BILL NUMBER: AB 2397 CHAPTERED
BILL TEXT
CHAPTER 277
FILED WITH SECRETARY OF STATE AUGUST 23, 2004
APPROVED BY GOVERNOR AUGUST 23, 2004
PASSED THE SENATE AUGUST 10, 2004
PASSED THE ASSEMBLY MAY 17, 2004
AMENDED IN ASSEMBLY APRIL 12, 2004
INTRODUCED BY Assembly Member Shirley Horton
FEBRUARY 19, 2004
An act to amend Sections 4535.1, 7084, 7118, 14842, and 14842.5 of
the Government Code, and to amend Sections 10303 and 12102 of the
Public Contract Code, relating to public contracts.
LEGISLATIVE COUNSEL'S DIGEST
AB 2397, Shirley Horton. Public contracts: debarment and
suspension.
Under existing law, a supplier or contractor with a state agency
may be suspended or debarred from future bidding and contracting for
periods between 3 months and 2 years, depending on the basis of the
suspension or debarment. A contractor that performs unsatisfactorily
under a contract for acquisition of information technology may be
excluded from bidding for up to 360 days, and a contractor that has
demonstrated lack of reliability in completing contracts may be
removed from the list of qualified bidders for up to 360 days.
This bill would permit a contractor to be ineligible to transact
any business for not less than 6 months or more than 36 months for
specified grounds, including unsatisfactory contract performance,
unwillingness to honor a binding bid or contract, and multiple
strikes.
This bill would authorize the department to temporarily remove a
bidder or a supplier, that has demonstrated lack of reliability in
completing contracts, from bidding for up to 36 months, as specified.
This bill would also make conforming, technical, and clarifying
changes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 4535.1 of the Government Code is amended to
read:
4535.1. A business that requests and is given the preference
provided for in Section 4533, 4533.1, 4534, or 4534.1 by reason of
having furnished a false certification, and which by reason of that
certification has been awarded a contract to which it would not
otherwise have been entitled, shall be subject to all of the
following:
(a) Pay to the state any difference between the contract amount
and what the state's cost would have been if the contract had been
properly awarded.
(b) In addition to the amount specified in subdivision (a), be
assessed a penalty in an amount of not more than 10 percent of the
amount of the contract involved.
(c) Be ineligible to directly or indirectly transact any business
with the state for a period of not less than six months and not more
than 36 months.
Prior to the imposition of any sanction under this chapter, the
contractor or vendor shall be entitled to a public hearing and to
five days' notice of the time and place thereof. The notice shall
state the reasons for the hearing.
SEC. 2. Section 7084 of the Government Code is amended to read:
7084. (a) Whenever the state prepares a solicitation for a
contract for goods in excess of one hundred thousand dollars
($100,000), except a contract in which the worksite is fixed by the
provisions of the contract, the state shall award a 5-percent
preference to California-based companies that demonstrate and certify
under penalty of perjury that of the total labor hours required to
manufacture the goods and perform the contract, at least 50 percent
of the hours shall be accomplished at an identified worksite or
worksites located in an enterprise zone.
(b) In evaluating proposals for contracts for services in excess
of one hundred thousand dollars ($100,000), except a contract in
which the worksite is fixed by the provisions of the contract, the
state shall award a 5-percent preference on the price submitted by
California-based companies that demonstrate and certify under penalty
of perjury that not less than 90 percent of the labor hours required
to perform the contract shall be accomplished at an identified
worksite or worksites located in an enterprise zone.
