BILL NUMBER: AB 1206	INTRODUCED
	BILL TEXT


INTRODUCED BY   Assembly Member Galgiani

                        FEBRUARY 18, 2011

   An act to add Section 185034.1 to the Public Utilities Code,
relating to high-speed rail.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 1206, as introduced, Galgiani. High-speed rail: contracts:
small businesses.
   (1) Existing law, the California High-Speed Rail Act, creates the
High-Speed Rail Authority to develop and implement a high-speed rail
system in the state, with specified powers and duties. Existing law,
pursuant to the Safe, Reliable High-Speed Passenger Train Bond Act
for the 21st Century, approved by the voters as Proposition 1A at the
November 4, 2008, general election, provides for the issuance of
$9.95 billion in general obligation bonds for high-speed rail and
related purposes. Under federal law, funding is made available for
allocation nationally to high-speed rail and other related projects.
   This bill would require the authority to identify essential
components of, and adopt, a small emerging business enterprise
program as part of contracts to be awarded by the authority relative
to development and construction of the high-speed rail system. The
bill would require the authority to provide certain bidding
preferences and to establish a goal methodology to determine the
appropriate level of involvement of small emerging business
enterprises in authority contracts. The bill would require at least
one public hearing by the authority before the program is adopted and
would require the authority to include a plan for outreach to small
emerging business enterprises. The bill would require the authority
to report annually to the Legislature in that regard.
   (2) Existing law provides for various programs to encourage the
participation of small businesses, as certified by the Department of
General Services, in state agency contracts, and sets forth the
duties of the Director of General Services and the directors of other
state agencies in this regard. Existing law imposes various
penalties for certain unlawful actions in obtaining classification as
a small business or in engaging in other unlawful actions.
   This bill would enact similar penalties relative to the
certification of businesses as small emerging business enterprises by
the authority and for other unlawful actions.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


