BILL NUMBER: AB 1084 CHAPTERED
BILL TEXT
CHAPTER 882
FILED WITH SECRETARY OF STATE OCTOBER 14, 2001
APPROVED BY GOVERNOR OCTOBER 13, 2001
PASSED THE SENATE SEPTEMBER 14, 2001
PASSED THE ASSEMBLY SEPTEMBER 14, 2001
AMENDED IN SENATE SEPTEMBER 13, 2001
AMENDED IN SENATE SEPTEMBER 12, 2001
AMENDED IN SENATE SEPTEMBER 7, 2001
AMENDED IN SENATE AUGUST 31, 2001
AMENDED IN ASSEMBLY MAY 31, 2001
AMENDED IN ASSEMBLY APRIL 16, 2001
INTRODUCED BY Assembly Member Wesson
(Coauthor: Senator Chesbro)
FEBRUARY 23, 2001
An act to amend Sections 14836, 14837, 14838.5, 14839, 14839.1,
14840, 14842, and 14842.5 of, and to repeal and add Section 14838 of,
the Government Code, and to amend Sections 2000 and 2001 of, and to
add Sections 2002 and 10116 to, the Public Contract Code, relating to
public contracts.
LEGISLATIVE COUNSEL'S DIGEST
AB 1084, Wesson. Public contracts.
(1) Existing law requires state agencies to give small businesses
a 5% preference in contracts for construction, the procurement of
goods, or the delivery of services.
This bill would include microbusinesses under those provisions,
and revise annual goals for the program. The bill would also add
related definitions and make related changes.
This bill would also authorize a local agency to provide for a
small business preference in construction, the procurement of goods,
or the delivery of services, and to establish a subcontracting
participation goal for small businesses on contracts with a
preference for those bidders who meet the goal.
This bill would require an awarding department to report to the
Governor and the Legislature on the level of participation by
business enterprises, by race, ethnicity, and gender of owner, in
specified contracts.
(2) The bill would state legislative intent to enact legislation
participation of small businesses in public contracting. The bill
would also state the intent of the Legislature to act in conformity
with certain public contracting recommendations.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 14836 of the Government Code is amended to
read:
14836. (a) The Legislature hereby declares that it serves a
public purpose, and it is of benefit to the state, to promote and
facilitate the fullest possible participation by all citizens in the
affairs of the State of California in every possible way. It is also
essential that opportunity is provided for full participation in our
free enterprise system by small business enterprises.
(b) Further, it is the declared policy of the Legislature that the
state should aid, counsel, assist, and protect, to the maximum
extent possible, the interests of small business concerns, including
microbusinesses, in order to preserve free competitive enterprise and
to ensure that a fair proportion of the total purchases and
contracts or subcontracts for property and services for the state be
placed with these enterprises.
SEC. 2. Section 14837 of the Government Code is amended to read:
14837. As used in this chapter:
(a) "Department" means the Department of General Services.
(b) "Director" means the Director of General Services.
(c) "Manufacturer" means a business that is both of the following:
(1) Primarily engaged in the chemical or mechanical transformation
of raw materials or processed substances into new products.
(2) Classified between Codes 2000 to 3999, inclusive, of the
Standard Industrial Classification (SIC) Manual published by the
United States Office of Management and Budget, 1987 edition.
(d) (1) "Small business" means an independently owned and operated
business, which is not dominant in its field of operation, the
principal office of which is located in California, the officers of
which are domiciled in California, and which, together with
affiliates, has 100 or fewer employees, and average annual gross
receipts of ten million dollars ($10,000,000) or less over the
previous three years, or is a manufacturer, as defined in subdivision
(c), with 100 or fewer employees.
(2) "Microbusiness" is a small business that, together with
affiliates, has average annual gross receipts of two million five
hundred thousand dollars ($2,500,000) or less over the previous three
years, or is a manufacturer, as defined in subdivision (c), with 25
or fewer employees.
(3) The director shall conduct a biennial review of the average
annual gross receipt levels specified in this subdivision and may
adjust that level to reflect changes in the California Consumer Price
Index for all items. To reflect unique variations or
characteristics of different industries, the director may establish,
to the extent necessary, either higher or lower qualifying standards
than those specified in this subdivision, or alternative standards
based on other applicable criteria.