(c) Where a bidder complies with subdivision (a) or (b), the state
shall award a 1-percent preference for bidders who certify under
penalty of perjury to hire persons living within a targeted
employment area or are enterprise zone eligible employees equal to 5
to 9 percent of its workforce during the period of contract
performance; a 2-percent preference for bidders who shall agree to
hire persons living within a targeted employment area or are
enterprise zone eligible employees equal to 10 to 14 percent of its
workforce during the period of contract performance; a 3-percent
preference for bidders who shall agree to hire persons living within
a targeted employment area or are enterprise zone eligible employees
equal to 15 to 19 percent of its workforce during the period of
contract performance; and a 4-percent preference for bidders who
shall agree to hire persons living within a targeted employment area
or are enterprise zone eligible employees equal to 20 or more percent
of its workforce during the period of contract performance.
(d) The maximum preference a bidder may be awarded pursuant to
this chapter and any other provision of law shall be 15 percent.
However, in no case shall the maximum preference cost under this
section exceed fifty thousand dollars ($50,000) for any bid, nor
shall the combined cost of preferences granted pursuant to this
section and any other provision of law exceed one hundred thousand
dollars ($100,000). In those cases where the 15-percent cumulated
preference cost would exceed the one hundred thousand dollar
($100,000) maximum preference cost limit, the one hundred thousand
dollar ($100,000) maximum preference cost limit shall apply.
(e) Notwithstanding any other provision of this section, small
business bidders qualified in accordance with Section 14838 shall
have precedence over nonsmall business bidders in that the
application of any bidder preference for which nonsmall business
bidders may be eligible, including the preference contained in this
section, shall not result in the denial of the award to a small
business bidder. This subdivision shall apply to those cases where
the small business bidder is the lowest responsible bidder, as well
as to those cases where the small business bidder is eligible for
award as the result of application of the 5-percent small business
bidder incentive.
(f) All state contracts issued to bidders who are awarded
preferences under this section shall contain conditions to ensure
that the contractor performs the contract at the location specified
and meets any commitment to employ persons with high risk of
unemployment.
(g) (1) A business that requests and is given the preference
provided for in subdivision (a) or (b) by reason of having furnished
a false certification, and that by reason of this certification has
been awarded a contract to which it would not otherwise have been
entitled, shall be subject to all of the following:
(A) Pay to the state any difference between the contract amount
and what the state's cost would have been if the contract had been
properly awarded.
(B) In addition to the amount specified in subparagraph (A), be
assessed a penalty in an amount of not more than 10 percent of the
amount of the contract involved.
(C) Be ineligible to directly or indirectly transact any business
with the state for a period of not less than six months and not more
than 36 months.
(2) Prior to the imposition of any sanction under this
subdivision, the business shall be entitled to a public hearing and
to five days' notice of the time and place thereof. The notice shall
state the reasons for the hearing.
(h) In each instance in this section an enterprise zone shall also
mean any enterprise zone or program area previously authorized under
any other provision of state law.
(i) As used in this section, "enterprise zone eligible employees"
means employees who meet any of the requirements of clause (iv) of
subparagraph (A) of paragraph (4) of subdivision (b) of Section
17053.74, or clause (iv) of subparagraph (A) of paragraph (4) of
subdivision (b) of Section 23622.5, of the Revenue and Taxation Code.
SEC. 3. Section 7118 of the Government Code is amended to read:
7118. (a) Whenever the state prepares a solicitation for a
contract for goods in excess of one hundred thousand dollars
($100,000), except a contract in which the worksite is fixed by the
provisions of the contract, the state shall award a 5-percent
preference to California-based companies who demonstrate and certify
under penalty of perjury that of the total labor hours required to
manufacture the goods and perform the contract, at least 50 percent
of the hours shall be accomplished at an identified worksite or
worksites located in a local agency military base recovery area.
(b) In evaluating proposals for contracts for services in excess
of one hundred thousand dollars ($100,000), except a contract in
which the worksite is fixed by the provisions of the contract, the
state shall award a 5-percent preference on the price submitted by
California-based companies who demonstrate and certify under penalty
of perjury that not less than 90 percent of the labor hours required
to perform the contract shall be accomplished at an identified
worksite or worksites located in a local agency military base
recovery area.
