Bill Text: CA AB2270 | 2015-2016 | Regular Session | Amended

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

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Bill Title: California Infrastructure and Economic Development Bank: surety bond program.

Spectrum: Partisan Bill (Democrat 2-0)

Status: (Failed) 2016-11-30 - From Senate committee without further action. [AB2270 Detail]

Download: California-2015-AB2270-Amended.html

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BILL NUMBER: AB 2270	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  APRIL 6, 2016

INTRODUCED BY   Assembly Member Bonta

                        FEBRUARY 18, 2016

   An act to  add Article 3 (commencing with Section 14848)
to Chapter 6.5 of Part 5.5 of Division 3 of Title 2 of the Government
Code, and to amend Section 10221 of the Public Contract Code,
relating to public contracts.   amend Sections 63089.95
and 63089.96 of the Government Code, relating to stat   e
government, and making an appropriation therefor. 


	LEGISLATIVE COUNSEL'S DIGEST


   AB 2270, as amended, Bonta.  Public contracts: business
development: statewide bonding program.   California
Infrastructure and Economic Development Bank: surety bond program.
 
   Under the Small Business Financial Assistance Act of 2013, the
California Infrastructure and Economic Development Bank, within the
Governor's Office of Business and Economic Development, administers
specific programs relating to small business, either administered
directly by the bank or under contract with small business financial
development corporations. The act authorizes bank programs to offer
surety bond guarantees. The act prohibits a corporation from
guaranteeing any loan unless and until it makes specified
determinations, including that there is a low probability that the
surety bond would be granted by a financial institution or financial
company under reasonable terms or conditions, and the beneficiary has
demonstrated a reasonable prospect of successful completion of the
project.  
   This bill would modify that prohibition to refer to a surety bond
instead of a loan and would add private bonding companies to those
entities considered when calculating the probability that a surety
bond would be granted.  
   The act, in addition to the authority described above, authorizes
a corporation to act as a guarantor on a surety bond for any small
business contractor, including, but not limited to, women, minority,
and disabled veteran contractors.  
   This bill would expand those entities for which a corporation may
act as a guarantor on a surety bond to include disadvantaged business
enterprise contractors. The bill would require a surety bond program
to include technical assistance to a participating contractor, as
prescribed. The bill would authorize the bank, in implementing a
surety bond program under the act, to assign all or part of the
program to another state entity in a prescribed manner, to establish
one or more pilot projects before approving directives and guidelines
for a statewide surety bond and small contractor assistance program,
and to establish one or more nonstate contracts under specific
circumstances.  
   The act continues in existence the California Small Business
Expansion Fund (expansion fund), a continuously appropriated fund
that includes General Fund moneys. The expansion fund may be used to
pay defaulted loan guarantee or surety bond losses, or other
financial product defaults or losses, to fund direct loans and other
debt instruments, to pay administrative costs of corporations, to pay
state support and administrative costs, and to pay costs to protect
a real property interest in a financial product default.  
   By expanding the activities of the bank that are funded by
continuous appropriation from the expansion fund, this bill would
make an appropriation.  
   Existing law requires that public contracts with state agencies
provide for the filing of separate performance and payment bonds by
the contractor in the form of bonds executed by an admitted surety
insurer, as provided.  
   This bill would establish, in the Department of General Services,
a statewide contractor bonding program, to be administered by the
Office of Small Business and Disabled Veteran Business Enterprise
Services, for the purpose of enabling participating contractors to
meet any applicable bid, payment, or performance bonding requirements
for public contracts with state agencies. This bill would authorize
the office to act as guarantor on surety bonds for participating
contractors on contracts with state agencies and require the office
to provide specified technical assistance to participating
contractors. The bill would authorize the office to charge
participating contractors fees for the provision of these services,
not to exceed the amount necessary to cover the costs incurred in the
administration of these provisions.  
   This bill would require the office to establish a request for the
proposals process by which contractors may participate in the program
as a participating contractor and to give preference to contractors
that are disadvantaged business enterprises, small business
enterprises, or disabled veteran business enterprises, as specified.
The bill would authorize the office to terminate a contractor's
participation after a reasonable period of time if the contractor is
no longer in compliance with the requirements of the program or
suspend a participating contractor that defaults on a bond from
transacting any business with the state for a period of not less than
3 years and not more than 10 years. 
   Vote:  majority   2/3  . Appropriation:
 no   yes  . Fiscal committee: yes.
State-mandated local program: no.


