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F I S C A L I M P A C T R E P O R T

SPONSOR Varela

ORIGINAL DATE

LAST UPDATED

2-7-06

2/14/06 HB 845

SHORT TITLE Protect Certain Small Businesses

SB

ANALYST Dearing

ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)

FY06

FY07

FY08

3 Year

Total Cost

Recurring

or Non-

Rec

Fund

Affected

Total

*Indeterminate Budgetary

Increases

*Indeterminate Budget-

ary Increases

Recurring

(Parenthesis ( ) Indicate Expenditure Decreases)

*Please See Narrative

Duplicates SB 652

SOURCES OF INFORMATION

LFC Files

Responses Received From

General Services Department (GSD)

SUMMARY

Synopsis of Bill

House Bill 845 provides for several changes to Section 13-1-21 NMSA 1978, Public Purchases

and Property.

Generally, House Bill 845 defines “bid,” “disadvantaged-small business,” and “proposal.” The

bill clarifies language that is currently found within this section relating to New York state busi-

ness procurement, and defines New York businesses as resident business, removing differential

status for the purposes of reciprocity of procurement, necessary due to amendments within the

New York statutes. Lastly, this legislation exempts construction industries and contracts, in-

cluding materials from preferential bidding parameters.

Similarly, new preferential bid limits and parameters are established for disadvantaged small

businesses, when these are the sole preference factor, as well as when this category is used in

conjunction with other preference factors such as resident business and small business.

FISCAL IMPLICATIONS

*Indeterminate fiscal impact. The level of fiscal impact level is expected to be negative and di-

rectly correlated to the indeterminate and variable volume of preferred bids accepted, as these

House Bill 845 – Page

2

bids would be tend to be slightly more expensive than the actual lowest bid.

The level of fiscal impact would vary directly on three factors:

1) Total dollar amount of bids received from the newly extended classes of preferentially

treated businesses.

If the lowest actual bid is considered to be 100%, then;

“Resident Business” bid values, which are in excess of the lowest bid, be-

tween 0% and 5.23% higher than the lowest bid, are now accepted as

these are preferred.

105.23% x .95 = 100%

Currently, up to a 5.23% bid-cost premium over the actual lowest bid can

be paid on these “Resident Business” bids.

“Small Business” bid values, which are in excess of the lowest bid, be-

tween 0% and 11.2% higher than the lowest bid, would be accepted as

these are preferred.

111.20% x .90 = 100%

If enacted, up to a 11.2% bid-cost premium over the actual lowest bid

could be paid on these “Small Business” bids.

“Disadvantaged Small Business” bid values, which are in excess of the

lowest bid, between 0% and 17.65% higher than the lowest bid, would be

accepted as these are preferred.

117.65% x .85 = 100%

If enacted, up to a 17.65% bid-cost premium over the actual lowest bid

could be paid on these “Disadvantaged Small Business” bids.

2)

How many of these preferred bid values fall within the “allotted” premium range.

Only those bids received from preferentially treated business classes which are also

higher and fall within the ranges {0-11.2% with “Small Business” and 0-17.65%

with “Disadvantaged Small Business”, and yet not higher than the upper limit(s)}

would have a negative impact on budgetary costs. Those preferential bids with values

higher than the lowest bid, yet still higher than the aforementioned upper limits,

would have no associated budgetary cost impact, as these bids would not be accepted.

3)

What percentage of “Resident” businesses, currently providing bids are either

“Small” or “Disadvantaged Small.” There is a potential concern that some current

“Resident” businesses would re-classify themselves as one of the newly expanded

preferentially treated business categories. This would increase the potential preferen-

tial bid premiums currently paid above the actual lowest bid, on preferred status bids,

from up to 5.23%, to up to 11.2% or up to 17.65%, depending on the re-classification.

House Bill 845 – Page

3

Currently, New Mexico resident businesses are allowed up to a 5.23% bid premium. Enactment

of this legislation could increase the number of preferred bids, as well as increase the preferential

business category premium on bids, up to a maximum of 17.65% in the case of “Disadvantaged

Small” businesses, and subsequently increase those associated costs to procure goods and ser-

vices falling under the parameters of this legislation.

