BILL ANALYSIS Ó
SENATE COMMITTEE ON VETERANS AFFAIRS
Senator Jim Nielsen, Chair
2015 - 2016 Regular
Bill No: AB 413 Hearing Date: 6/23/15
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|Author: |Chávez |
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|Version: |6/16/15 Amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Wade Cooper Teasdale |
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Subject: California Disabled Veteran Business Enterprise
Program.
DESCRIPTION
Summary:
With regard to the Disabled Veteran Business Enterprise (DVBE)
program:
Following the death or permanent disability of the disabled
veteran majority owner of a certified DVBE, this bill authorizes
a surviving spouse or child to enter into additional state
contracts during the three year period following the death or
disability, provided that the contracts can be completed within
the three-year period.
Existing law:
1)Establishes the DVBE program for the purposes of addressing
the special needs of disabled veterans seeking rehabilitation
and training through entrepreneurship, and to recognize the
sacrifices California's disabled veterans made during their
military service.
2)Establishes an annual 3% DVBE procurement participation goal
for each state agency, department, and officer that enters
into a contract for materials, supplies, equipment,
alteration, repair, or improvement.
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3)Designates the Department of General Services (DGS) as the
administering agency for the DVBE program, including managing
the certification of individual DVBE firms.
4)Establishes criteria for certification eligibility, including
ownership and operation by one or more disabled veterans, as
defined.
5)Extends "certified DVBE" status to the spouse or child of a
disabled veteran majority owner, upon the owner's death or
upon receipt of certification of the owner's permanent medical
disability, for up to three years for the sole purpose of
completing any contracts entered into prior to the owner's
death or certification.
This bill:
1)Authorizes - following the death or permanent disability of
the disabled veteran majority owner of a certified DVBE - a
surviving spouse or child to enter into additional state
contracts during the three year period following the death or
disability, provided that the contracts can be completed
within the three-year period.
2)Offers intent language and makes findings and declarations:
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."
b) 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
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special needs of disabled veterans.
c) 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.
d) 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.
e) 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.
BACKGROUND
California is home to nearly two million of the nation's 22
million veterans. Many are disabled and would qualify to
participate as a DVBE entrepreneur. The demographics of the
state's veteran population is changing rapidly due to the
passing away of older generations and new growth generated by
the current, ongoing downsizing our nation's active duty armed
forces. Many of the newer, younger veterans will have
disabilities from serving in the conflicts in Iraq and
Afghanistan or other service-connected causes.
The program's purpose and philosophical orientation are
established in Military and Veterans Code Section 999(a):
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
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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.
Ownership and Operation
Under existing law, a DVBE must meet certain standards in order
to be certified by DGS, including the following requirements for
ownership and operation:
1)Ownership:
a) Sole proprietorship: At least 51% owned by one or more
disabled veterans;
b) Publicly owned business: At least 51% of its stock
unconditionally owned by one or more disabled veterans;
c) Subsidiary that is wholly owned by a parent corporation:
Only if at least 51% of the voting stock of the parent
corporation is unconditionally owned by one or more
disabled veterans; or
d) Joint venture: At least 51% of the joint venture's
management, control, and earnings are held by one or more
disabled veterans.
1)Control and Operation
a) 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.
b) It has a home office located in the U.S., which is not a
branch or subsidiary of a foreign corporation, foreign
firm, or other foreign-based business.
Survivorship
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Existing law provides that, if the disabled veteran majority
owner dies or incurs a permanent medical disability, an
inheriting spouse and/or child may retain the firm's
certification and continue to operate as a DVBE for three years,
for the sole purpose of fulfilling the terms of any contract
entered into prior to the disabled veteran's death or permanent
disability. However, the spouse/child certification may not be
used to enter into any new contracts during the three-year
period.
The above provision was added via AB 409 (Dickerson, 1999) due
to concerns about the fate of the veteran's spouse, who, in most
cases, relies totally or primarily on the income generated the
DVBE operation.
COMMENT
Related Legislation
AB 409 (Dickerson, Chapter 767, Statutes of 1999 requires (1)
that certification of a disabled veteran business enterprise
(DVBE) be continued for up to three years after the death or
certification of permanent medical disability of the disabled
veteran owning the enterprise; and (2) that the Department of
Veterans Affairs (CalVet) appoint an advocate, who would be
responsible for overseeing implementation of this bill and
general DVBE participation goals in state contracting.
Committee Comments
1)Opponents' Concerns:
Opponents posit that this measure, by allowing the inheriting
spouse/child to enter into new contracts during the three-year
period, places them into direct competition with fully
eligible DVBE owned by disabled veterans. First, this is not
purely consistent with the intent of the program, as presented
in statute. Second, multiple opponents have expressed concern
that this is the proverbial "camel's nose under the tent," and
could lead to the future legislative expansion of contracting
rights for the spouse/child. These are not insignificant
concerns and they were central when existing law on this
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matter was enacted in 1999 via AB 409. The bill analysis by
Committee on Utilities and Commerce Committee stated:
This bill in an attempt to alleviate hardship to the
family seeks to transfer DVBE status to the family
members. This bill currently states that the business, for
a period of up to three years, shall be deemed to be a
DVBE. This bill does not specify that the status is solely
for the purpose of completing existing contracts.
Temporary DVBE status may enable the new owners to bid on
new contracts within that three year period.
Accordingly, AB 409 was amended on April 27, 1999 to include
the phase "and solely for the purpose of any contract entered
into before that death or certification." By removing that
specific provision, AB 413 would allow new contracting in
order to provide a livable revenue stream to the spouse/child
during the three-year window in which the survivor/spouse is
managing the disposition of the business, whether that
disposition is closing it down, selling to another eligible
disabled veterans, or selling to a non-disabled veteran.
2)Author Response to Opponents' Concerns:
The author recently inserted the following amendments into the
bill in an effort to mitigate some of the opponents' concerns:
a) Specifying that the spouse or child may only enter into
contracts that can be fulfilled within whatever is left of
the three-year time period at the time the firm enters into
the contract.
b) Adding intent language and making legislative findings
and declarations that set forth the following principles:
i) The general intent for the program is violated if
non-disabled veterans are allowed to compete against
eligible disabled veterans.
ii) Allowing a surviving spouse/child to fulfill
pre-existing contracts or enter into limited contracts
during a three-year final business disposition window
does not violate the intent.
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iii) Three years is sufficient time to determine and
effect the final disposition of the DVBE firm.
POSITIONS
Sponsor: Disabled Veteran Business Alliance (DVBA)
Support:
American Legion - Department of California
AMVETS - Department of California
California Asian Pacific Chamber of Commerce (CalAsian)
California Association of County Veterans Service Officers
(CACVSO)
California State Commanders Veteran Council
Military Officers Association of America - California Council of
Chapters
Veterans of Foreign Wars - Department of California
Vietnam Veterans of American - California State Council
10 letters/emails in support from individual DVBEs
Oppose:
Service Disabled Veteran Owned Small Businesses (SDVOSB) Network
26 letters/emails in opposition from individual DVBEs
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