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

   SECTION 1.    Section 63089.95 of the  
Government Code   is amended to read: 
   63089.95.  In furtherance of the purposes set forth in Section
63088.1 of this code and Section 14001 of the Corporations Code, a
corporation may do any one or more of the following activities, but
only to the extent that the activities are authorized pursuant to the
contract between the bank and corporation: guarantee, endorse, or
act as surety on the bonds, notes, contracts, or other obligations
of, or assist financially, any person, firm, corporation, or
association, and may establish and regulate the terms and conditions
with respect to any such guarantees or financial assistance and the
charges for interest and service connected therewith, except that the
corporation shall not  make or guarantee any
 loan,   surety bond  unless and until it
determines:
   (a) There is a low probability that the surety bond would be
granted by a  private bonding company,  financial 
institution   institution,  or financial company
under reasonable terms or conditions, and the beneficiary has
demonstrated a reasonable prospect of successful completion of the
project.
   (b) The surety bond project coverage will be used exclusively in
this state.
   (c) The beneficiary has a minimum equity interest in the business
as determined by the directives and requirements.
   (d) As a result of the surety bond, the jobs generated or retained
demonstrate reasonable conformance to the directives and
requirements specifying employment criteria.
   SEC. 2.    Section 63089.96 of the 
Government Code   is amended to read: 
   63089.96.  (a) In addition to the authority granted by Section
63089.95, pursuant to the directives and requirements a corporation
may act as guarantor on a surety bond for any small business
contractor, including, but not limited to, women, minority, 
and disabled veteran   disabled veteran, and
disadvantaged business enterprise  contractors.
   (b) The provisions of subdivision (a) allowing a corporation to
act as a guarantor on surety bonds may be funded through appropriate
state or federal funding sources. Federal funds shall be deposited in
the Federal Trust Fund in the State Treasury in accordance with
Section 16360, for transfer to the expansion fund. 
   (c) The surety bond program shall include technical assistance to
a participating contractor. Technical assistance provided pursuant to
this section shall include, but is not limited to, all of the
following:  
   (1) Assessment and identification of the particular barriers
facing the participating contractor and development of solutions to
those barriers. Activities pursuant to this paragraph may include the
following:  
   (A) Assessments by surety and construction experts.  
   (B) Development of a business plan.  
   (C) Workshops addressing contractor bonding, bidding on state
projects, job safety, and other topics that would be beneficial to
the participating contractor.  
   (D) Project field support.  
   (2) Identification of, and assistance in obtaining, other
financial support and resources. Activities pursuant to this
paragraph may include the following:  
   (A) Linkages with accountants, brokers, and surety companies
committed to helping contractors build bonding and organizational
capacity.  
   (B) Prequalifications for additional assistance.  
   (C) Collateral guarantees.  
   (d) In implementing a surety bond program pursuant to this
chapter, the bank may:  
   (1) Assign all or part of the program to another state entity that
agrees to implement the program consistent with this chapter and
directives and requirements adopted by the bank. If the bank assigns
all or a part of the program to another state entity, the bank shall
retain responsibility for reporting on the use and outcomes of the
program, pursuant to Section 63089.98.  
   (2) Establish one or more pilot projects before approving
directives and guidelines for a statewide surety bond and small
contractor assistance program.  
   (3) Establish one or more nonstate contracts, to the extent deemed
necessary by the bank, based on there being an insufficient number
of corporations interested in, and qualified to, implement a surety
bond program, including the technical assistance required in
subdivision (c). These contractors shall be subject to the applicable
reporting requirements of this chapter, Section 63089.97, and any
other directive or requirement set by the bank.  
  SECTION 1.    Article 3 (commencing with Section
14848) is added to Chapter 6.5 of Part 5.5 of Division 3 of Title 2
of the Government Code, to read:

