Bill Text: CA AB1650 | 2009-2010 | Regular Session | Amended

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Public contracts: state and local contract eligibility:

Spectrum: Moderate Partisan Bill (Democrat 15-4)

Status: (Passed) 2010-09-30 - Chaptered by Secretary of State - Chapter 573, Statutes of 2010. [AB1650 Detail]

Download: California-2009-AB1650-Amended.html

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BILL NUMBER: AB 1650	AMENDED
	BILL TEXT

	AMENDED IN SENATE  AUGUST 4, 2010
	AMENDED IN SENATE  AUGUST 2, 2010
	AMENDED IN SENATE  JULY 1, 2010
	AMENDED IN SENATE  JUNE 23, 2010
	AMENDED IN ASSEMBLY  APRIL 27, 2010
	AMENDED IN ASSEMBLY  APRIL 13, 2010
	AMENDED IN ASSEMBLY  FEBRUARY 23, 2010

INTRODUCED BY   Assembly Members Feuer, Blumenfield, and Huffman
   (Coauthors: Assembly Members Anderson, Bass, Block, De Leon, Hill,
Jones, Lieu, Miller, John A. Perez, Portantino, Silva, and Tran)
   (Coauthors: Senators  Leno,  Padilla, Pavley, and Price)


                        JANUARY 13, 2010

   An act to add Chapter 2.7 (commencing with Section 2200) to Part 1
of Division 2 of the Public Contract Code, relating to public
contracts.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 1650, as amended, Feuer. Public contracts: state and local
contract eligibility: energy sector investment activities in Iran.
   Existing law sets forth the requirements for the solicitation and
evaluation of bids and the awarding of contracts by public entities.
   The federal Comprehensive Iran Sanctions, Accountability, and
Divestment Act of 2010, which became Public Law 111-195 on July 1,
2010, authorizes a state or local government to adopt and enforce
measures meeting certain requirements, to divest the assets of the
state or local government from, or prohibit the investment of those
assets in, any person that the state or local government, using
credible information available to the public, determines to be
engaged in investment activities in Iran. The federal act specifies
than an investment includes the entry into or renewal of a contract
for goods or services, and that such a measure is not preempted by
any federal law or regulation.
   Pursuant to this authority, this bill would  90 days after the
effective date of this bill,  prohibit a person that is engaged
in investment activities in  the energy sector in 
Iran, as described, from bidding on or entering into or renewing a
contract with a state agency for goods  and   or
 services or a contract with a local public entity for goods or
services of $1,000,000 or more. The bill would require a prospective
bidder for those contracts to certify, after exercising due
diligence, that it is not engaged in investment activities in
 the energy sector in  Iran and would impose
penalties, as specified, for a person that provides a false
certification and did not exercise due diligence, as provided. This
bill would require an awarding body to give reasonable notice, and
hearing if requested, before the penalties are imposed. This bill
would impose the penalties on a person that provides a false
certification but exercised due diligence, unless the person has
ceased or ceases its engagement in investment activities in 
the energy sector in  Iran, as specified.
   This bill would,  90 days after the effective date of this
bill,  for a pending bid or contract proposal, or for a contract
for which no false certification was made, require the awarding
body, if the awarding body determines, using credible information
available to the public, that a person is a person that engages in
investment activities in  the energy sector in 
Iran, to provide 90 days' written notice of its intent not to enter
into or renew a contract for goods or services with the person and
would require the awarding body to provide a person that is alleged
to be engaged in investment activities in  the energy sector
in  Iran with an opportunity to comment in writing that it
is not engaged in those activities.
   This bill would make legislative findings and declarations
regarding a statewide concern.
   This bill would become inoperative upon the date that federal
authorization ceases.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Chapter 2.7 (commencing with Section 2200) is added to
Part 1 of Division 2 of the Public Contract Code, to read:
      CHAPTER 2.7.  IRAN CONTRACTING ACT OF 2010


