Amended in Senate June 16, 2015

Amended in Assembly May 7, 2015

Amended in Assembly March 16, 2015

California Legislature—2015–16 Regular Session

Assembly Bill No. 413

Introduced by Assembly Member Chávez

(Coauthors: Assembly Members begin delete Kim end delete begin insert Brough, Kim, end insert and Mathis)

February 19, 2015

An act to amend Section 999 of the Military and Veterans Code, relating to veterans.

LEGISLATIVE COUNSEL’S DIGEST

AB 413, as amended, Chávez. California Disabled Veteran Business Enterprise Program.

The California Disabled Veteran Business Enterprise Program addresses the special needs of disabled veterans by assisting state procurement authorities in meeting or exceeding the disabled veteran enterprise participation goal of 3% for procurement contracts. Existing law, under the program, authorizes a child or spouse to continue to operate a disabled veteran business enterprise for 3 years after the death or the certification of a permanent medical disability of a disabled veteran who was the majority owner of that enterprise, but only for purposes of any contract entered into before his or her death or certification of disability.

This bill would delete the provision that only allows a child or spouse to operate the business for purposes of the contracts entered into before death or certification of disability. begin insert The bill would clarify the scope and purpose of the provision authorizing a child or spouse to continue to operate a disabled veteran business enterprise for 3 years after the death or the certification of a permanent medical disability of a disabled veteran who was the majority owner of that enterprise. The bill would also set forth a statement of legislative intent. end insert

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

begin insert

begin insert SECTION 1. end insert   

end insert begin insert

(a) It is the intent of the Legislature that the
certification created by this act not conflict with the intended
purpose of the California Disabled Veteran Business Enterprise
Program, which is, as stated in subdivision (a) of Section 999 of
the Military and Veterans Code, “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.”

end insert begin insert

(b) The Legislature finds and declares all of the following:

end insert begin insert

(1) Allowing any person who is not a “disabled veteran,” as
defined in paragraph (6) of subdivision (b) of Section 999 of the
Military and Veterans Code, to perform the role of a “disabled
veteran” within the California Disabled Veteran Business
Enterprise Program, would conflict with the intended purpose of
the program by placing that person in competition with a “disabled
veteran” for program benefits intended to meet the special needs
of disabled veterans.

end insert begin insert

(2) Family members of disabled veterans may participate in the
program without conflicting with the program’s intended purpose,
if their participation is limited to either fulfilling existing contracts
or providing for the orderly and equitable disposition of a certified
disabled veteran business enterprise following the death or
permanent medical disability of the business’ majority owner.

end insert begin insert

(3) Three years is sufficient time for the orderly and equitable
disposition of a certified disabled veteran business enterprise
following the death or permanent medical disability of the majority
owner.

end insert begin insert

(c) It is the intent of the Legislature that the certification created
by this act shall not establish any business advantage other than
to permit certain family members of the majority owner of a
disabled veteran business enterprise to temporarily control and
fully operate that business upon the death or permanent medical
disability of the majority owner.

end insert

begin delete SECTION 1. end delete
begin insert SEC. 2. end insert   

Section 999 of the Military and Veterans Code is
amended to read:

999.  

(a) This article shall be known as, and may be cited as,
the California Disabled Veteran Business Enterprise Program. The
California Disabled Veteran Business Enterprise Program is
established 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. It is the intent of the Legislature that every state
procurement authority honor California’s disabled veterans by
taking all practical actions necessary to meet or exceed the disabled
veteran business enterprise participation goal of a minimum of 3
percent of total contract value.

(b) As used in this article, the following definitions apply:

(1) “Administering agency” means the Treasurer, in the case of
contracts for professional bond services, and the Department of
General Services’ Office of Small Business and Disabled Veteran
Business Enterprise Services, in the case of contracts governed by
Section 999.2.

(2) “Awarding department” means a state agency, department,
governmental entity, or other officer or entity empowered by law
to issue bonds or enter into contracts on behalf of the state.

(3) “Bonds” means bonds, notes, warrants, certificates of
participation, and other evidences of indebtedness issued by, or
on behalf of, the state.

(4) “Contract” includes any agreement or joint agreement to
provide professional bond services to the State of California or an
awarding department. “Contract” also includes any agreement or
joint development agreement to provide labor, services, materials,
supplies, or equipment in the performance of a contract, franchise,
concession, or lease granted, let, or awarded for, and on behalf of,
the state.

