BILL ANALYSIS �
SB 719
Page 1
Date of Hearing: July 2, 2013
ASSEMBLY COMMITTEE ON VETERANS AFFAIRS
Al Muratsuchi, Chair
SB 719 (Correa) - As Amended: April 17, 2013
SENATE VOTE : 39-0
SUBJECT : Department of Veterans Affairs: California Disabled
Veteran Business Enterprise Program reports
SUMMARY : Modifies reporting requirements for State departments
regarding their goal attainment in the California Disabled
Veteran Business Enterprise (DVBE) procurement program.
Specifically, this bill : requires each department that adopts
and uses the Financial Information System for California
(FISCal) system to begin reporting its statewide goal attainment
to the Department of General Services (DGS) in terms of overall
dollar amount expended each year by the awarding department.
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
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:
a) The total amount the prime contractor received under the
contract.
b) The name and address of the DVBE that participated in
the contract.
c) The amount each DVBE received from the prime contractor.
d) That all payments under the contract have been made to
the DVBE.
e) Requires the awarding department to keep that
certification on file.
4)Provides for civil penalties if a person or entity knowingly
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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.
FISCAL EFFECT : According to the Senate Committee on
Appropriations:
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.
COMMENTS :
FISCal
The FISCal Project is a transformation project intended to
optimize the business management of State government in the
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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.
Existing law provides that "(all) state departments and agencies
shall use the FISCal system." [Government Code Section
15849.22(b) (1)] The system is scheduled to be deployed through
State government in five waves: Pre-Wave and Waves 1-4.
According to FISCal's Annual Report to the Legislature (February
13, 2013), the program's Pre-Wave is scheduled to "go live" on
July 1, 2013. Waves 1 through 4 are scheduled to go live in the
following three years, with full implementation targeted for
July 1, 2016. Thus, the effective implementation date of this
bill's reporting requirements for any given State agency
parallels that agency's position within the five-wave adoption
schedule for FISCal.
DVBE Program
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
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.
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However, 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.
According to the Senate Committee on Veterans Affairs:
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 nonstandardized 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 problem is to provide economic
assistance to disabled veterans, the more appropriate
measure of success would be actual awards paid out. That
metric is what SB 719 would standardize as the metric for
all agency reporting.
It is a better measure of actual impact to disabled veteran
businesses to evaluate the "?overall dollar amount expended each
year by the awarding department?" than to include a mix of
awarded amounts and amounts expended. Mixing the two metrics
together could result in the impact to disabled veteran
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businesses being either over or understated. The point of the
reporting requirement is to provide accurate feedback to
government on the DVBE goal.
Related Legislation :
SB 276 (Roth, pending, 2013)
Existing law permits a state agency to award contracts for
goods, services, or information technology with values of
between $5,000 and $250,000 to certified small businesses,
including microbusinesses, or to disabled veteran business
enterprises (DVBE), without complying with specified competitive
bidding requirements. This bill increases the upper limit of the
value of those contracts to $500,000.
SB 297 (Roth, pending, 2013)
Increases the DVBE program's annual statewide participation
goals for state agencies from 3% up to 5%.
SB 733 (Block, pending, 2013)
Existing law permits the use of business utilization plans (BUP)
to meet certain requirements in the DVBE program. This bill
repeals those provisions and establishes new criteria using the
"business utilization plan value" of a "business utilization
plan partner," as defined.
SB 817 (Committee on Vet Affs, held Senate Approps, 2011)
Allows a vendor with state contracts to meet DVBE goals with
dollars from other than state contracts. (2) Modifies 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. (3) Codifies certain key definitions
into the Public Contract Code.
ABX4 21 (Evans, Ch. 19, Stats. 2009 4th Ex.S.)
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.
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SB 115 (Florez, Ch. 451, Stats. 2005)
Moved the DVBE from the Department of Veterans Affairs to the
Department of General Services and modified the standards for
meeting the program's participation goals.
REGISTERED SUPPORT / OPPOSITION :
Support
American Legion- Department of California
AMVETS- Department of California
California State Commanders Veterans Council
Vietnam Veterans of America- California State Council
Opposition
None on File.
Analysis Prepared by : John Spangler / V. A. / (916) 319-3550