(c) Where a bidder complies with subdivision (a) or (b), the state
shall award a 1-percent preference for bidders who certify under
penalty of perjury to hire persons living within a local agency
military base recovery area equal to 5 to 9 percent of its workforce
during the period of contract performance; a 2-percent preference for
bidders who shall agree to hire persons living within a local agency
military base recovery area equal to 10 to 14 percent of its
workforce during the period of contract performance; a 3-percent
preference for bidders who shall agree to hire persons living within
a local agency military base recovery area equal to 15 to 19 percent
of its workforce during the period of contract performance; and a
4-percent preference for bidders who shall agree to hire persons
living within a local agency military base recovery area equal to 20
or more percent of its workforce during the period of contract
performance.
(d) The maximum preference a bidder may be awarded pursuant to
this chapter and any other provision of law shall be 15 percent.
However, in no case shall the maximum preference cost under this
section exceed fifty thousand dollars ($50,000) for any bid, nor
shall the combined cost of preferences granted pursuant to this
section and any other provision of law exceed one hundred thousand
dollars ($100,000). In those cases where the 15-percent cumulated
preference cost would exceed the one hundred thousand dollar
($100,000) maximum preference cost limit, the one hundred thousand
dollar ($100,000) maximum preference cost limit shall apply.
(e) Notwithstanding any other provision of this section, small
business bidders qualified in accordance with Section 14838 shall
have precedence over nonsmall business bidders in that the
application of any bidder preference for which nonsmall business
bidders may be eligible, including the preference contained in this
section, shall not result in the denial of the award to a small
business bidder. This subdivision shall apply to those cases where
the small business bidder is the lowest responsible bidder, as well
as to those cases where the small business bidder is eligible for
award as the result of application of the 5-percent small business
bidder preference.
(f) All state contracts issued to bidders who are awarded
preferences under this section shall contain conditions to ensure
that the contractor performs the contract at the location specified
and meets any commitment to employ persons with high risk of
unemployment.
(g) (1) A business that requests and is given the preference
provided for in subdivision (a) or (b) by reason of having furnished
a false certification, and that by reason of this certification has
been awarded a contract to which it would not otherwise have been
entitled, shall be subject to all of the following:
(A) Pay to the state any difference between the contract amount
and what the state's cost would have been if the contract had been
properly awarded.
(B) In addition to the amount specified in subparagraph (A), be
assessed a penalty in an amount of not more than 10 percent of the
amount of the contract involved.
(C) Be ineligible to directly or indirectly transact any business
with the state for a period of not less than six months and not more
than 36 months.
(2) Prior to the imposition of any sanction under this
subdivision, the business shall be entitled to a public hearing and
to five days' notice of the time and place thereof. The notice shall
state the reasons for the hearing.
(h) In each instance in this section, a local agency military base
recovery area shall also mean any local agency military base
recovery area previously authorized under any other provision of
state law.
SEC. 4. 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 that knew, or should have known, the information furnished was
incorrect or the information withheld was relevant to its request for
classification, and that 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.
(b) Suspend any person who violates subdivision (a) 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 six months and not more than 36 months. State agencies may
reject the bid of a supplier offering goods, information technology,
or services manufactured or provided by a subcontractor if that
subcontractor has been declared ineligible to transact any business
with the state under this chapter, even though the bidder is a
business in good standing.
(c) 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.
(d) All payments to the state pursuant to paragraph (2) of
subdivision (a) shall be deposited in the state General Fund.
(e) The small business certification of a business found to have
violated subdivision (a) shall be revoked by the department for a
period of not less than one year. For an additional or subsequent
violation, the period of certification revocation or suspension shall
be extended for a period of up to three years. The revocation shall
apply to the principals of the business and any subsequent
businesses formed by those principals.
(f) Prior to the imposition of any sanctions under this article, 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. 5. 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.