(4) Standards applied under this subdivision shall be established
by regulation, in accordance with Chapter 3.5 (commencing with
Section 11340) of Part 1, and shall preclude the qualification of
businesses that are dominant in their industry.
SEC. 3. Section 14838 of the Government Code is repealed.
SEC. 3.1. Section 14838 is added to the Government Code, to read:
14838. In order to facilitate the participation of small
business, including microbusiness, in the provision of goods,
information technology, and services to the state, and in the
construction (including alteration, demolition, repair, or
improvement) of state facilities, the directors of General Services
and other state agencies that enter those contracts, each within
their respective areas of responsibility, shall do all of the
following:
(a) Establish goals, consistent with those established by the
Office of Small Business Certification and Resources, for the extent
of participation of small businesses, including microbusinesses, in
the provision of goods, information technology, and services to the
state, and in the construction of state facilities.
(b) Provide for small business preference, or nonsmall business
preference for bidders that provide for small business and
microbusiness subcontractor participation, in the award of contracts
for goods, information technology, services, and construction, as
follows:
(1) In solicitations where an award is to be made to the lowest
responsible bidder meeting specifications, the preference to small
business and microbusiness shall be 5 percent of the lowest
responsible bidder meeting specifications. The preference to
nonsmall business bidders that provide for small business or
microbusiness subcontractor participation shall be, up to a maximum
of 5 percent of the lowest responsible bidder meeting specifications,
determined according to rules and regulations established by the
Department of General Services.
(2) In solicitations where an award is to be made to the highest
scored bidder based on evaluation factors in addition to price, the
preference to small business or microbusiness shall be 5 percent of
the highest responsible bidder's total score. The preference to
nonsmall business bidders that provide for small business or
microbusiness subcontractor participation shall be up to a maximum 5
percent of the highest responsible bidder's total score, determined
according to rules and regulations established by the Department of
General Services.
(3) The preferences under paragraphs (1) and (2) may not be
awarded to a noncompliant bidder and may not be used to achieve any
applicable minimum requirements.
(4) The preference under paragraph (1) may not exceed fifty
thousand dollars ($50,000) for any bid, and the combined cost of
preferences granted pursuant to paragraph (1) and any other provision
of law may not exceed one hundred thousand dollars ($100,000). In
bids in which the state has reserved the right to make multiple
awards, this fifty thousand dollar ($50,000) maximum preference cost
shall be applied, to the extent possible, so as to maximize the
dollar participation of small businesses, including microbusiness, in
the contract award.
(c) Give special consideration to small businesses and
microbusinesses by both:
(1) Reducing the experience required.
(2) Reducing the level of inventory normally required.
(d) Give special assistance to small businesses and
microbusinesses in the preparation and submission of the information
requested in Section 14310.
(e) Under the authorization granted in Section 10163 of the Public
Contract Code, make awards, whenever feasible, to small business and
microbusiness bidders for each project bid upon within their
prequalification rating. This may be accomplished by dividing major
projects into subprojects so as to allow a small business or
microbusiness contractor to qualify to bid on these subprojects.
(f) Small business and microbusiness bidders qualified in
accordance with the provisions of this chapter shall have precedence
over nonsmall business bidders in that the application of any bidder
preference for which nonsmall business bidders may be eligible under
this provision or any other provision of law shall not result in the
denial of the award to a small business or microbusiness bidder. In
the event of a precise tie between the low responsible bid of a
bidder meeting specifications of a small business or microbusiness,
and the low responsible bid of a bidder meeting the specifications of
a disabled veteran-owned small business or microbusiness, the
contract shall be awarded to the disabled veteran-owned small
business or microbusiness. This provision applies if the small
business or microbusiness bidder is the lowest responsible bidder, as
well as if the small business or microbusiness bidder is eligible
for award as the result of application of the small business and
microbusiness bidder preference granted by subdivision (b).
SEC. 4. Section 14838.5 of the Government Code is amended to read:
14838.5. (a) Notwithstanding the advertising, bidding, and
protest provisions of Chapter 6 (commencing with Section 14825) of
this code and Chapter 2 (commencing with Section 10290) and Chapter 3
(commencing with Section 12100) of Part 2 of Division 2 of the
Public Contract Code, a state agency may award a contract for the
acquisition of goods, services, or information technology that has an
estimated value of greater than five thousand dollars ($5,000), but
less than two hundred thousand dollars ($200,000) for construction
contracts and less than one hundred thousand dollars ($100,000) for
all other contracts, to a certified small business, including a
microbusiness, or to a disabled veteran business enterprise, as long
as the agency obtains price quotations from two or more certified
small businesses, including microbusinesses, or from disabled
veterans business enterprises.
