BILL ANALYSIS Ó
AB 413
Page 1
Date of Hearing: April 21, 2015
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT, AND THE ECONOMY
Eduardo Garcia, Chair
AB 413
(Chávez) - As Amended March 16, 2015
SUBJECT: California Disabled Veteran Business Enterprise Program
SUMMARY: Authorizes a spouse or child to enter into additional state
contracts during the three years currently permitted for the continued
operation of a disabled veteran-owned business enterprise (DVBE)
following the death or permanent disability of an owner of a certified
DVBE. Existing law limits the business' activities to the completion
of existing contracts.
EXISTING LAW:
1)Establishes the California Disabled Veteran Business Enterprise
Program for the purpose 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)Designates the Department of General Services (DGS) as the
administrator of the state Small Business Procurement and Contract
Act (Small Business Procurement Act), including the oversight of the
California Disabled Veteran Business Enterprise Program and the
certification of the disabled veteran owned business enterprises
(DVBEs).
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3)Sets 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.
This requirement can be waived on a specific contract with the
approval of the department director or another designated person.
4)Extends DVBE status to the spouse of a DVBE who has died or received
certification of a permanent medical disability for up to three
years for the sole purpose of completing any contracts entered into
prior to the death or certification.
5)Defines the following terms:
a) A DVBE contractor, subcontractor, or supplier is any person or
entity that has been certified by the administering agency and
that performs a commercially useful function, as defined.
b) A disabled veteran is a veteran of the military, naval, or air
service of the U.S. who has a service-connected disability of at
least 10% and who is domiciled in the state.
c) A DVBE is a business certified by the administering agency as
meeting all of the following requirements:
i) The legal structure of the business is a:
(1) Sole proprietorship with at least 51% owned by one
or more disabled veterans;
(2) Publicly owned business with at least 51% of its
stock unconditionally owned by one or more disabled
veterans;
(3) Subsidiary that is wholly owned by a parent
corporation, but only if at least 51% of the voting stock of
the parent corporation is unconditionally owned by one or
more disabled veterans; or
(4) Joint venture in which at least 51% of the joint
venture's management, control, and earnings are held by one
or more disabled veterans.
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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 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.
FISCAL EFFECT: Unknown
POLICY ISSUE FRAME:
California is home to 1.8 million veterans, representing 8% of the
total U.S. veteran population. This bill proposes to extend new
contracting authority for a previously certified DVBE, which is owned
by a spouse or child of a qualifying disabled veteran following their
death or permanent disability. Current law only allows the business
to complete existing contracts during the three-year transition
period. AB 413 authorizes the family to bid on and complete
additional state contracts during the same three-year period.
The analysis includes background on the Small Business Procurement
Act, the California Disabled Veteran Owned Business Enterprise
Program, the federal veteran procurement participation program, and
other spousal benefits for deceased veterans.
COMMENTS:
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1)Author's Purpose: According to the author, "AB 413 would allow
survivors to maintain the DVBE certification for three years
following the death of a disabled veteran business owner. Doing so
would provide the families time to continue the business after the
death of a veteran without an immediate end to the business."
2)Small Business Procurement Act: The Small Business Procurement Act,
administered through DGS, was implemented more than 30 years ago to
establish a small business preference within the state's procurement
process that would increase the number of contracts between the
state and small businesses. A DBVE component was added in 1989.
Today, approximately 90% of DVBEs have dual certification as a small
business or a microbusiness.
The Small Business Procurement Act states that it is the policy of
the State of California that the state aid the interests of small
businesses in order to preserve free competitive enterprise and to
ensure that a fair portion of the total purchases and contracts of
the state be placed with these enterprises. The statute further
states that DVBE participation is strongly encouraged to address the
special needs of disabled veterans seeking rehabilitation and
training through entrepreneurship, and to recognize the sacrifices
of California's disabled military veterans. Statute sets an annual
3% DVBE participation goal, and a 2006 executive order sets a 25%
goal for small businesses and microbusinesses.
There are 1,537 certified DVBEs in California during the 2013-14
fiscal year with 1,129 within the service sector, 530 in
construction, 30 in manufacturing and 373 in a non-manufacturing
sector. The majority size of certified DVBEs are very small with
1,289 out of 1,537 total DVBEs having a second certification as a
microbusiness.
In 2013-14, mandated state entities achieved an overall DVBE
participation rate of 3.67%, or $299 million of the $8.2 billion
expended in state contracts. This is the third year in a row that
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the state has met its DVBE goal. DGS notes, however, that the
overall DVBE percentage could be higher if the top five state
contracting entities had all met their individual department goals.
The chart below shows current numbers.