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

  SECTION 1.  The Legislature finds and declares all of the
following:
   (a) The High-Speed Rail Authority has assembled teams of the best
minds throughout the world to guide our scientists and engineers in
the newest technologies for high-speed rail systems. Revolutions in
technology from around the world will be shared with California
during the engineering, design, and construction phases of the
project that will provide California workers with valuable experience
and training as we enter a new wave of transportation innovation.
   (b) In order to keep faith with the promise to promote California
jobs, following the passage of the Safe, Reliable High-Speed
Passenger Train Bond Act for the 21st Century, the state should aid,
counsel, assist, and protect, to the maximum extent possible, the
interests of small emerging business enterprises, including
microbusinesses.
   (c) Furthermore, it is beneficial to the state to promote and
facilitate the fullest possible participation by California workers
to train for new jobs and careers in today's global economy.
   (d) Therefore, it is essential to ensure that a fair proportion of
the total purchases and contracts or subcontracts for property and
services for California's high-speed rail system be placed with these
small emerging business enterprises.
  SEC. 2.  Section 185034.1 is added to the Public Utilities Code, to
read:
   185034.1.  (a) The authority shall identify essential components
of, and adopt, a small emerging business enterprise program as part
of contracts to be awarded by the authority relative to the
construction of the high-speed rail system. The program may have
separate elements for small emerging business enterprises,
microbusinesses, and disabled veteran business enterprises, as
defined in subdivision (k). The program shall include proper
oversight of expenditure of state and federal funds, contractor
compliance monitoring and enforcement efforts, tracking and reporting
mechanisms, and prompt payment, reporting, and project closeout
provisions. The State Auditor, pursuant to its authority under
subdivision (e) of Section 2704.04 of the Streets and Highways Code,
shall review the expenditures associated with the program.
   (b) In developing the small emerging business enterprise program,
the authority shall do all of the following:
   (1) Review and consider examples of existing small business
enterprise programs used by other public agencies in California.
   (2) Establish a goal methodology to determine the appropriate
level of involvement of small emerging business enterprises in
authority contracts, based on the likely nature of the work needed to
be performed and the likely ability of the enterprises to do that
work.
   (3) Provide two small emerging business enterprise preferences, as
follows:
   (A) Provide a 5 percent bid preference to a responsible bid
meeting specifications that is submitted by a small emerging business
enterprise.
   (B) Provide an incentive to nonsmall business bidders that submit
a responsible bid meeting specifications if the bid incorporates the
participation of small emerging business enterprises in the manner
consistent with the goals set forth in the authority's program
established pursuant to this section. A nonsmall business bidder
shall be granted a 5 percent bid preference for meeting the goals.
   (4) Identify small business enterprise certifications of other
public agencies that are suitable for acceptance by the authority, in
order to avoid having to create a separate certification process
solely for the authority. The authority shall establish a reciprocity
program with other public agencies in this regard to utilize the
certification directories of those agencies and to allow those other
agencies to use access to any similar small business certification
directory that the authority establishes. At a minimum, the authority
shall recognize small business certifications from all of the
following:
   (A) Department of General Services, Procurement Division.
   (B) Department of General Services, Office of Small Business and
Disabled Veterans Business Enterprise Services.
   (C) Los Angeles County Metropolitan Transportation Authority.
   (D) Other public agencies, to the extent the small businesses
listed by those agencies are certified as disadvantaged business
enterprises by a California Unified Certification Program certifying
agency.
   (5) Establish, if determined to be desirable by the authority, a
prequalified list of contractors for certain types of authority
contracts, including, but not limited to, architectural and
engineering contracts.
   (6) Include a plan for outreach, including information on training
and technical assistance that is available to assist small
businesses in understanding and bidding on contracts to be offered by
the authority. The authority shall specifically conduct an outreach
campaign that contacts certified small businesses listed in the
certification directories of the Department of General Services
pursuant to subparagraphs (A) and (B) of paragraph (4).
   (c) The authority shall hold at least one public hearing on the
small emerging business enterprise goal methodology required by
paragraph (2) of subdivision (b), and on the overall program
developed pursuant to this section. Following the public hearing, the
authority shall adopt the plan at a regularly scheduled meeting of
the board. When adopting the plan, the authority shall take into
consideration comments from the public hearing and written comments
that it receives in that regard, and any hearings that the
Legislature may hold prior to adoption of the plan.
   (d) Upon approval by the authority of the small emerging business
enterprise program, its provisions shall be included in the
design-build procurement for Phase 1 and Phase 2 of the high-speed
rail program and in the environmental, architectural, and engineering
stage for Phase 2 of the high-speed rail program.
   (e) (1) A business that has obtained classification as a small
emerging business enterprise, microbusiness, or disabled veteran
business enterprise 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:
   (A) Pay to the authority any difference between the contract
amount and what the authority's costs would have been if the contract
had been properly awarded.
   (B) Pay to the authority an amount that is equal to the costs
incurred for investigating the small emerging business enterprise,
microbusiness, or disabled veteran business enterprise certification
that led to the finding that the contract had been improperly
awarded. Costs incurred shall include, but are not limited to, costs
and attorney's fees paid by the authority related to hearings and
court appearances.
   (C) In addition to the amounts described in subparagraphs (A) and
(B), be assessed a penalty in an amount of not more than 10 percent
of the amount of the contract involved.
   (2) The authority shall suspend any person or firm who violates
paragraph (1) from transacting any business with the authority either
directly as a prime contractor or indirectly as a subcontractor, for
a period of not less than three years and not more than 10 years.
The authority may reject the bid of a suspended person or firm, or
the services or goods, provided by a subcontractor if that
subcontractor has been declared ineligible to transact any business
with the authority under this section, even though the bidder is a
business in good standing.
   (3) All payments to the authority pursuant to subparagraphs (A)
and (B) of paragraph (1) shall be deposited in the fund or funds from
which payments on the contract involved were made.
   (4) All payments to the state pursuant to subparagraph (C) of
paragraph (1) shall be deposited in the General Fund.
