are governed by a combination of state law and city charter provisions. Ultimately, small business programs assist various types of businesses in obtaining government contracts by “setting aside” specific government purchases exclusively for participation by these particular types of businesses. It is important to note that the contracts are still competitive; however, the competition is narrowed.
3. SBE report. As mentioned, AB 2690 required METRO to submit a report to the Legislature by December 31, 2017 providing an overview of the contracts awarded through the SBE set-aside process. The report notes that the since the inception of the SBE program until the end of 2017, METRO has awarded more than $52 million in SBE contracts. Specifically, for the 2017 calendar year, METRO awarded over $3.5 million to six SBE prime contractors. The report further noted that out of the 19 contracts that were solicited for SBE participants, 13 contracts failed to obtain the required three price quotes, in turn, requiring METRO to solicit bids from a general pool of bidders as opposed to only SBE participants. METRO estimated that the total loss to SBEs due to lack of sufficient bid quotes was $14.5 million in 2017.
4. MBE: Similar to METRO’s SBE program, this bill proposes to establish the first-of-its-kind MBE program. The sponsor and author of this bill assert that creating a set-aside program for medium sized businesses, METRO could create a path for growth and development that help communities they serve. Currently, no known medium sized business program exists in the United States and the federal Small Business Administration does not have any certified MBE programs or guidelines. Therefore, it is unclear whether the MBE criteria established in this bill sets the appropriate program parameters. Furthermore, small business programs are typically designed to assist minority and women-owned businesses obtain government contracts. To that end, the Small Business Administration provides detailed policies for small business programs to meet these guidelines and requirements. With no federal policies established for MBEs, it is unclear whether an MBE program created under this bill will similarly assist minority or women-owned medium sized businesses obtain government contracts.

However, other countries do in fact have medium sized business programs. For example, the European Union’s criteria for a medium sized business include a business having less than 250 employees, and generate less than €50 million euro or have a balance sheet of less than €43 million euro. In Switzerland, medium sized enterprises are businesses with between 50 and 249 employees.

This bill aims to provide METRO with greater flexibility to assist existing small businesses in the Los Angeles region and those businesses growing but cannot yet competitively compete with larger corporations. It’s important to note that AB 2690 included a reporting requirement for METRO’s SBE program. If this bill is approved by this committee, the author may wish to consider including reporting requirements for METRO’s MBE program as the bill moves forward. A reporting requirement will allow the Legislature to evaluate the program’s effectiveness similar to METRO’s SBE program.

FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No

POSITIONS: (Communicated to the committee before noon on Wednesday,

May 9, 2018.)

SUPPORT:

Los Angeles Metropolitan Transportation Authority (sponsor)

OPPOSITION:

None received.

-- END --

 THIRD READING 

Bill No: AB 1205

Author:

:

Vote:

SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 6/28/17

AYES: McGuire, Nguyen, Beall, Hernandez, Hertzberg, Lara, Moorlach

ASSEMBLY FLOOR: 69-0, 5/18/17 (Consent) - See last page for vote

SUBJECT:

SOURCE: Author

DIGEST:

This bill extends, from three years to four, the period for which a distributor must not be delinquent in the filing of reports or returns to be relieved by the State Board of Equalization (BOE) of additional security requirements.

ANALYSIS: Existing law requires, pursuant to the Cigarette and Tobacco Products Tax Law, distributors of cigarette and tobacco products to be licensed by the BOE and to furnish a security deposit to BOE if the distributor desires to defer payments for stamps or meter register settings. Provides that upon authorization of the security deposit, BOE may not require additional security from the distributor if the distributor’s average monthly purchase of stamps or meter register settings for the previous 12 months does not exceed 72,000 stamps or meter register settings and if the distributor meets certain requirements, including that the distributor has not been delinquent in the filing of any reports or returns to the BOE for the preceding three consecutive years.

This bill extends, from three years to four, the period for which a distributor must not be delinquent in the filing of reports or returns to be relieved by the BOE of additional security requirements.

Comments

The author wants to tighten the requirements that distributors must meet to qualify for the protection against additional security requirements.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 6/30/17)

None received

OPPOSITION: (Verified 6/30/17)

None received

ASSEMBLY FLOOR: 69-0, 5/18/17

AYES: Acosta, Travis Allen, Arambula, Baker, Berman, Bigelow, Bloom, Bocanegra, Bonta, Brough, Burke, Caballero, Cervantes, Chávez, Chen, Chiu, Choi, Chu, Cooley, Cooper, Cunningham, Dababneh, Dahle, Daly, Eggman, Flora, Fong, Gallagher, Cristina Garcia, Eduardo Garcia, Gomez, Gonzalez Fletcher, Gray, Grayson, Harper, Irwin, Jones-Sawyer, Kalra, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Muratsuchi, Nazarian, Obernolte, O'Donnell, Patterson, Quirk, Quirk-Silva, Reyes, Ridley-Thomas, Rodriguez, Rubio, Salas, Steinorth, Mark Stone, Thurmond, Ting, Voepel, Waldron, Weber, Wood

NO VOTE RECORDED: Aguiar-Curry, Calderon, Chau, Frazier, Friedman, Gipson, Gloria, Holden, Mullin, Santiago, Rendon

Prepared by:

7/6/17 11:21:15

**** END ****

SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Mike McGuire, Chair

2017 - 2018 Regular

Taxation

Extends from three years to four the period for which a distributor must not be delinquent in the filing of reports or returns to be relieved by the State Board of Equalization (BOE) of additional security requirements.

