BILL ANALYSIS
Bill No: SB
755
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2009-2010 Regular Session
Staff Analysis
SB 755 Author: Negrete McLeod
As Introduced: February 27, 2009
Hearing Date: April 14, 2009
Consultant: Art Terzakis
SUBJECT
State Contracts
DESCRIPTION
SB 755 establishes a new participation goal program for
persons with developmental disabilities business
enterprises (PDDBEs), as defined, to assist and encourage
participation of developmentally disabled in state
contracting opportunities. Specifically, this measure:
1. Requires, until June 30, 2014 , that all contracts
awarded by state entities for "goods and services" have a
statewide participation goal of not less than 1% for
PDDBEs, as defined. This goal applies to the total
number of contracts granted, let, or awarded each year by
the awarding department.
2. Defines "developmental disability" to mean a
disability, as specified, rendering the affected person
eligible to participate in rehabilitation, education, or
social services programs conducted by or on behalf of a
public agency.
3. Defines "PDDBE" as any of the following: (a) a business
concern at least 51% owned by one or more persons with a
developmental disability; (b) a business concern managed
by, and controlled by, one or more persons with a
developmental disability; and, (c) a community-based
nonprofit organization that employs persons with a
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developmental disability that meets any of certain
specified conditions.
4. Requires each awarding department to advertise bid
contracts in the State Contracts Register and provide
information to PDDBEs regarding training and technical
assistance that is available to assist these persons in
understanding the bid process.
5. Requires the Department of General Services (DGS), in
consultation with the Department of Developmental
Services (DDS), to adopt regulations in order to
implement the provisions of this measure. Also, permits
the adoption of emergency regulations, without review and
approval by the Office of Administrative Law (OAL), if
they're adopted within 90 days of the effective date of
this measure. Additionally, makes it explicit that the
awarding department must utilize existing resources, such
as DDS, in implementing these provisions.
6. Imposes civil penalties for initial and subsequent
violations of providing false or fraudulent information
with respect to the qualification of contractors meeting
the requirements of a PDDBE and prohibits the contractor
from bidding on, or participating in, state contracts for
specified periods of time.
7. Requires annual reports by each awarding department,
submitted to DGS, on the level of participation by PDDBEs
in state contracts, as specified. If the procurement
goals are not being met, the awarding department is
required to report on the reasons for its inability to
achieve the standards and identify remedial steps that
will be taken to fulfill the requirements of this
measure.
8. Also, beginning 1/1/2011, and annually thereafter,
requires DGS, in consultation with the DDS, to report to
the Governor and Legislature on the level of
participation by PDDBEs.
9. Expresses legislative intent to: (a) recognize the
potential contribution of persons with developmental
disabilities to the workforce; (b) encourage state
agencies to contract with companies owned or managed by,
or that employ persons with developmental disabilities;
SB 755 (Negrete McLeod) continued
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(c) reduce pressure on the state budget by encouraging
more individuals with developmental disabilities to join
the workforce and become more self-sufficient; and, (d)
entice state agencies to take all practical actions
necessary to meet or exceed the 1% goal.
EXISTING LAW
Under current law, the Department of General Services
generally governs state procurement activities, including
acquisition of materials, supplies, and services.
Under the State Contract Act and various provisions in the
Local Agency Public Construction Act, state and local
agencies awarding contracts are required to award the
contract to the lowest responsible bidder.
The Small Business Procurement and Contract Act permits a
state agency to award a contract for goods, services, or
information technology with a value of between $5,000 and
$100,000 to a certified small business, including a
microbusiness and a disabled veteran business enterprise,
without complying with specified competitive bidding
requirements.
Existing law requires state agencies to give
"California-based" small businesses, as defined, a 5% bid
preference in contracts for construction, the procurement
of goods, or the delivery of services. Executive Order
D-37-01 established a certified small business
participation goal of 25% for state agencies, departments,
boards and commissions to achieve.
Under existing law, contracts awarded by state entities for
professional bond services, construction, and acquisition
of materials, supplies, and services are required to have
annual statewide participation goals of not less than 15%
for minority-owned firms, 5% for women-owned firms, and 3%
for disabled veteran-owned business enterprises.
Contractors must achieve these minimum participation goals
or demonstrate that they have made a "good faith effort" to
achieve participation. (These statutes have essentially
been rendered inoperative as a result of a U.S. 9th Circuit
Court of Appeals decision - Monterey Mechanical v. State of
California.) Unaffected by that court order are
contracting preferences for disabled veterans.