   (5) The small emerging business enterprise, microbusiness, or
disabled veteran business enterprise certification of a person or
firm found to have violated paragraph (1) shall be revoked by the
authority for a period of not less than five years. For an additional
or subsequent violation, the period of certification revocation or
suspension shall be extended for a period of up to 10 years. The
certification revocation shall apply to the principals of the
business and any subsequent businesses formed by one or more of those
principals.
   (6) Prior to the imposition of any sanctions under this section, 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.
   (7) Any business or person that fails to satisfy any of the
amounts specified in subparagraphs (A) to (C), inclusive, of
paragraph (1) shall be prohibited from further contracting with the
authority until all amounts are satisfied.
   (f) (1) It shall be unlawful for a person to do any of the
following:
   (A) 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 emerging business enterprise, microbusiness,
or disabled veteran business enterprise for the purposes of this
section.
   (B) 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
emerging business enterprise, microbusiness, or disabled veteran
business enterprise.
   (C) 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 emerging business enterprise,
microbusiness, or disabled veteran business enterprise.
   (D) Knowingly and with intent to defraud, fraudulently obtain,
attempt to obtain, or aid another person in fraudulently obtaining or
attempting to obtain, public moneys, contracts, or funds expended
under a contract, that are awarded by the authority, to which the
person is not entitled under this section.
   (E) Knowingly and with intent to defraud, fraudulently represent
certified small emerging business enterprise, microbusiness, or
disabled veteran business enterprise participation in order to obtain
or retain a bid preference or a state contract.
   (F) Knowingly and with intent to defraud, fraudulently represent
that a commercially useful function is being performed by a certified
small emerging business enterprise, microbusiness, or disabled
veteran business enterprise in order to obtain or retain a bid
preference or a state contract.
   (G) Willfully and knowingly make or subscribe to any statement,
declaration, or other document that is fraudulent or false as to any
material matter, whether or not that falsity or fraud is committed
with the knowledge or consent of the person authorized or required to
present the declaration, statement, or document.
   (H) Willfully and knowingly aid or assist in, or procure, counsel,
or advise, the preparation or presentation of a declaration,
statement, or other document that is fraudulent or false as to any
material matter, regardless of whether that falsity or fraud is
committed with the knowledge or consent of the person authorized or
required to present the declaration, statement, or document.
   (I) Establish, or knowingly aid in the establishment of, or
exercise control over, a firm found to have violated any provision of
subparagraphs (A) to (H), inclusive.
   (2) (A) Any person who is found by the authority to have violated
any of the provisions of paragraph (1) is subject to a civil penalty
of not less than ten thousand dollars ($10,000) nor more than thirty
thousand dollars ($30,000) for the first violation, and a civil
penalty of not less than thirty thousand dollars ($30,000) nor more
than fifty thousand dollars ($50,000) for each additional or
subsequent violation.
   (B) A person who violates any of the provisions of paragraph (1)
shall pay all costs incurred by the authority for any investigations
that led to the finding of the violation. Costs incurred shall
include, but are not limited to, costs and attorney's fees paid by
the authority related to hearings and court appearances. All payments
to the authority pursuant to this subparagraph shall be deposited in
the fund or funds from which payments on the contract involved were
made.
   (3) The authority shall revoke the small emerging business
enterprise, microbusiness, or disabled veteran business enterprise
certification of any person or firm that violates paragraph (1) for a
period of not less than five years, and shall, in addition to the
penalties provided for in paragraph (2), suspend the person or firm
from bidding on, or participating as a contractor, subcontractor, or
supplier in, any authority contract or project for a period of not
less than three years nor more than 10 years. 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
one or more of those principals. Any business or person who fails to
satisfy any of the penalties imposed pursuant to subparagraphs (A)
and (B) of paragraph (2) shall be prohibited from further contracting
with the authority until the penalties are satisfied.
   (4) If a contractor, subcontractor, supplier, subsidiary, or
affiliate thereof, has been found by the authority to have violated
paragraph (1) and that violation occurred within three years of
another violation of paragraph (1) found by the authority, the
authority shall prohibit that contractor, subcontractor, supplier,
subsidiary, or affiliate thereof, from entering into an authority
project or contract and from further bidding to the authority, and
from being a subcontractor to a contractor for the authority, and
from being a supplier to the authority.
   (5) In addition to the penalties imposed by this section, if a
contractor is found to be in violation of subparagraph (F) of
paragraph (1), any existing contract between that contractor and the
authority may be terminated at the discretion of the authority, and,
where payment to the contractor is made directly by the authority,
the authority shall set off penalties and costs due to the authority
against any payments due to that contractor. In the event that the
authority has forwarded the contract and invoices to the Controller
for payment, the authority shall reduce the amount due to the
contractor as reflected in the claim schedule submitted to the
Controller by the amount of the penalties and costs due the
authority. In addition, with regard to any penalties and costs due to
the authority that the authority has not accounted for by either a
set off against payments due to the contractor or a reduction
reflected in the claim schedule submitted to the Controller, to the
extent that the Controller is making payments to the contractor on
behalf of any state agency, the Controller shall set off penalties
and costs due against any invoices due to the contractor from any
other contract awarded to the contractor.
   (j) The authority shall submit an annual report to the Legislature
on the level of participation by business enterprises in contracts
awarded under the small emerging business enterprise program. To the
extent feasible, the report should draw upon information and material
developed according to other requirements, including, but not
limited to, the preappropriation review process and the
preexpenditure review process pursuant to Section 2704.08 of the
Streets and Highways Code. The report shall be submitted pursuant to
Section 9795 of the Government Code.
   (k) As used in this section, the following terms have the
following meanings:
   (1) "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.
   (2) "Goal" means a target which, when achieved, indicates progress
in a preferred direction. A goal is neither a requirement nor a
quota.
   (3) "Microbusiness" means a small business which, 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 with 25 or fewer employees.
   (4) "Small emerging business enterprise" 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 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 which is a manufacturer with 100 or
fewer employees.