Background

The Cigarette and Tobacco Products Tax Law requires distributors of cigarette and tobacco products to be licensed by the state Board of Equalization (BOE) and to furnish a security deposit to BOE if the distributor desires to defer payments for stamps or meter register settings. Upon authorization of the security deposit, BOE may not require additional security from the distributor if the distributor’s average monthly purchase of stamps or meter register settings for the previous 12 months does not exceed 72,000 stamps or meter register settings and if the distributor meets certain requirements, including that the distributor has not been delinquent in the filing of any reports or returns to the BOE for the preceding 3 consecutive years.

The author wants to tighten the requirements that distributors must meet to qualify for the protection against additional security requirements.

Proposed Law

Assembly Bill 1205 extends the period of time in which a distributor must not be delinquent in the filing of reports or returns from 3 years to 4 years to be relieved by the BOE from additional security requirements under the Cigarette and Tobacco Products Tax Law.

State Revenue Impact

No estimate.

Comments

1. Purpose of the bill. According to the author, “This bill proposes to protect taxpayers by simply extending, from three years to four, the period of time in which a distributor must not be delinquent in the filing of reports or returns to be relieved by the State Board of Equalization of additional security requirements under the Cigarette and Tobacco Products Tax Law.”

2. Administration of Cigarette and Tobacco Products Tax Law transferring to new California Department of Tax and Fee Administration (CDTFA). Effective July 1, 2017, the responsibility for administering the Cigarette and Tobacco Products Tax Law will transfer from BOE to the new CDTFA if the Governor signs, as expected, AB 102 (Committee on Budget) a trailer bill to the 2017 state budget act.

Assembly Actions

Assembly Revenue and Taxation 9-0

Assembly Floor 69-0

Support and Opposition

(6/21/17)

Support: Unknown.

Opposition: Unknown.

-- END --

Date of Hearing: May 8, 2017

ASSEMBLY COMMITTEE ON REVENUE AND TAXATION

Sebastian Ridley-Thomas, Chair

ABPCA Bill Id:AB 1205 (

Author:Ridley-Thomas) – As Introduced Ver:February 17, 2017

Majority vote.

SUBJECT: Taxation

SUMMARY: Extends, from three years to four, the period of time in which a distributor must not be delinquent in the filing of reports or returns to be relieved by the State Board of Equalization (BOE) of additional security requirements under the Cigarette and Tobacco Products Tax Law.

EXISTING LAW:

1. Requires distributors of cigarette and tobacco products to be licensed by the BOE.
2. Requires a distributor that desires to defer payments for stamps or meter register settings to furnish a security deposit, subject to certain requirements, to the BOE.
3. Provides, upon BOE authorization, that no additional security shall be required for a distributor that desires to defer payments for stamps or meter register settings, as provided, if the distributor's average monthly purchase of stamps or meter register settings for the previous 12 months does not exceed a specified amount and if the distributor meets certain requirements, including a requirement that the distributor has not been delinquent in the filing of any reports or returns for the preceding 3 consecutive years.

FISCAL EFFECT: Unknown

COMMENTS:

1. Existing law and this bill: Under existing law, the BOE must fix the amount of security required of any distributor and may increase or decrease the amount at any time. Nevertheless, every distributor required to be licensed must furnish a minimum security amount of $1,000.

Subject to the exception discussed below, if a distributor desires to defer payments for stamps or meter register settings, the following requirements apply:

• 1. If a distributor elects to make payments on a monthly basis, the BOE shall require a security of no less than 70% and no more than twice the amount of the distributor's purchases of stamps and meter register settings for which payment may be deferred;
  2. If a distributor elects to make payments on a twice-monthly basis, the BOE shall require a security of no less than 50% and no more than twice the amount of the distributor's purchases of stamps and meter register settings for which payment may be deferred; and,
  3. If a distributor elects to make payments on a weekly basis, the BOE shall require a security of no less than 25% and no more than twice the amount of the distributor's purchase of stamps and meter register settings for which payment may be deferred.

Nevertheless, existing law also provides that, upon BOE authorization, no additional security shall be required for a distributor that desires to defer payments for stamps or meter register settings if the distributor's average monthly purchase of stamps or meter register settings for the previous 12 months does not exceed 72,000 stamps or meter register settings and if the distributor meets specified requirements. These requirements include that the distributor has not been delinquent in the filing of any reports or returns for the preceding three consecutive years. This bill, in turn, would modify this provision to extend, from three consecutive years to four, the number of years a distributor has not been delinquent in the filing of any reports or returns.

REGISTERED SUPPORT / OPPOSITION:

Support

None on file

Opposition

None on file

Analysis Prepared by: M. David Ruff / REV. & TAX. / (916) 319-2098