(5) (A) “Contractor” means any person or persons, regardless
of race, color, creed, national origin, ancestry, sex, marital status,
disability, religious or political affiliation, age, or any sole
proprietorship, firm, partnership, joint venture, corporation, or
combination thereof that submits a bid and enters into a contract
with a representative of a state agency, department, governmental
entity, or other officer empowered by law to enter into contracts
on behalf of the state. “Contractor” includes any provider of
professional bond services who enters into a contract with an
awarding department.

(B) “Disabled veteran business enterprise contractor,
subcontractor, or supplier” means any person or entity that has
been certified by the administering agency pursuant to this article
and that performs a “commercially useful function,” as defined
below, in providing services or goods that contribute to the
fulfillment of the contract requirements:

(i) A person or an entity is deemed to perform a “commercially
useful function” if a person or entity does all of the following:

(I) Is responsible for the execution of a distinct element of the
work of the contract.

(II) Carries out the obligation by actually performing, managing,
or supervising the work involved.

(III) Performs work that is normal for its business services and
functions.

(IV) Is responsible, with respect to products, inventories,
materials, and supplies required for the contract, for negotiating
price, determining quality and quantity, ordering, installing, if
applicable, and making payment.

(V) Is not further subcontracting a portion of the work that is
greater than that expected to be subcontracted by normal industry
practices.

(ii) A contractor, subcontractor, or supplier will not be
considered to perform a “commercially useful function” if the
contractor’s, subcontractor’s, or supplier’s role is limited to that
of an extra participant in a transaction, contract, or project through
which funds are passed in order to obtain the appearance of a
disabled veteran business enterprise participation.

(6) “Disabled veteran” means a veteran of the military, naval,
or air service of the United States, including, but not limited to,
the Philippine Commonwealth Army, the Regular Scouts, “Old
Scouts,” and the Special Philippine Scouts, “New Scouts,” who
has at least a 10-percent service-connected disability and who is
domiciled in the state.

(7) (A) “Disabled veteran business enterprise” means a business
certified by the administering agency as meeting all of the
following requirements:

(i) It is a sole proprietorship at least 51 percent owned by one
or more disabled veterans or, in the case of a publicly owned
business, at least 51 percent of its stock is unconditionally owned
by one or more disabled veterans; a subsidiary that is wholly owned
by a parent corporation, but only if at least 51 percent of the voting
stock of the parent corporation is unconditionally owned by one
or more disabled veterans; or a joint venture in which at least 51
percent of the joint venture’s management, control, and earnings
are held by one or more disabled veterans.

(ii) The management and control of the daily business operations
are by one or more disabled veterans. The disabled veterans who
exercise management and control are not required to be the same
disabled veterans as the owners of the business.

(iii) It is a sole proprietorship, corporation, or partnership with
its home office located in the United States, which is not a branch
or subsidiary of a foreign corporation, foreign firm, or other
foreign-based business.

(B) Notwithstanding subparagraph (A), after the death or the
certification of a permanent medical disability of a disabled veteran
who is a majority owner of a business that qualified as a disabled
veteran business enterprise prior to that death or certification of a
permanent medical disability, that business shall be deemed to be
a disabled veteran business enterprise for a period not to exceed
three years after the date of that death or certification of a
permanent medical disability, if the business is inherited or
controlled by the spouse or child of that majority owner, or by
both of those persons. begin insert A business is a disabled veteran business
enterprise pursuant to this subparagraph under either of the
following circumstances: end insert

begin insert

(i) For the duration of any contract entered into prior to the
death or certification of permanent medical disability for the sole
purpose of fulfilling the requirements of that contract.

end insert begin insert

(ii) After the date of the majority owner’s death or certification
of permanent medical disability established by this subparagraph
for the sole purpose of providing sufficient time to make orderly
and equitable arrangements for the disposition of the business,
except that the business shall not enter into any new contract as
a disabled veteran business enterprise for purposes of the program
if the contract would not be completed within the three-year period.

end insert

(8) “Foreign corporation,” “foreign firm,” or “foreign-based
business” means a business entity that is incorporated or has its
principal headquarters located outside the United States of
America.

(9) “Goal” means a numerically expressed objective that
awarding departments and contractors are required to make efforts
to achieve.

(10) “Management and control” means effective and
demonstrable management of the business entity.

(11) “Professional bond services” include services as financial
advisers, bond counsel, underwriters in negotiated transactions,
underwriter’s counsel, financial printers, feasibility consultants,
and other professional services related to the issuance and sale of
bonds.