   2200.  This chapter shall be known and may be cited as the Iran
Contracting Act of 2010.
   2201.  The Legislature hereby finds and declares all of the
following:
   (a) In imposing United States sanctions on Iran, Congress and the
President have determined that the illicit nuclear activities of the
Government of Iran, combined with its development of unconventional
weapons and ballistic missiles, and its support of international
terrorism, represent a serious threat to the security of the United
States, Israel, and other United States allies in Europe, the Middle
East, and around the world.
   (b) On September 9, 2009, it was reported that American
intelligence agencies have concluded that Iran has already created
enough nuclear fuel to develop a nuclear weapon, and United States
Ambassador to the International Atomic Energy Agency Glyn Davies
declared that Iran had achieved "possible breakout capacity."
   (c) On September 21, 2009, Iran sent a letter to the International
Atomic Energy Agency acknowledging that it is considering a
previously undeclared "new pilot fuel enrichment plan."
   (d) On Sept. 25, 2009, President Barack H. Obama, joined by Prime
Minister Gordon Brown of Britain and President Nicolas Sarkozy of
France, stated that the secret plant "represents a direct challenge
to the basic foundation of the nonproliferation regime" and "deepens
a growing concern that Iran is refusing to live up to those
international responsibilities, including specifically revealing all
nuclear-related activities. As the international community knows,
this is not the first time that Iran has concealed information about
its nuclear program."
   (e) The International Atomic Energy Agency has repeatedly called
attention to Iran's unlawful nuclear activities, and, as a result,
the United Nations Security Council has adopted a range of sanctions
designed to encourage the Government of Iran to cease those
activities and comply with its obligations under the Treaty on the
Non-Proliferation of Nuclear Weapons (commonly known as the "Nuclear
Non-Proliferation Treaty"). 
   (f) It is anticipated that Congress will declare its intent that
state and local governments be able to direct divestiture from,
prevent investment in, and prohibit entry into or renewal of
contracts with, companies operating in Iran's energy sector. Under
bipartisan federal legislation advancing in the 111th Congress and
cosponsored by more than one-third of the members of the United
States Senate and more than half of the members of the House of
Representatives, state and local governments would be expressly
authorized to divest and otherwise disassociate themselves from
companies with investments that have the result of directly or
indirectly supporting the efforts of the Government of Iran to
achieve a nuclear weapons capability.  
   (f) On July 1, 2010, President Barack Obama signed into law H.R.
2194, the "Comprehensive Iran Sanctions, Accountability, and
Divestment Act of 2010" (Public Law 111-195), which expressly
authorizes states and local governments to prevent investment in,
including prohibiting entry into or renewing contracts with,
companies operating in Iran's energy sector with investments that
have the result of directly or indirectly supporting the efforts of
the Government of Iran to achieve nuclear weapons capability. 
   (g) On October 7, 2008, then-Senator Obama stated, "Iran right now
imports gasoline, even though it's an oil producer, because its oil
infrastructure has broken down. If we can prevent them from importing
the gasoline that they need and the refined petroleum products, that
starts changing their cost-benefit analysis. That starts putting the
squeeze on them."
   (h) The serious and urgent nature of the threat from Iran demands
that states, local governments, educational institutions, and private
institutions work together with the federal government and American
allies to do everything possible diplomatically, politically, and
economically to prevent Iran from acquiring a nuclear weapons
capability.
   (i) There are moral and reputational reasons for this state and
local governments to not engage in business with foreign companies
that have business activities benefiting foreign states, such as
Iran, that commit egregious violations of human rights, proliferate
nuclear weapons capabilities, and support terrorism.
   (j) It is the responsibility of the state to decide how, where,
and by whom its financial resources should be invested. It also is
the prerogative of the state to not invest in, or do business with,
companies whose investments with Iran place those companies at risk
from the impact of economic sanctions imposed upon the Government of
Iran for sponsoring terrorism, committing egregious violations of
human rights, and engaging in illicit nuclear weapons development.
   (k) The human rights situation in Iran has steadily deteriorated
in 2009, as punctuated by transparently fraudulent elections and the
brutal repression and murder, arbitrary arrests, and show trials of
peaceful dissidents.
   (l) During the postelection protests in June 2009, the Iranian
government imposed widespread and unjustifiable restrictions on
telecommunications services, denying the citizens of Iran their
rights and liberties to free speech.
   (m) On October 14, 2007, Governor Arnold Schwarzenegger stated his
intention to support "efforts to further prevent terrorism" when
signing Assembly Bill 221, which prohibits the state's pension funds
from investing in companies with active business in Iran.
   (n) This state currently honors contracts with foreign companies
that may be at financial risk due to business ties with foreign
states, such as Iran, that are involved in the proliferation of
weapons of mass destruction, commit human rights violations, and
support terrorism.
   (o) The concerns of the State of California regarding Iran are
strictly the result of the actions of the Government of Iran.
   (p) The people of the State of California declare all of the
following:
   (1) We have feelings of friendship for the people of Iran.
   (2) We regret that developments in recent decades have created
impediments to that friendship.
   (3) We hold the people of Iran, their culture, and their ancient
and rich history in the highest esteem.
   (q) In order to effectively address the need for the governments
of this state to respond to the policies of Iran in a uniform
fashion, prohibiting contracts with persons engaged in investment
activities in the energy sector  in   of 
Iran must be accomplished on a statewide basis, and, therefore, the
subject is a matter of statewide concern rather than a municipal
affair.
   2202.  As used in this chapter, the following definitions apply:
   (a) "Awarding body" means a department, board, agency, authority,
or officer, agent, or other authorized representative of the public
entity awarding a contract for goods or services.
   (b) "Energy sector"  of Iran  means activities to develop
petroleum or natural gas resources or nuclear power  in Iran
 .
   (c) "Financial institution" means the term as used in Section
 14(5)   14  of the Iran Sanctions Act of
1996 (Public Law 104-172; 50 U.S.C. 1701 note).
   (d) "Iran" includes  the Government of Iran and  any
agency or instrumentality of Iran.
   (e) "Person" means any of the following:
   (1) A natural person, corporation, company, limited liability
company, business association, partnership, society, trust, or any
other nongovernmental entity, organization, or group.
   (2) Any governmental entity or instrumentality of a government,
including a multilateral development institution, as defined in
Section 1701(c)(3) of the International Financial Institutions Act
(22 U.S.C. 262r(c)(3)).
   (3) Any successor, subunit, parent  company  
entity  , or subsidiary of, or  company  
any entity  under common ownership or control with, any entity
described in paragraph (1) or (2).
   2202.5.  For purposes of this chapter, a person engages in
investment activities  in the energy sector  in Iran
if any of the following is true:
   (a) The person has an investment of twenty million dollars
 ($20,000,000) or more in the energy sector in Iran.

