LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 77th Regular Session April 6, 2001 TO: Honorable Florence Shapiro, Chair, Senate Committee on State Affairs FROM: John Keel, Director, Legislative Budget Board IN RE: SB1518 by Lucio (Relating to state purchasing using the reverse auction procedure.), As Introduced ************************************************************************** * Estimated Two-year Net Impact to General Revenue Related Funds for * * SB1518, As Introduced: positive impact of $6,800,000 through the * * biennium ending August 31, 2003. * * * * The bill would make no appropriation but could provide the legal * * basis for an appropriation of funds to implement the provisions of * * the bill. * ************************************************************************** General Revenue-Related Funds, Five-Year Impact: **************************************************** * Fiscal Year Probable Net Positive/(Negative) * * Impact to General Revenue Related * * Funds * * 2002 $3,400,000 * * 2003 3,400,000 * * 2004 3,400,000 * * 2005 3,400,000 * * 2006 3,400,000 * **************************************************** All Funds, Five-Year Impact: *************************************************************************** *Fiscal Probable Savings/(Cost) from Probable Savings/(Cost) from * * Year General Revenue Fund State Highway Fund * * 0001 0006 * * 2002 $3,400,000 $252,000 * * 2003 3,400,000 504,000 * * 2004 3,400,000 756,000 * * 2005 3,400,000 1,008,000 * * 2006 3,400,000 1,260,000 * *************************************************************************** Technology Impact None Fiscal Analysis This bill would amend the Government Code to authorize the General Services Commission to use a reverse auction procedure to procure goods and services for the state. This bill would also specify which commodities purchased for, or by, the Texas Department of Transportation would have to be purchased using reverse auctions. The bill would establish the percentage of those commodities, ranging from 10 to 50 percent, that would be purchased using reverse auctions in fiscal year 2002 through fiscal year 2006. Methodology In the e-Texas report, the Comptroller of Public Accounts estimates potential savings generated by reverse auctions at anywhere from 2 percent to 10 percent. In fiscal year 1999 approximately $70 million was expended on such items as fuel, office furniture, paper, reflective sheeting, salt, and tires and tubes. Using a midpoint of 6 percent as potential savings, less vendor payment of 20 percent, it is estimated that approximately $3.4 million could be saved using reverse auctions. Also, in the Comptroller's report, Paving the Way: A Performance Review of the Texas Department of Transportation, the Comptroller's office estimates reverse auctions could be expected to generate savings for items such as cement, fuel, paint, furniture, and drainage materials. Using the material categories and dollar purchases for fiscal 1999, approximately $42 million, and subjecting 10 percent of these purchase or about $4.2 million to reverse auctions in fiscal year 2002, and using a midpoint of 6 percent as potential savings, it is estimated that $252,000 could be saved. Using reverse auctions to purchase 20 percent of these commodities, or about $8.4 million, in fiscal year 2003, would result in savings of about $504,000. By 2006, when at least 50 percent of these commodities, or about $21 million, would be purchased using reverse auctions, the savings would be $1,260,000. Local Government Impact No significant fiscal implication to units of local government is anticipated. Source Agencies: 303 General Services Commission, 304 Comptroller of Public Accounts, 601 Texas Department of Transportation LBB Staff: JK, RB, GS