BILL ANALYSIS
AB 1942
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CONCURRENCE IN SENATE AMENDMENTS
AB 1942 (Ruskin)
As Amended July 10, 2008
Majority vote
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|ASSEMBLY: |71-4 |(May 28, 2008) |SENATE: |34-0 |(August 11, |
| | | | | |2008) |
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Original Committee Reference: J., E.D. & E.
SUMMARY : Increases and conforms penalties for persons who
engage in fraudulent activities relating to the Small Business
Procurement and Contract Act (Small Business Act), including
small businesses, microbusinesses, and disabled veteran-owned
business enterprises (DVBE).
The Senate amendments make a minor technical change to this
bill.
EXISTING LAW :
1)Designates the Department of General Services (DGS) to
administer the State Procurement Act, which specifies
procedures for public contracting and establishes requirements
for the procurement of supplies, materials, equipment, and
services by state departments and state agencies.
2)Establishes a preference for bids made by certified small
businesses and microbusinesses, including providing a 5%
preference for awards of state procurement contracts where
solicitations are made either on the basis of lowest
responsible dollar bid, or on the basis of highest score,
considering factors in addition to price. Non-small
businesses that subcontract at least 25% of their contracts
with small businesses may also qualify for the small business
bidder's preference.
3)Provides for the following definitions under the Small
Business Act:
a) A "small business" is a business that is independently
owned, not dominant in its field of operation, domiciled in
California, employing 100 or fewer employees, and earning
AB 1942
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$10 million or less in average annual gross revenues for
the three previous years;
b) A "microenterprise" is a small business that has average
annual gross receipts of $250,000 or less during the
previous three years or is a manufacturer with 25 or fewer
employees; and,
c) A "DVBE" is a business entity that is at least 51% owned
or controlled by one or more disabled veterans, as
specified.
AS PASSED BY THE ASSEMBLY , this bill:
1)Extended revocation of small business certification and
prohibition on further state business for certain specified
fraudulent activities.
2)Added a new penalty for making false statements on DVBE
participation in contracts.
3)Extended revocation of DVBE certification and prohibition on
further state business for certain specified fraudulent
activities.
4)Terminated other state contracts for certain specified
fraudulent activities related to small business, including
microbusiness, and DVBE procurement.
5)Authorized DGS and the awarding department to recover costs
incurred during their investigation into specified violations
under the Small Business Act.
FISCAL EFFECT : According to the Senate Appropriations
Committee, Pursuant to Senate Rule 28.8, negligible state costs.
COMMENTS :
1)Fraudulent contract bids: DGS has reported instances where
contractors have fraudulently stated that they are a certified
small business, DVBE, or that they will utilize the services
of a certified small business or DVBE subcontractor. In some
cases, the subcontractors were not actually certified by DGS
or the business did not actually provide any commercially
useful service.
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Existing law contains penalties for contractors which
fraudulently bid; however, examples of contractor abuses in
the small business and DVBE programs are increasing. This
bill would substantially increase penalties for a variety of
fraudulent behaviors, including extending the term of
revocations of certification and suspensions from applying for
or participating in state contracts.
2)Funding for enforcement: Under current law, a business that
has been awarded a contract based on an illegally obtained
small business certificate is required to repay the state any
amounts of money received due to their certified small
business status and pay a penalty of not more than 10% of the
contract amount, Government Code Section 14842.
Moneys recovered due to their lack of certified small business
status are returned to the fund from which the moneys were
originally awarded. All penalty moneys are deposited in the
General Fund. This bill allows DGS and the awarding agency to
recover the costs of its investigation of the contractor, in
cases where the contractor is found to have committed
fraudulent activities, as specified.
3)Further information: The policy committee analysis includes a
full discussion of the policies, programs, and legislation
related to this bill.
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916)
319-2090
FN: 0006207