BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 719|
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THIRD READING
Bill No: SB 719
Author: Correa (D)
Amended: 4/17/13
Vote: 21
SENATE VETERANS AFFAIRS COMMITTEE : 7-0, 4/23/13
AYES: Hueso, Knight, Block, Correa, Lieu, Nielsen, Roth
NO VOTE RECORDED: Vacancy
SENATE APPROPRIATIONS COMMITTEE : 7-0, 5/23/13
AYES: De Le�n, Walters, Gaines, Hill, Lara, Padilla, Steinberg
SUBJECT : Department of Veterans Affairs: California Disabled
Veteran
Business Enterprise Program
SOURCE : Author
DIGEST : This bill modifies reporting requirements for State
departments regarding their goal attainment in the California
Disabled Veteran Business Enterprise (DVBE) procurement program.
ANALYSIS :
Existing law:
1.Requires state departments to implement a goal of awarding at
least 3% of their annual contract dollars to certified DVBEs.
2.Designates the Department of General Services (DGS) as the
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administering agency for the DVBE program, except in the case
of contracts for professional bond services.
3.Provides that an awarding state department shall require the
prime contractor, upon completion of a contract that includes
DVBE subcontracting, to certify to the department the
following information:
The total amount the prime contractor received under the
contract.
The name and address of the DVBE that participated in
the contract.
The amount each DVBE received from the prime contractor.
That all payments under the contract have been made to
the DVBE.
1.Requires the awarding department to keep that certification on
file.
2.Provides for civil penalties if a person or entity knowingly
provides false information shall be subject to a civil penalty
for each violation (minimum of $2,500, maximum of $25,000).
An action for a civil penalty under this subdivision may be
brought by any public prosecutor in the name of the people of
the State of California and the penalty imposed shall be
enforceable as a civil judgment.
This bill requires an awarding department that uses the
Financial Information System for California (FISCal), commencing
with the first reporting period after its implementation of the
FISCal, to begin reporting its statewide DVBE participation
goals in terms of overall dollar amount expended each year by
the awarding department to DGS.
Background
California's Small Business Act (SBA), which is administered
through DGS, was implemented more than 30 years ago to establish
a small business preference within the state's procurement
process for the purpose of increasing the number of contracts
between the state and small businesses.
In 1989, a DVBE component was established within the SBA to
address the special needs of disabled veterans seeking
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rehabilitation and training through entrepreneurship, and to
recognize the sacrifices of Californians disabled during
military service. Under the provisions of the DVBE program,
each state agency is required, in awarding contracts throughout
the year, to honor California's disabled veterans by taking all
practical actions necessary to meet or exceed an annual 3% DVBE
participation goal.
State agencies have a goal to award at least 3% of their annual
contract dollars to certified DVBEs. The agency decides whether
or not to include the DVBE participation requirements in a
particular solicitation and the percentage of the goal, if it is
included. The result is that some contracts may have a goal of
more than 3%, some may have a goal of less than 3%, and some
contracts may have no DVBE participation goal.
The overall 3% DVBE annual goal was reached rarely by any state
agency until recent years. The primary problems have been that
(1) state law contains no strong enforcement measure to ensure
agency compliance and (2) a supply shortfall - the lack of
certified DVBEs to meet aggregate agency demand.
DGS plays several important roles in the program, including
certifying veteran-owned businesses as eligible DVBEs and
monitoring the compliance of state agencies in meeting their 3%
goals.
DGS reports DVBE goal attainment in state contracting in its
"Statewide Consolidated Annual Report" for each fiscal year.
According to these reports, the State generally was
underperforming in attaining the 3% DVBE goal until the three
most recent years for which data is available. (The most current
data year available is for Fiscal Year 2010-2011.)
According to DGS, the state's recent record is 2.96% in FY
2008-2009, 3.78% in FY 2009-2010, and 4.82% in FY 2010-2011.
The FISCal Project is a transformation project intended to
optimize the business management of state government in the
areas of budgeting, accounting, procurement, and cash
management. The project will prepare the state systems and
workforce to function in an integrated financial management
system environment.
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Existing law provides that "(all) state departments and agencies
shall use the FISCal system." The system is scheduled to be
deployed through state government in five waves: Pre-Wave and
Waves 1-4.
Comments
In August 2012, the Senate Veterans Affairs Committee held a
public informational hearing on the DVBE Program. Testimony by
a representative from DGS' Procurement Division indicated that
the state's recent positive DVBE record reflects a mix of
non-standardized data from various agencies. The mix includes
reporting from some agencies based on the dollar amounts
expressed up-front in DVBE contracts and reporting from other
agencies based on the dollar amounts actually paid to the DVBEs
under those contracts. Thus, the state's official performance
record is a mix of "actually paid out" and "what was promised."
Since the purpose of the program is to provide economic
assistance to disabled veterans, the more appropriate measure of
success would be actual awards paid out.
Prior Legislation
SB 817 (Senate Veterans Affairs Committee, 2011), was held
Senate Appropriations Committee, and would have allowed a vendor
with state contracts to meet DVBE goals with dollars from other
than state contracts, modified the requirement for a DVBE
business utilization plan so that the plan's required listing of
products and services includes both direct and indirect costs
and codified certain key definitions into the Public Contract
Code.
AB21 X4 (Evans, Chapter 19, Statutes of 2009, Fourth
Extraordinary Session), deleted the requirement (including all
of the supporting subdivisions) that the lowest responsible
bidder make "a good faith effort" to meet minority business
enterprise, women business enterprise, and disabled veteran
business enterprise participation goals on all state
procurements.
SB 115 (Florez, Chapter 451, Statues of 2005), moved the DVBE
from the Department of Veterans Affairs to DGS and modified the
standards for meeting the program's participation goals.
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FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
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.
SUPPORT : (Verified 5/23/13)
Alan Amaro Construction
American Legion - Department of California
AMVETS - Department of California
California State Commanders Veterans Council
Veterans Council
Vietnam Veterans of America - California State Council
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AL:ne 5/24/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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