BILL NUMBER: AB 2778	CHAPTERED  07/10/08

	CHAPTER  102
	FILED WITH SECRETARY OF STATE  JULY 10, 2008
	APPROVED BY GOVERNOR  JULY 10, 2008
	PASSED THE SENATE  JUNE 26, 2008
	PASSED THE ASSEMBLY  MAY 1, 2008
	AMENDED IN ASSEMBLY  APRIL 10, 2008

INTRODUCED BY   Assembly Member Mendoza

                        FEBRUARY 22, 2008

   An act to amend Section 14837 of the Government Code, relating to
public contracts.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 2778, Mendoza. Small business and procurement.
   Under the Small Business Procurement and Contract Act, a state
agency is authorized to award a contract for construction, including
the erection, construction, alteration, repair, or improvement of any
state structure, building, road, or other state improvement of any
kind that has an estimated value of greater than $5,000, but less
than a specified cost limit, to a certified small business, including
a microbusiness, or to a disabled veteran business enterprise, as
long as the agency obtains written bid submittals from 2 or more
certified small businesses, including microbusinesses, or from 2 or
more disabled veteran business enterprises. For purposes of the act,
"small business" and "microbusiness" are defined, among other things,
as including a manufacturer with a maximum number of employees.
"Manufacturer" is defined as a business that is primarily engaged in
the chemical or mechanical transformation of raw materials or
processed substances into new products and is within a specified
classification of the Standard Industrial Classification (SIC)
Manual.
   This bill would replace the reference to a manufacturer within
that particular classification of the SIC Manual with a requirement
that a manufacturer falls within a specified classification of the
North American Industry Classification System.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  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 meets both of the
following requirements:
   (1) It is primarily engaged in the chemical or mechanical
transformation of raw materials or processed substances into new
products.
   (2) It is classified between Codes 31 to 33, inclusive, of the
North American Industry Classification System.
   (d) (1) "Small business" means an independently owned and operated
business that 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 that, 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 of Division 3 of Title 2, and shall preclude
the qualification of businesses that are dominant in their industry.
In addition, the standards shall provide that the certified small
business or microbusiness shall provide goods or services that
contribute to the fulfillment of the contract requirements by
performing a commercially useful function, as defined below:
   (A) A certified small business or microbusiness is deemed to
perform a commercially useful function if the business does all of
the following:
   (i) (I) Is responsible for the execution of a distinct element of
the work of the contract.
   (II) Carries out its obligation by actually performing, managing,
or supervising the work involved.
   (III) Performs work that is normal for its business services and
functions.
   (ii) Is not further subcontracting a portion of the work that is
greater than that expected to be subcontracted by normal industry
practices.
   (B) A contractor, subcontractor, or supplier will not be
considered to perform a commercially useful function if the
contractor's, subcontractor's, or supplier's role is limited to that
of an extra participant in a transaction, contract, or project
through which funds are passed in order to obtain the appearance of
small business or microbusiness participation.
   (e) "Disabled veteran business enterprise" means an enterprise
that has been certified as meeting the qualifications established by
subdivision (g) of Section 999 of the Military and Veterans Code.