New Law Provides Postsecondary Education Institutions Exceptions to the Competitive Bidding Requirements for Goods, Services, or Information Technology Contracts

Under current law, postsecondary education institutions, including California Community Colleges, the University of California, and the California State University, are required to follow competitive bidding procedures to procure contracts for goods and services above a certain value.  With respect to California Community Colleges, Public Contract Code section 20651 requires competitive bidding for any contract involving an expenditure of more than $83,400 for equipment, materials, or supplies, non-construction services, and repairs.  This amount is adjusted annually.  Similar requirements exist for the University of California under Public Contract Code section 10507.7 and for the California State University under Public Contract Code section 10705.

On September 9, 2013, the Governor approved Assembly Bill 173 (AB 173) which creates exceptions to allow postsecondary education institutions to contract directly with certified small businesses if the contract value falls within a certain range.  These exceptions took effect on January 1, 2014.

For California Community Colleges, AB 173 enacts Public Contract Code section 20651.2 which allows community college districts to award contracts for the acquisition of goods, services, or information technology (“Goods/Services Contracts”) to certified small businesses without going through the competitive bidding process if the estimated value of the contract is greater than $5,000 but less than $250,000.  “Certified small businesses” include microbusinesses and disabled veteran business enterprises.

Under Government Code section 14837, a small business is a California business which has 100 or fewer employees with average annual gross receipts of $10,000,000 or less over the previous 3 years or is a manufacturer with 100 or fewer employees.  A “microbusiness” has average annual gross receipts of $2,500,000 or less over the previous three years or is a manufacturer with 25 or fewer employees.

AB 173 also enacts Government Code section 14838.64 which grants the same rights to the California State University.  For the University of California, AB 173 enacts Public Contract Code section 10508.5, allowing direct Goods/Services Contracts with the certified small businesses as long as the estimated value is greater than $100,000 but less than $250,000.

In order to utilize this competitive bidding exception, postsecondary institutions must obtain price quotations from two or more certified small businesses, including microbusinesses, or from two or more disabled business enterprises.  If small businesses are available and prepared to provide quality work, postsecondary institutions can avoid the cost and hassle of going through the competitive bidding process by contracting directly with a small business as long as the requirements of AB 173, and the new Public Contract Code provisions are met.

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