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Existing law requires state agencies to prepare annual
reports describing the participation by disabled veteran
owned firms in meeting the 3% participation goal.
Proposition 209 of 1996 was voted into law by California
voters on November 5, 1996 with 54% of the vote.
Proposition 209 amended the state constitution to prohibit
the state, local governments, districts, public
universities, colleges, and schools, and other governmental
instrumentalities from discriminating against or giving
preferential treatment to any individual or group in public
employment, public education, or public contracting on the
basis of race, sex or ethnicity. In late November of
1996, U.S. District Judge Thelton Henderson blocked
enforcement of the proposition. A three-judge panel of the
9th Circuit Court of Appeal subsequently overturned that
ruling and Proposition 209 became the subject of many
lawsuits in state courts.
BACKGROUND
Purpose of SB 755: According to the author's office, this
measure is intended to assist Californians with
developmental disabilities find desirable jobs by
encouraging State agencies to contract with groups that
employ such persons. The author's office states that SB
755 would create a "win/win" situation whereby the State
receives the products or services they need and
Californians with disabilities become productive, taxpaying
citizens.
The author's office points out that current law permits
departments to contract for work to be done in the private
sector under limited and specific conditions. The law also
specifically permits contracts to be issued to agencies
employing persons with developmental disabilities. Known
as "set aside" (Welfare & Institutions Code 19403,
19404), this law provides for the efficient and effective
access to this work force. Created in 1974, the purpose of
"set aside" is to encourage state and local entities and
other political subdivisions to purchase products
manufactured by and services provided by public or private
non-profit California corporations serving individuals with
developmental disabilities whenever it is feasible to do so
and the proximity of the public or private non-profit
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California corporation makes the purchases reasonably
convenient and to provide equality of competitive advantage
for such organizations.
The author's office states that the use of this law has
been limited, primarily because many departments are either
unfamiliar with the provisions of the law or unfamiliar
with the quality of work they can expect to receive from
workers with developmental disabilities.
The author's office states that employment should be
encouraged and supported as a fundamental advancement of a
person's rights to live their lives in their communities.
But too many people with developmental disabilities do not
have jobs. The author's office notes that there are
approximately 220,000 people in California with mental
retardation, autism, cerebral palsy, seizure disorders such
as epilepsy and other developmental disabilities.
Approximately 90,000, or 40%, are between the ages of 22
and 61 - working age adults. But of this number, less than
25,000 have jobs - which equates to a very high
unemployment rate (nearly 72%). Thousands of people with
disabilities can and do work. They hold jobs in many
industries and perform many different types of work. The
key factor that often differentiates between those who work
and those who don't work is whether or not an employer has
been introduced to this qualified, valuable and dedicated
work force.
The author's office references Supported Employment which
is a program funded through a combination of federal and
state funds that helps introduce potential employers to
available workers. Specifically, the program assists
workers in getting a job, helps train them and enables them
to retain the job over time. The job development and
coaching is paid for by the state utilizing skills of
community-based, not for profit organizations. The wages
and benefits of the worker are paid by the employer. The
author's office notes that SB 755 would take advantage of
the Supported Employment Program and strengthen the
set-aside law by encouraging state entities to consider
contracting with PDDBEs which are owned, operated by or
employ people with developmental disabilities.
The author's office emphasizes that this measure does not
create "make work" jobs - the contracts will be for work
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that the State needs to have done. SB 755 simply reminds
the State of this valuable work force and makes it clear
that they are ready, willing and able to perform that work.
Arguments in Opposition: Disability Rights California
(DRC), a non-profit entity involved in advancing the human
and legal rights of Californians with disabilities has
expressed concern with the fact that this measure
incorporates "community-based nonprofit organizations"
within the definition of a PDDBE. Specifically, DRC
references Section 214 of the U.S. Labor Code which permits
employers to pay less than minimum wage to "handicapped
workers." DRC claims that such organizations typically "do
not offer minimum wages or full equality in the terms and
conditions of employment (including benefits) and they do
not offer fully integrated work environments."
Historical Note #1 (MBE/WBE Program): In 1988, AB 1933 -
M. Waters (Chapter 61), established a minority-owned
business enterprise (MBE) and women-owned business
enterprise (WBE) participation goal program that required
state entities awarding contracts for professional bond
services, construction, and acquisition of materials,
supplies and services to have annual statewide
participation goals of not less than 15% for MBEs and 5%
for WBEs. (These provisions were found violative of equal
protection principles by the U.S. Court of Appeals for the
Ninth Circuit in Monterey Mechanical Co. v. Wilson.)
