BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
SB 719 (Correa) - Disabled Veteran Business Enterprise Program
Amended: April 17, 2013 Policy Vote: Veterans Affairs
7-0
Urgency: No Mandate: No
Hearing Date: May 6, 2013 Consultant: Robert Ingenito
This bill meets the criteria for referral to the Suspense File.
Bill Summary: SB 719 would modify reporting requirements for
state departments with respect to their participation goal for
disabled veteran business enterprises (DVBEs).
Fiscal Impact: The Department of General Services (DGS)
indicates that it would incur one-time costs of $150,000
(General and special funds) to implement this bill.
Specifically, DGS would need to revise policies in the State
Contracting Manual, revise training curricula and materials in
the California Procurement and Contracting Academy, and provide
training to all the departmental reports coordinators on the new
reporting methodology.
Statewide, the bill could result in unknown, but potentially
major costs (reaching the low millions of dollars) to
departments to use the reporting method prescribed by the bill.
Approximately 180 state departments are currently required to
report DVBE participation to DGS. Current administrative
practice is to allow departments to report DVBE participation to
DGS in a manner that is feasible for them. In many cases,
participation is reported based on the estimated value of the
contract award and the level of participation to which the prime
contractor committed, rather than based on the state's actual
expenditures to the prime contractor or, in cases where the DVBE
is a subcontractor, on the prime contractor's report of its
expenditures to the DVBE subcontractor.
Standardizing the manner in which state agencies report DVBE
participation by requiring them all to report using the same
methodology will likely increase costs because they will no
longer be permitted to select the least labor-intensive method.
SB 719 (Correa)
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Background: The California Small Business Act (SBA),
administered through DGS, was implemented over 30 years ago to
establish a small business preference within the State's
procurement process with the intent to increase the number of
contracts between the State and small businesses.
Established within the SBA in 1989, the Disabled Veteran
Business Enterprise (DVBE) program sets a goal for most awarding
state departments to expend a minimum of three percent of their
overall contract dollars on DVBEs certified by DGS. Departments
that award contracts may meet this goal by either contracting
directly with certified DVBE firms or requiring winning bidders
to use them as subcontractors. To be eligible to become a
certified DVBE, a business must be at least 51 percent owned by
a disabled veteran, have its daily operations managed and
controlled by a disabled veteran, and be located in the United
States.
The Financial Information System for California (FI$Cal) is an
information technology project currently underway by a
partnership of control agencies including the Department of
Finance (DOF), the State Controller's Office (SCO), the State
Treasurer's Office (STO), and DGS. Fi$Cal will replace the
state's multiple aging and disparate financial systems with a
centralized, fully integrated, modern financial information
system for the entire state, and will include budgeting,
accounting, procurement, and cash management functions.
Proposed Law: This bill would require each department that
adopts and uses Fi$Cal to begin reporting its statewide goal
attainment to the Department of General Services (DGS) in terms
of overall dollar amount expended each year.
Related Legislation: SB 722 (Correa), would define "disabled
veteran" for purposes of the DVBE program, as a veteran of the
Armed Forces of the United States, as specified, who has a
service-connected disability, as documented by a letter from any
branch of the United States Armed Forces or the federal
Department of Veterans Affairs, and who is domiciled in the
State.
SB 733 (Block) would delete the provisions allowing the awarding
department to accept submission of a DVBE utilization plan and
SB 719 (Correa)
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would instead specify that the statewide participation goal for
DVBEs may be met by the business utilization plan value of a
business utilization plan partner, as defined, established by
payments between the partner and a DVBE, as specified.
Staff Comments: DGS reports in its 2010-11 Statewide
Consolidated Annual Report that at the close of the fiscal year,
there were 1,211 certified DVBEs, 88 percent of whom were also
certified as small businesses, as defined. In 2010-11, state
agencies reported about $5.6 billion in contracts for
procurement of goods, services, construction, and information
technology (IT) goods and services, an increase of $490 million
over the prior year. More than $272 million was awarded to
DVBEs, an overall contracting rate of 4.82 percent. This is the
highest level of DVBE participation ever reported, and is the
second time in over a decade that the State met the current-law
goal of three percent. DVBE participation increased by 1.04
percentage points above the prior year's figure of 3.78 percent.
Staff notes that state departments' participation rate in
providing these data to DGS was 86 percent in 2010-11, down from
93 percent in 2008-09. Potential explanations for the decline in
participation among state agencies include the use of employee
furloughs, unfilled staff vacancies and the elimination of
vacant positions.