---------------------------------------------------------------
| 2013-14 State Contracting with DVBE Participation |
---------------------------------------------------------------
|--+--------------------------------------------------+----------|
|1 |Department of Corrections and Rehabilitation |3.60% |
|--+--------------------------------------------------+----------|
|2 |Department of Transportation |3.79% |
|--+--------------------------------------------------+----------|
|3 |Department of Health Care Services |0.45% |
|--+--------------------------------------------------+----------|
|4 |Department of State Hospitals |2.12% |
|--+--------------------------------------------------+----------|
|5 |Department of Water Resources |2.62% |
----------------------------------------------------------------
---------------------------------------------------------------
|DGS Consolidated Report |
|11/25/2014 |
---------------------------------------------------------------
3)Federal Contracting: The federal government operates the Vets First
Contracting Program, overseen by the Veterans Administration (VA),
which includes a veteran-owned and a disabled veteran-owned
component. Upon certification, a business is eligible to benefit
from special contract set asides and subcontract with VA's large
prime contractors. The business is also eligible to participate in
VA's Veteran-Owned Small Business Mentor-Protégé Program. Given
that the VA is one of the largest procurement organizations in the
federal government with over $3 billion in contracts annually, there
are significant procurement opportunities.
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In instances where the owner of federal VA certified disabled
business dies, which results in the business having less than 51%
veteran ownership, the surviving spouse can retain the certification
status until they remarry, relinquish ownership of the business, 10
years following the veteran's death, or until the business no longer
meets the definition of a federal small business.
In comparison, AB 413 offers a more limited extension in certified
contracting status than allowed under a similar federal program.
4)California's Veteran Population: California, Texas, and Florida
have the highest number of veterans among the 50 states.
Approximately 1.8 million veterans live in California, with an
additional 30,000 being discharged into the state each year.
The veteran population in Los Angeles, Orange, Riverside,
Sacramento, San Bernardino, San Diego, and Ventura Counties are
among the highest in the U.S. Based on age, the VA reports that
California has a greater percentage of veterans under the age of 25
than the rest of the country, as well as the largest overall number
of older veterans.
The federal Small Business Administration estimates that the most
common industry sector in which veterans participate is the
professional, science, and technology services sector, with 20.4% of
all veteran-owned businesses being within the industry sector.
California veterans also tend to be entrepreneurs at higher rates
than the national average, 13.2% vs. 10.9%.
5)Veteran Service-related Survivorship Benefits: Approximately 4
million California veterans receive some level of VA disability
compensation, with about 500,000 of those individuals certified as
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100% disabled. Given the aging population of the veterans who
served in Viet Nam, and the significant nature of the medical
challenges faced by the younger veteran population, the number of
DVBEs who will die or whose injuries will become more impactful
while still operating their business is likely to increase in the
coming decade. The Disable Veteran Business Alliance, the sponsor
AB 413, provided the list below of currently available
veteran-related benefits that are transferable or directly provided
to veterans and their families:
An eligible surviving spouse may continue a Service Disabled
Veteran Owned Small Business certification for up to ten years
according to Federal PL 109-461 SDVOSB Survivorship rights are
contained in two different sections of federal regulation: 38
CFR Part 74, and 13 CFR Part 125.
Military members and Veterans can transfer 48 months of GI
Bill educational benefits to their family members
(spouse/children).
Tricare for Life (TFL) medical benefits available to family
members of a retired service member, Medal of Honor recipient's
family member and survivor of a deceased sponsor.
Tricare Retiree Dental Program (TRDP) available to eligible
family members and surviving family members of deceased sponsors
and Medal of Honor recipients and their immediate family members
and survivors.
The spouse and children of a deceased service member living in
government quarters are entitled to either remain in government
housing for up to a year or relocate to a private quarters and
receive up to a year of Basic Housing Allowance as appropriate.
Scholarship assistance for dependent survivors of deceased
members is provided by many schools.
Surviving spouses and certain mothers of deceased members who
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served during war time are entitled to an additional 10 points to
their earned rating on the civil service examination for federal
employment.
The Social Security Administration will pay to a surviving
spouse or children $225 lump sum death payment and other monthly
benefits to the surviving member.
Many states provide benefits for survivors of veterans such as
educational assistance, land settlement preference, civil service
preference, tax and license fee exemptions, loans, relief and
rehabilitation, employment assistance and bonuses.
Dependent survivors of a deceased member have access to the
Uniformed Services Identification and Privilege Card to continue
to have access to facilities such as commissaries, exchanges and
medical facilities.
The Survivor Benefit Plan allows retirement pay to continue to
flow to spouse or children for the lifetime of the beneficiary.
The Dependency and Indemnity Compensation is a monthly benefit
paid to eligible survivors of certain deceased veterans.
Death Gratuity (one time lump sum of $100K) and Death Pensions
available to next of kin and eligible dependents.
The family members of veterans are eligible to collect burial
and memorial benefits.
Survivor and Dependent Assistance (DEA) program is established
by Chapter 35 of Title 38 US Code providing 45 months education
and training opportunities to eligible dependents of veterans
that were disabled due to a service related condition or who died
while on active duty.
VA Home Loan Guarantee to surviving spouses of disabled
veterans.
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No fee passports are available to immediate family members for
the purpose of visiting their loved ones grave or
memorialization.
REGISTERED SUPPORT / OPPOSITION:
Support
Disabled Veteran Business Alliance (sponsor)
American Legion-Department of California
AMVETS-Department of California
California Association of County Veteran Service Officers
California State Commanders Veterans Council
Military Officers Association of America, California Council of
Chapters
VFW-Department of California
Vietnam Veterans of America-California State Council
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Opposition
None received
Analysis Prepared by:Toni Symonds / J., E.D., & E. / (916) 319-2090