    (b)     The person
provides oil or liquefied natural gas tankers, or products used to
construct or maintain pipelines used to transport oil or liquefied
natural gas, for the energy sector in Iran.  
($20,000,000) or more in the energy sector of Iran, including in a
person that provides oil or liquified natural gas tankers, or
products used to construct or maintain pipelines used to transport
oil or liquified natural gas, for the energy sector of Iran. 

   (c) 
    (b)  The person is a financial institution that extends
twenty million dollars ($20,000,000) or more in credit to another
person, for 45 days or more, if that person will use the credit to
invest in the energy sector  in   of  Iran.

   2203.   (a)    A person that engages in
investment activities  in the energy sector  in Iran
is ineligible to, and shall not, bid on, submit a proposal for, or
enter into or renew, a contract with a state agency for goods or
services or a contract with a local public entity for goods 
and   or  services of one million dollars
($1,000,000) or more. 
   (b) The prohibition described in subdivision (a) applies on and
after the date that is 90 days after the effective date of this act.

   2204.  (a) A state agency or local public entity shall require a
person that submits a bid or proposal to, or otherwise proposes to
enter into or renew a contract with, a state agency or local public
entity with respect to a contract for goods or services described in
Section 2203 to certify, after exercising due diligence, that the
person does not engage in investment activities  in the
energy sector  in Iran.
   (b) For purposes of this section and Section 2205, a person shall
be deemed to have not exercised due diligence if the person knows or
should have known that the person is engaged in investment activities
 in the energy sector  in Iran after having made an
affirmative, reasonable inquiry as to the facts and circumstances
surrounding the person's investments, or if the person fails to make
that affirmative, reasonable inquiry. 
   (c) The certification described in subdivision (a) is required on
and after the date that is 90 days after the effective date of this
act. 
   2205.  (a)  (1)  If the awarding body determines, using credible
information available to the public and after providing reasonable
notice, and a hearing if requested, that a person has submitted a
false certification under Section 2204 without exercising due
diligence as described in that section, the following shall apply:
   (A) Pursuant to an action under subdivision (b), a civil penalty
in an amount that is equal to the greater of two hundred fifty
thousand dollars ($250,000) or twice the amount of the contract for
which the false certification was made.
   (B) Termination of an existing contract with the awarding body at
the option of the awarding body.
   (C) Ineligibility to bid on a contract for a period of three years
from the date of the determination that the person submitted the
false certification.
   (2) (A) If the awarding body determines, using credible
information available to the public and after providing reasonable
notice, and a hearing if requested, that a person has submitted a
false certification under Section 2204 but determines the person has
exercised due diligence as described in that section, the awarding
body shall provide written notice of its intent to not enter into or
renew a contract for goods or services with the person and that the
person is subject to the penalties described in subparagraphs (B) and
(C) of paragraph (1), unless the person has ceased or ceases its
engagement in investment activities  in the energy sector
 in Iran within 90 days. The person may still be subject to
subparagraph (C) of paragraph (1) due to a false certification made
on another contract.
   (B) If a person described in subparagraph (A) that ceased its
engagement in investment activities  in the energy sector
 in Iran is awarded the contract or contract renewal for
which the false certification was made, and the awarding body later
determines, using credible information available to the public and
after providing reasonable notice, and a hearing if requested, that
the person is engaged in investment activities  in the energy
sector  in Iran during the term of that contract, the
person shall be subject to the penalties described in subparagraphs
(B) and (C) of paragraph (1).
   (b) The awarding body shall report to the Attorney General the
name of the person that the awarding body determines has submitted a
false certification under Section 2204, together with its information