In March1998, Governor Pete Wilson issued an executive
order, No. W-172-98, which directed all state agencies and
departments to "cease any enforcement of the MBE/WBE
participation goals and the good faith effort requirements
related thereto under the Public Contract Code with respect
to any state contracts or amendments thereto awarded or
entered, or proposed to be awarded or entered, on or after
March 10, 1998." The same order further stated: "All
actions, programs, and regulations which seek to monitor,
promote, or comply with the MBE/WBE goals or the good faith
efforts related thereto under the Public Contract Code
shall no longer be administered and, where appropriate, be
repealed."
Historical Note #2 (DVBE Program): In 1989, SB 1517 -
Dills (Chapter 1207) established a 3% participation goal
for disabled veteran business enterprises (DVBEs),
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applicable to all contracts including those for
professional bond services, to assist and encourage DVBE
participation in state contracting opportunities. In 1990,
SB 2398 - Dills (Chapter 516) extended the DVBE
participation program to contracts of the University of
California, the Department of Corrections and specified
public utilities. In 1993, SCR 18 - Dills, encouraged
local entities to enact ordinances and implement policies
promoting the participation of DVBEs in construction and
procurement contracts. Also, SJR 13 - Dills of 1993,
requested that Congress establish and maintain DVBE
programs. (The state's DVBE program was not affected by
the court's MBE/WBE ruling.)
In 2001, Congress expressed support for service disabled
and prisoner of war veterans by enacting a 3% participation
goal for DVBEs that is modeled after California law.
PRIOR/RELATED LEGISLATION
SB 1687 (Negrete McLeod) 2007-08 Session. Similar to SB
755 (Negrete McLeod) of 2009. Would have required that
state agencies take all practical actions to encourage the
awarding of contracts for goods and services to persons
with developmental disabilities business enterprises.
(Died in Assembly Appropriations Committee - Suspense file)
AB 323 (Parra) Chapter 359, Statutes of 2004. Allowed a
"nonprofit veteran service" agency, as defined, to be
eligible for certification as a small business and be
granted a small business preference, provided certain
requirements are met.
SB 1008 (Machado) Chapter 632, Statutes of 2003. Among
other things, strengthened the sanctions that can be levied
against businesses that fraudulently misrepresent their
eligibility for disabled veteran business enterprise (DVBE)
certification.
AB 669 (Cohn) Chapter 623, Statutes of 2003. Among other
things, required small businesses and DVBEs to perform
commercially useful functions, as defined; in relation to
any contract those businesses are awarded under existing
provisions of law. Also, revised the definition of
disabled veteran to require that the veteran have at least
a 10% service-connected disability and be domiciled in
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California.
AB 2323 (Wyman) 2001-02 Session. Would have established
parity between DVBEs and small businesses by creating a 5%
bid preference for DVBEs on public contracts. (Held in
Senate fiscal committee)
SB 1033 (Knight) 2001-02 Session. Would have established
an additional 3% bid preference in the Small Business
Procurement and Contract Law for small businesses that are
also certified as a DVBE. (Held in Assembly fiscal
committee)
AB 941 (Florez) Chapter 666, Statutes of 2001. Required
the Department of Veterans Affairs and the awarding
departments to appoint disabled veteran business enterprise
advocates to assist in meeting the 3% participation goals
for DVBEs.
SB 2110 (Knight) 1999-2000 Session. Would have required
state agencies, in evaluating bid submissions, to give a 5%
bid preference, until 1/1/2004, to bids by any DVBE that is
a prime contractor. (Held in Assembly fiscal committee)
SB 73 (Murray) 1999-2000 Session. Would have recast many
of the same requirements previously mandated of bidders
under the MBE and WBE participation statutes, and the
existing DVBE statute for small businesses. (Vetoed by
Governor)
AB 1664 (Murray) 1997-98 Session. Identical to SB 73
(Murray) of 1999. (Vetoed by Governor)
SB 2041 (Kopp) 1997-98 Session. Would have dismantled
various programs that promote access for women and
minorities in public sector employment, education and state
contracting. Also, would have enacted the Small Business
Acquisition and Contract Act for the purpose of promoting
and facilitating the participation of California "small
businesses" in state contracting. (Failed passage in this
committee)
SUPPORT: As of April 10, 2009:
California Disability Services Association (sponsor)
American Federation of State, County and Municipal
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Employees (AFSCME)
OPPOSE: As of April 10, 2009:
Disability Rights California
DUAL REFERRAL: Senate Judiciary Committee
FISCAL COMMITTEE: Senate Appropriations Committee
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