(b) In carrying out subdivision (a), state agencies shall consider
a responsive offer timely received from a responsible certified
small business, including a microbusiness, or from a disabled veteran
business enterprise.
(c) If the estimated cost to the state is less than five thousand
dollars ($5,000) for the acquisition of goods, services, or
information technology, or a greater amount as administratively
established by the director, a state agency shall obtain at least two
price quotations from responsible suppliers whenever there is reason
to believe a response from a single source is not a fair and
reasonable price.
SEC. 5. Section 14839 of the Government Code is amended to read:
14839. There is hereby established within the department the
Office of Small Business Certification and Resources. The duties of
the office shall include:
(a) Compiling and maintaining a comprehensive bidders list of
qualified small businesses, and noting which small businesses also
qualify as microbusinesses.
(b) Coordinating with the Federal Small Business Administration,
the Minority Business Development Agency, and the Office of Small
Business Development of the Department of Economic and Business
Development.
(c) Providing technical and managerial aids to small businesses
and microbusinesses by conducting workshops on matters in connection
with government procurement and contracting.
(d) Assisting small businesses and microbusinesses in complying
with the procedures for bidding on state contracts.
(e) Working with appropriate state, federal, local, and private
organizations and business enterprises in disseminating information
on bidding procedures and opportunities available to small businesses
and microbusinesses.
(f) Making recommendations to the department and other state
agencies for simplification of specifications and terms in order to
increase the opportunities for small business and microbusiness
participation.
(g) Develop, by regulation, other programs and practices that are
reasonably necessary to aid and protect the interest of small
businesses and microbusinesses in contracting with the state.
(h) The information furnished by each contractor requesting a
small business or microbusiness preference shall be under penalty of
perjury.
SEC. 6. Section 14839.1 of the Government Code is amended to read:
14839.1. The department shall have sole responsibility for
certifying and determining the eligibility of small businesses and
microbusinesses under this chapter.
SEC. 7. Section 14840 of the Government Code is amended to read:
14840. The department shall submit an annual report to the
Legislature no later than January 1 of each year containing the
following information:
(a) Upon request, an up-to-date list of eligible small business
bidders by general procurement and construction contract categories,
noting company names and addresses and also noting which small
businesses also qualify as microbusinesses.
(b) By general procurement and construction contract categories,
statistics comparing the small business and microbusiness contract
participation dollars to the total state contract participation
dollars.
(c) By awarding department and general procurement and
construction categories, statistics comparing the small business and
microbusiness contract participation dollars to the total state
contract participation dollars.
(d) Any recommendations for changes in statutes or state policies
to improve opportunities for small businesses and microbusinesses.
(e) A statistical summary of small businesses and microbusinesses
certified for state contracting by the number of employees at the
business for each of the following categories: 0-25, 26-50, 51-75,
and 76-100.
(f) To the extent feasible, beginning in the year 2002, the number
of contracts awarded by the department in the categories specified
in subdivision (e).
(g) The number of contracts and dollar amounts awarded annually
pursuant to Section 14838.5 to small businesses, microbusinesses, and
disabled veteran business enterprises.
SEC. 8. Section 14842 of the Government Code is amended to read:
14842. (a) A business that has obtained classification as a small
business or microbusiness by reason of having furnished incorrect
supporting information or by reason of having withheld information,
and which knew, or should have known, the information furnished was
incorrect or the information withheld was relevant to its request for
classification, and which by reason of that classification has been
awarded a contract to which it would not otherwise have been
entitled, shall do all of the following:
(1) Pay to the state any difference between the contract amount
and what the state's costs would have been if the contract had been
properly awarded.
(2) In addition to the amount described in subdivision (a), be
assessed a penalty in an amount of not more than 10 percent of the
amount of the contract involved.
(3) Be ineligible to transact any business with the state for a
period of not less than three months and not more than 24 months.