(5) Knowingly and with intent to defraud, fraudulently represent
certified small business or microbusiness participation in order to
obtain or retain a bid preference or a state contract.
(6) Knowingly and with intent to defraud, fraudulently represent
that a commercially useful function is being performed by a certified
small business or microbusiness in order to obtain or retain a bid
preference or a state contract.
(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) The department shall revoke the small business or
microbusiness certification of any person that violates subdivision
(a) for a period of not more than one year, and shall, in addition to
the penalties provided for in subdivision (b), be suspended from
bidding on, or participating as a contractor, a subcontractor, or a
supplier in, any state contract or project for a period of not less
than six months nor more than 36 months. However, for an additional
or subsequent violation, the period of certification revocation or
suspension shall be extended for a period of up to three years. The
certification revocation shall apply to the principals of the
business and any subsequent businesses formed by those principals.
Any business or person who fails to satisfy the penalties imposed
pursuant to subdivisions (b) and (c) shall be prohibited from further
contracting with the state until the penalties are satisfied.
(d) 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. 6. Section 10303 of the Public Contract Code is amended to
read:
10303. The department shall adopt, publish and apply uniform
standards of rating bidders, on the basis of questionnaires and
required statements, with respect to contracts upon which each bidder
is qualified to bid. The department may adopt and publish lists of
qualified bidders. No list so adopted and published shall preclude a
qualified bidder not on the list from submitting a bid or bids and
from being awarded a contract or contracts as the successful bidder.
The department may remove a bidder who has demonstrated a lack of
reliability in complying with and completing previously awarded
contracts with the state, based upon his or her performance on
contracts previously been awarded by the state. The department may
remove the bidder from any list of qualified bidders prepared by the
department for a period of not less than six months but not to exceed
36 months.
Any bidder temporarily removed under this section shall be
returned to the list of qualified bidders at any time after the
initial six months, upon demonstrating to the department's
satisfaction that the problems that resulted in the bidder's
previously demonstrated unreliability in complying with and
completing state contracts have been corrected.
SEC. 7. Section 12102 of the Public Contract Code is amended to
read:
12102. The Department of General Services shall maintain, in the
State Administrative Manual, policies and procedures governing the
acquisition and disposal of information technology goods and
services.
(a) Acquisition of information technology goods and services shall
be conducted through competitive means, except when the Director of
General Services determines that (1) the goods and services proposed
for acquisition are the only goods and services which can meet the
state's need, or (2) the goods and services are needed in cases of
emergency where immediate acquisition is necessary for the protection
of the public health, welfare, or safety. The acquisition mode to
be used and the procedure to be followed shall be approved by the
Director of General Services. The Department of General Services
shall maintain, in the State Administrative Manual, appropriate
criteria and procedures to ensure compliance with the intent of this
chapter. These criteria and procedures shall include acquisition and
contracting guidelines to be followed by state agencies with respect
to the acquisition of information technology goods and services.
These guidelines may be in the form of standard formats or model
formats.
(b) Contract awards for all large-scale systems integration
projects shall be based on the proposal that provides the most
value-effective solution to the state's requirements, as determined
by the evaluation criteria contained in the solicitation document.
Evaluation criteria for the acquisition of information technology
goods and services, including systems integration, shall provide for
the selection of a contractor on an objective basis not limited to
cost alone.
(1) The Department of General Services shall invite active
participation, review, advice, comment, and assistance from the
private sector and state agencies in developing procedures to
streamline and to make the acquisition process more efficient,
including, but not limited to, consideration of comprehensive
statements in the request for proposals of the business needs and
governmental functions, access to studies, planning documents,
feasibility study reports and draft requests for proposals applicable
to solicitations, minimizing the time and cost of the proposal
submittal and selection process, and development of a procedure for
submission and evaluation of a single proposal rather than multiple
proposals.