SIGNIFICANT ISSUES

As currently written, Section 13-1-21 a.) NMSA 1978 defines “recycled content goods”

As enacted, the Section 13-1-21 a.) 1, 2, & 3 NMSA 1978 is expanded and clauses are inserted to

define “bid” according to 13-1-102 NMSA 1978, “disadvantaged small business” as a resident

business, one with 51% majority ownership by; females, honorably discharged veterans, to in-

clude those disabled, & all others defined to be minority as specified by the minority develop-

ment agency of the U.S. Department of Commerce, and “proposal” according to Section 13-1-

102 NMSA 1978

As currently written, Section 13-1-21 a.) 1) NMSA 1978 defines “resident business” as a New

Mexico resident business, or a New York State business authorized to do business within the

state, under the applicable laws.

As enacted, Section 13-1-21 a.) 5 NMSA 1978 redefines “resident business” as one which is au-

thorized to do business in the state, and removes New York state-specific language from this sub-

section.

As currently written, Section 13-1-21 a.) 3) NMSA 1978 defines New York state businesses of

all forms, in most industries as one having a principle office within the borders of that state.

As enacted, Section 13-1-21 a.) 3) NMSA 1978 is removed from the statutes.

As currently written, Section 13-1-21 a.) 4) NMSA 1978 defines “resident manufacturer” and

includes a stipulation that a New York state business is a resident manufacturer in order to evalu-

ate that business’s bid against the bid of a resident manufacturer, which is not a New York state

business.

As enacted, Section 13-1-21 a.) 1) NMSA 1978 the clause that applies to New York state busi-

nesses is removed.

As enacted, Section 13-1-21 a.) 7) NMSA 1978 is inserted to define “small business” as a resi-

dent business as defined in Section 13-1-21 a.) 5) NMSA 1978.

As enacted, exceptions are created in Section 13-1-21 m.) 1 & 2 NMSA 1978 such that all provi-

sions of this do not apply to construction contracts, construction service contracts, maintenance

contracts, or those construction contracts based on unit pricing; as well as those materials used

for in these contacts.

As enacted, Section 13-1-21 n.) NMSA 1978 is inserted such that when a bid from a small busi-

ness is received, and the lowest bid is from either a non-resident or a resident business that is

not defined as small, the bid is awarded to the small business closest to the low bid, as long as

House Bill 845 – Page

4

the small business bid, when multiplied by .90, is lower than the others. When a bid preference

is both small and resident, the preferential award may not exceed 10%.

As enacted, Section 13-1-21 o.) NMSA 1978 is inserted such that when a bid from a disadvan-

taged small business is received, and the lowest bid is from either a non-resident or a resident

business that is not defined as small & disadvantaged, the bid is awarded to the disadvantaged

small business closest to the low bid, as long as the disadvantaged small business bid, when mul-

tiplied by .85, is lower than the others. When a bid preference is both disadvantaged-small and

resident, the preferential award may not exceed 15%.

As enacted, Section 13-1-21 p.) NMSA 1978 is inserted such that price-inclusive proposals from

resident businesses are multiplied by .95 before evaluation points are awarded, as outlined in the

RFP.

As enacted, Section 13-1-21 q.) NMSA 1978 is inserted such that price-inclusive proposals from

small businesses are multiplied by .90 before evaluation points are awarded, as outlined in the

RFP. When a bid preference is both small and resident, the preferential award may not exceed

10%.

As enacted, Section 13-1-21 r.) NMSA 1978 is inserted such that price-inclusive proposals from

disadvantaged small businesses are multiplied by .85 before evaluation points are awarded, as

outlined in the RFP. When a bid preference is both disadvantaged-small and resident, the pref-

erential award may not exceed 15%

As enacted, Section 13-1-21.2 a.) NMSA 1978, Equal Procurement Access for New York Busi-

nesses, is amended to be more concise. This section previously referred to prior amendments to

New York law that made reciprocity of procurement statutes necessary between NY & NM, how-

ever the amendment establishes the same reciprocity of procurement, albeit more concisely.

As enacted, Section 13-1-22 a.), b.), & c.) are amended to include disadvantaged-small and

small business language, to the existing resident business language, for the application and

submission of certificate of preferred business bids.

Some possible legal implications giving resident businesses versus non resident businesses pref-

erence based on the commerce clause of the United States Constitution.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

Sections 13-1-21 & 13-1-22 NMSA 1978 will remain as written.

PD/mt:yr