(b) All payments to the state pursuant to paragraph (1) of
subdivision (a) shall be deposited in the fund out of which the
contract involved was awarded.
(c) All payments to the state pursuant to paragraph (2) of
subdivision (a) shall be deposited in the state General Fund.
(d) Prior to the imposition of any sanctions under subdivision
(a), a business shall be entitled to a public hearing and to at least
five working days' notice of the time and place thereof. The notice
shall state the reasons for the hearing.
SEC. 9. Section 14842.5 of the Government Code is amended to read:
14842.5. (a) It shall be unlawful for a person to do any of the
following:
(1) Knowingly and with intent to defraud, fraudulently obtain,
retain, attempt to obtain or retain, or aid another in fraudulently
obtaining or retaining or attempting to obtain or retain,
certification as a small business or microbusiness enterprise for the
purposes of this chapter.
(2) Willfully and knowingly make a false statement with the intent
to defraud, whether by affidavit, report, or other representation,
to a state official or employee for the purpose of influencing the
certification or denial of certification of any entity as a small
business or microbusiness enterprise.
(3) Willfully and knowingly obstruct, impede, or attempt to
obstruct or impede, any state official or employee who is
investigating the qualifications of a business entity that has
requested certification as a small business or microbusiness
enterprise.
(4) Knowingly and with intent to defraud, fraudulently obtain,
attempt to obtain, or aid another person in fraudulently obtaining or
attempting to obtain, public moneys to which the person is not
entitled under this chapter.
(b) Any person who is found by the department to have violated any
of the provisions of subdivision (a) is subject to a civil penalty
of not more than five thousand dollars ($5,000).
(c) If a contractor, subcontractor, supplier, subsidiary, or
affiliate thereof, has been found by the department to have violated
subdivision (a) and that violation occurred within three years of
another violation of subdivision (a) found by the department, the
department shall prohibit that contractor, subcontractor, supplier,
subsidiary, or affiliate thereof, from entering into a state project
or state contract and from further bidding to a state entity, and
from being a subcontractor to a contractor for a state entity and
from being a supplier to a state entity.
SEC. 10. Section 2002 is added to the Public Contract Code, to
read:
2002. Notwithstanding any other provision of law requiring a
local agency to award contracts to the lowest responsible bidder, any
local agency may do any of the following in facilitating contract
awards to small businesses:
(a) Provide for a small business preference in construction, the
procurement of goods, or the delivery of services where
responsibility and quality are equal. The preference to a small
business shall be up to 5 percent of the lowest responsible bidder
meeting specifications.
(b) Establish a subcontracting participation goal for small
businesses on contracts and grant a preference, up to a maximum of 5
percent, to those bidders who meet the goal.
(c) Require bidders to make good faith efforts to meet a
subcontracting participation goal for small business contracts.
Bidders that fail to meet the goal shall demonstrate that they made
good faith efforts to utilize small business contractors.
SEC. 11. Section 10116 is added to the Public Contract Code, to
read:
10116. (a) On January 1, of each year, each awarding department
shall report to the Governor and the Legislature on the level of
participation of business enterprises, by race, ethnicity, and gender
of owner, in contracts as identified in this article for the fiscal
year beginning July 1 and ending June 30. In addition, the report
shall contain the levels of participation of business enterprises, by
race, ethnicity, and gender of owner, for the following categories
of contracts:
(1) Construction.
(2) Purchases of materials, supplies, or equipment.
(3) Professional services.
(4) All contracts for a dollar amount of less than twenty-five
thousand dollars ($25,000).
(b) Awarding departments are prohibited from using the data
compiled under this section to discriminate or provide a preference
in the awarding of any contracts.
(c) Contractors are prohibited from using the information compiled
under this section to discriminate or provide a preference in the
solicitation or acceptance of bids for subcontracting, or for
materials or equipment, on the basis of race, color, sex, ethnic
origin, or ancestry.
SEC. 12. It is the intent of the Legislature to enact legislation
that will authorize local governmental entities to establish programs
to increase the participation of small businesses in public
contracting. In enacting that legislation, as well as in the other
provisions of this act, it is the intent of the Legislature to act in
conformity with the public contracting recommendations made by the
Governor's Task Force on Diversity and Outreach in its report
entitled, "Report to the Governor on Outreach Options" (August 1,
2000) and with existing Executive Orders.