      Article 3.  Statewide Contractor Bonding Program


   14848.  As used in this article, the following definitions shall
apply:
   (a) "Office" means the Office of Small Business and Disabled
Veteran Business Enterprise Services established within the
department pursuant to Section 14839.
   (b) "Program" means the statewide contractor bonding program
established pursuant to this chapter.
   (c) "Participating contractor" means a person seeking to bid on a
contract with a state agency that is required by law, including, but
not limited to, Sections 10221 to 10225, inclusive, of the Public
Contract Code, to acquire bonds to participate in those contracts and
participate in the program.
   14848.10.  There is in the department a statewide contractor
bonding program for the purpose of enabling participating contractors
to meet any applicable bid, payment, or performance bonding
requirements for public contracts with state agencies. The office
shall be the entity to administer this program.
   14848.20.  The office may act as guarantor on a surety bond for a
participating contractor on a contract with a state agency.
   14848.30.  (a) The office shall establish a request for proposals
process by which contractors may participate in the program as
participating contractors pursuant to this chapter.
   (b) In considering requests for proposals for assistance pursuant
to this article, the department shall give preference to contractors
that are any of the following:
   (1) A disadvantaged business enterprise, as defined in Section
2051 of the Public Contract Code.
   (2) A small business enterprise certified pursuant to Article 1
(commencing with Section 14835).
   (3) A disabled veteran business enterprise, as defined in Section
999 of the Military and Veterans Code.
   (c) (1) The office may terminate a contractor's participation in
the program after a reasonable period of time if the contractor is no
longer in compliance with the requirements of the program.
   (2) The office may suspend a participating contractor that
defaults on a bond issued pursuant to this article from transacting
any business with the state either directly as a prime contractor or
indirectly as a subcontractor, for a period of not less than three
years and not more than 10 years. A contractor that was previously a
participating contractor but was suspended pursuant to this paragraph
may resume participation in the bonding program at the end of his or
her suspension upon approval by the office.
   14848.40.  The office shall provide technical assistance to a
participating contractor. Technical assistance provided pursuant to
this section shall include, but is not limited to, all of the
following:
   (a) Assessment and identification of the particular barriers
facing the participating contractor and development of solutions to
those barriers. Activities pursuant to this subdivision may include
the following:
   (1) Assessments by surety and construction experts.
   (2) Development of a business plan.
   (3) Workshops addressing the following topics:
   (A) Basic information pertaining to contractor bonding.
   (B) Understanding the surety process and underwriting.
   (C) The process for bidding on state projects.
   (D) Addressing stop notices.
   (E) Strategies for accessing capital.
   (F) Prevailing wages.
   (G) Job safety and the Occupational Safety and Health
Administration.
   (H) Certification.
   (I) Any other topics that would be beneficial to the participating
contractor.
   (4) Project field support.
   (b) Identification of and assistance in obtaining other financial
support and resources. Activities pursuant to this subdivision may
include the following:
   (1) Linkages with accountants, brokers, and surety companies
committed to helping contractors build bonding and organizational
capacity.
   (2) Pre-qualifications for additional assistance.
   (3) Collateral guarantees.
   (c) Monitoring and reporting on the progress of the participating
contractor, including the following:
   (1) Collaboration with other programs.
   (2) Progress on any project for which a bond is issued pursuant to
this article.
   (3) Defaults on a bond issued pursuant to this article.
   (4) Funds administration. Notwithstanding subdivision (b) of
Section 14848.50, the office shall not charge a participating
contractor fees for the purpose of this paragraph.
   14848.50.  (a) The department shall adopt rules and regulations
necessary to implement the provisions of this article.
   (b) The office may charge a participating contractor fees for the
provision of services pursuant to this article. The fees shall not
exceed the amount necessary to cover the costs incurred in the
administration of this article.  
  SEC. 2.    Section 10221 of the Public Contract
Code is amended to read:
   10221.  Every contract shall provide for the filing of separate
performance and payment bonds by the contractor in the form of bonds
executed by either an admitted surety insurer or the Office of Small
Business and Disabled Veteran Business Enterprise Services pursuant
to Section 14848.20 of the Government Code and not deposits in lieu
of bond, subject to the approval of the department.