(2) Solicitations for acquisitions based on evaluation criteria
other than cost alone shall provide that sealed cost proposals shall
be submitted and that they shall be opened at a time and place
designated in the solicitation for bids and proposals. Evaluation of
all criteria, other than cost, shall be completed prior to the time
designated for public opening of cost proposals, and the results of
the completed evaluation shall be published immediately before the
opening of cost proposals. The state's contact person for
administration of the solicitation shall be identified in the
solicitation for bids and proposals, and that person shall execute a
certificate under penalty of perjury, which shall be made a permanent
part of the official contract file, that all cost proposals received
by the state have been maintained sealed and under lock and key
until the time cost proposals are opened.
(c) The acquisition of hardware acquired independently of a system
integration project may be made on the basis of lowest cost meeting
all other specifications.
(d) The 5 percent small business preference provided for in
Chapter 6.5 (commencing with Section 14835) of Part 5.5 of Division 3
of Title 2 of the Government Code and the regulations implementing
that chapter shall be accorded to all qualifying small businesses.
(e) For all transactions formally advertised, evaluation of
bidders' proposals for the purpose of determining contract award for
information technology goods shall provide for consideration of a
bidder's best financing alternatives, including lease or purchase
alternatives, if any bidder so requests, not less than 30 days prior
to the date of final bid submission, unless the acquiring agency can
prove to the satisfaction of the Department of General Services that
a particular financing alternative should not be so considered.
(f) Acquisition authority may be delegated by the Director of
General Services to any state agency that has been determined by the
Department of General Services to be capable of effective use of that
authority. This authority may be limited by the Department of
General Services. Acquisitions conducted under delegated authority
shall be reviewed by the Department of General Services on a
selective basis.
(g) To the extent practical, the solicitation documents shall
provide for a contract to be written to enable acquisition of
additional items to avoid essentially redundant acquisition processes
when it can be determined that it is economical to do so.
Further, it is the intent of the Legislature that, if a state
information technology advisory committee or a state
telecommunications advisory committee is established by the Governor,
or the Director of General Services, the policies and procedures
developed by the Director of General Services in accordance with this
chapter shall be submitted to that committee, including supplier
representatives, for review and comment, and that the comment be
considered by both departments prior to the adoption of any policy or
procedure. It is also the intent of the Legislature that this
section shall apply to the Department of General Services Information
Technology Customer Council.
(h) Protest procedures shall be developed to provide bidders an
opportunity to protest any formal, competitive acquisition conducted
in accordance with this chapter. The procedures shall provide that
protests must be filed no later than five working days after the
issuance of an intent to award. Authority to protest may be limited
to participating bidders. The Director of General Services, or a
person designated by the director, may consider and decide on initial
protests. A decision regarding an initial protest shall be final.
If prior to the last day to protest, any bidder who has submitted an
offer files a protest with the department against the awarding of the
contract on the ground that his or her bid or proposal should have
been selected in accordance with the selection criteria in the
solicitation document, the contract shall not be awarded until either
the protest has been withdrawn or the State Board of Control has
made a final decision as to the action to be taken relating to the
protest. Within 10 calendar days after filing a protest, the
protesting bidder shall file with the State Board of Control a full
and complete written statement specifying in detail the grounds of
the protest and the facts in support thereof.
(i) Information technology goods that have been determined to be
surplus to state needs shall be disposed of in a manner that will
best serve the interests of the state. Procedures governing the
disposal of surplus goods may include auction or transfer to local
governmental entities.
(j) A supplier may be excluded from bid processes if the supplier'
s performance with respect to a previously awarded contract has been
unsatisfactory, as determined by the state in accordance with
established procedures that shall be maintained in the State
Administrative Manual. This exclusion may not exceed 36 months for
any one determination of unsatisfactory performance. Any supplier
excluded in accordance with this section shall be reinstated as a
qualified supplier at any time during this 36-month period, upon
demonstrating to the department's satisfaction that the problems that
resulted in the supplier's exclusion have been corrected.