Legislation urges disclosure, transparency of state contracts

The state of California is in a major push to increase the disclosure around contracts with private firms. But it's not enough for Assemblyman Mike Eng, D-Monterey Park.

Eng is back for a second try with legislation that would force the state to move beyond the changes currently underway. Under the direction of the Schwarzenegger administration, the state is streamlining it's IT-contracting methods and reporting all contracts over $5,000 on a new website.

But Eng's AB 756 would add new requirements — such as forcing agencies to list the reason for no-bid contracts or why a low bid was not accepted. It would call on contractors to list the number of staff they have assigned to contracts and the reasons for all amendments.

The bill passed the Senate Appropriations Committee on Monday by a 9-4 vote after Eng took several amendments, including one that would allow departments more time to report contract amendments. Sen. Mark Wyland, R-Escondido, was the sole Republican to cross party lines and support Eng's bill.

Eng's effort also adds fuel to a longstanding debate that has intensified as the state has looked for deeper and deeper spending cuts — whether it's generally cheaper to hire contractors or full-fledged state workers. For his part, Eng is on the side of state workers.

"We have no idea how many positions are being outsourced, and more importantly, why," Eng said. He added, "You don't run on a spare tire forever. We're buying a lot of spare tires. We've got some perfectly good tires already on the car."

That kind of talk bothers Tom Blackburn, the president of the American Council of Engineering Companies (ACEC), whose members include many of the firms who do engineering contracting with the state. For years, the ACEC has battled the Professional Engineers in California Government (PECG) and other unions in a rhetoric battle over the relative cost effectiveness of contractors and state workers.

PECG has frequently cited research it says shows that an engineer employed by the state costs about $105,000 a year, while paying a private contractor to do the same work runs anywhere from $178,000 to $193,000. But Blackburn charges that PECG's figures fail to take the full cost of state worker benefits into account.

"We're pretty sure they would not be all that efficient on projects if they had to bill all their time to a particular project," Blackburn said. "We have to bill all our time to a particular project. There's no hiding for us."

Blackburn's group is on record opposing AB 756 because of what he said are punitive clauses that could cause firms to lose contracts or be ineligible for bidding for state business if they fail to live up to all the disclosure terms of the bill. In effect, Blackburn said, this would put them at the mercy of state bureaucrat who may forget to add needed information. He also said that there are already rules in place to monitor contractors and weed out those who aren't living up to their deals.

"We're all for transparency, but the way this bill is written it's really a hit job on private contractors," he said. He added, "We have to have an army of clerical people as it is now… We get audited all the time."

Eng said that he has been talking to critics of the bill and has amended out some of the more punitive clauses. The most important goal, he said, is giving people ability to view what is actually in state contracts. California spends $3 million a day on contracts, he said. He believes the state could save $100 million a year from the $1 billion annually in IT contracts, and another $150 million or more from medical registry service contracts.

None of what he's trying to do is particularly cutting edge, Eng added. He noted that several other states are making similar efforts. The Obama administration is also seeking to streamline and modernize to make major cuts to an estimated $440 billion in annual federal contracting.

Eng's effort began last session with a similar bill, AB 2603. That bill eventually died in the Senate Appropriations Committee after a Republican committee analysis put its cost of the bill at $800,000, mostly for gathering all the information and designing a searchable web interface. Eng, who chaired the Assembly Business and Professions Committee at the time, said his staff estimated the cost at only $200,000.

"Even if it were a half a million-let's split the difference-no one has disputed that it's going to save hundreds of millions of dollars," Eng said. "I don't know how you could turn away a dollar when it would get you ten. It's like not buying a $10,000 car to get to a $100,000 a year job."

Like the earlier bill, AB 756 has gotten little Republican support-a fact that may have something to do with the bill's sponsor, the Service Employees Union International Local 1000, which represents 95,000 state workers.

The administration has not taken a position on AB 756, according to Rachel Cameron, a spokeswoman for the Governor.

"The Governor successfully fought for IT reform in the budget revision he signed last month that will reduce costs, shorten the time it takes to complete an IT project and help modernize the state's technology environment to be more efficient," Cameron said.

Last week, the administration announced a new program to reform the IT procurement process. Under the new guidelines, the implementation schedule for large IT projects will be reduced from three to five years down to 24 to 26 months. There is also a greater allowance for multi-state procurement and pilot-projects from small bidders.

All of these changes will help lead to reduced costs, said Jim Butler, chief procurement officer for the DGS. Butler also pointed to DGS's searchable database of state contracts. The latest version, launched in March, can be seen at http://www.pd.dgs.ca.gov/scpreg/data.asp_blank.

The administration also has a transparency website, http://www.reportingtransparency.ca.gov/. The initial site was launched in April and included information like the travel expenses and financial disclosures of constitutional officers. Information about state contracts was added in June.

Unions have criticized the governor's site for being difficult to navigate and search.

"It's all about allowing citizens to go in and look at how their government works," said SEIU Local 1000 spokesman Jim Zamora. "I think there is some concern on the part of the administration and perhaps their Republican allies about what it might show."

"We all understand we have more than we can do in terms of making the data easier to get to," said DGS's Butler. "But we're certainly proud of where we are compared to where the state used to be."