as to the false certification, and the Attorney General shall
determine whether to bring a civil action against the person to
collect the penalty described in subparagraph (A) of paragraph (1) of
subdivision (a). The awarding body of a local public entity may also
report to the city attorney, county counsel, or district attorney
the name of the person that the awarding body determines has
submitted a false certification under Section 2204, together with its
information as to the false certification, and the city attorney,
county counsel, or district attorney may determine whether to bring a
civil action against the person to collect the penalty described in
subparagraph (A) of paragraph (1) of subdivision (a). If it is
determined in that action that the person submitted a false
certification, the person shall pay all reasonable costs and fees
incurred in a civil action, including costs incurred by the awarding
body for investigations that led to the finding of the false
certification and all reasonable costs and fees incurred by the
Attorney General, city attorney, county counsel, or district
attorney. Only one civil action against the person to collect the
penalty described in subparagraph (A) of paragraph (1) of subdivision
(a) may be brought for a false certification on a contract.
   2206.  (a) If the awarding body, using credible information
available to the public, determines that a person that has an
existing contract with the awarding body that is not subject to
Section 2205, or has submitted a pending bid or contract proposal to,
or otherwise proposes to enter into a contract with, the awarding
body, engages in investment activities  in the energy sector
 in Iran, the awarding body shall provide 90 days' written
notice of its intent to not enter into or renew a contract for goods
or services with the person. The notice shall specify that the
person, if it ceases its engagement in investment activities 
in the energy sector  in Iran, may become eligible for a
future contract, or contract renewal, for goods or services with the
awarding body.
   (b) The awarding body shall provide a person with an opportunity
to comment in writing to the awarding body that it is not engaged in
investment activities  in the energy sector  in
Iran. If the person demonstrates to the awarding body that the person
is not engaged in investment activities  in the energy
sector  in Iran, the person shall be eligible to enter into
or renew a contract for goods or services with the awarding body,
unless the person is otherwise ineligible to bid on a contract as
described in subparagraph (C) of paragraph (1) of subdivision (a) of
Section 2205.
   (c) This section shall apply to contracts for goods  and
  or  services with a state agency and contracts
for goods  and   or  services of one
million dollars ($1,000,000) or more with a local public entity
entered into, or renewed, on and after the date that is 90 days after
the  operative date of this chapter   effective
date of this act  .
   2207.  The Legislature shall submit to the Attorney General of the
United States a written notice describing this chapter within 30
days after the  operative date of this chapter  
effective date of this act  .
   2208.  (a) If any one or more provisions, sections, subdivisions,
sentences, clauses, phrases, or words of this act or the application
thereof to any person or circumstance is found to be invalid,
illegal, unenforceable, or unconstitutional, the same is hereby
declared to be severable and the balance of this act shall remain
effective and functional notwithstanding such invalidity, illegality,
unenforceability, or unconstitutionality.
   (b) The Legislature hereby declares that it would have passed this
act, and each provision, section, subdivision, sentence, clause,
phrase, or word thereof, irrespective of the fact that any one or
more provisions, sections, subdivisions, sentences, clauses, phrases,
or words are declared invalid, illegal, unenforceable, or
unconstitutional. 
  SEC. 2.    (a) Section 1 of this act shall become
operative only if federal legislation authorizing states to adopt and
enforce contracting prohibitions of the type provided for in that
section is enacted and, in that event, shall become operative on the
later of January 1, 2011, or the operative date of the authorizing
federal legislation.


   (b) 
   SEC. 2.   Section 1 of this act shall become inoperative
upon the date that federal law ceases to authorize the states to
adopt and enforce the contracting prohibitions of the type provided
for in that section.