BILL ANALYSIS                                                                                                                                                                                                    Ó






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          |SENATE RULES COMMITTEE            |                        AB 413|
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                                   THIRD READING 


          Bill No:  AB 413
          Author:   Chávez (R), et al.
          Amended:  6/30/15 in Senate
          Vote:     21  

           SENATE VETERANS AFFAIRS COMMITTEE:  5-0, 6/23/15
           AYES:  Nielsen, Hueso, Allen, Nguyen, Roth

           SENATE APPROPRIATIONS COMMITTEE:  7-0, 8/27/15
           AYES:  Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen

           ASSEMBLY FLOOR:  78-0, 5/14/15 (Consent) - See last page for  
            vote

           SUBJECT:   California Disabled Veteran Business Enterprise  
                     Program California Disabled Veteran Business  
                     Enterprise Program.


          SOURCE:    Disabled Veteran Business Alliance

          DIGEST:    This bill amends the Disabled Veteran Business  
          Enterprise (DVBE) program by authorizing that following the  
          death or permanent disability of the disabled veteran majority  
          owner of a certified DVBE, a surviving spouse or child may 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.

          ANALYSIS:
          
          Existing law:









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          1)Establishes the DVBE program for the purposes of addressing  
            the special needs of disabled veterans seeking rehabilitation  
            and training through entrepreneurship, and recognizing 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.

          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 DVBE program, which is, as stated  
               in subdivision (a) of Section 999 of the Military and  
               Veterans Code (MVC), "to address the special needs of  
               disabled veterans seeking rehabilitation and training  
               through entrepreneurship and to recognize the sacrifices of  







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               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 MVC, to perform the role of a "disabled veteran"  
               within the DVBE 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.

             c)   The spouse or child 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 DVBE entrepreneurs. 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 ongoing downsizing our nation's active duty armed forces.  
          Many of the newer, younger veterans have disabilities from  
          serving in the conflicts in Iraq and Afghanistan or other  
          service-connected causes.








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          The program's purpose and philosophical orientation are  
          established in MVC Section 999(a):

            The DVBE 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.

          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.

          2)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  







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               firm, or other foreign-based business.

          Survivorship.  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, Chapter  
          767, Statutes of 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.

          Related/Prior Legislation
          
          AB 409 (Dickerson, Chapter 767, Statutes of 1999) requires (1)  
          that certification of a 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  
          California Department of Veterans Affairs appoint an advocate,  
          who would be responsible for overseeing implementation of the  
          bill and general DVBE participation goals in state contracting.

          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   No

          According to the Senate Appropriations Committee:


           The aggregate impact of this bill on state contracts is  
            unknown, and would reflect various factors. Some of these  
            factors would potentially increase state costs, while others  
            would likely lead to a reduction in state costs.


           DGS would incur minor and absorbable costs related to  
            rulemaking.










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          SUPPORT:   (Verified 8/31/15)


          Disabled Veteran Business Alliance (source)
          American Legion - Department of California
          AMVETS - Department of California
          California Asian Pacific Chamber of Commerce 
          California Association of County Veterans Service Officers 
          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
          Numerous individual DVBEs


          OPPOSITION:   (Verified8/27/15)


          DVBE Investigations
          Service Disabled Veteran Owned Small Businesses Network
          Numerous individual DVBEs

          ARGUMENTS IN SUPPORT:   According to the author, this bill does  
          not expand the program, but merely provides the surviving,  
          eligible spouse/child with time and ability to generate enough  
          cash flow for the spouse/child to transform the business model,  
          sell the business, close the business down, or otherwise dispose  
          of it. 

          ARGUMENTS IN OPPOSITION:Opponents say that this bill, by  
          allowing the inheriting spouse/child to enter into new contracts  
          during the three-year period, places them into direct  
          competition with other DVBEs owned by fully eligible disabled  
          veterans, which is inconsistent with the program purpose.

          ASSEMBLY FLOOR:  78-0, 5/14/15
          AYES:  Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,  
            Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang,  
            Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle,  
            Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina  
            Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez,  
            Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden,  







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            Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Lopez, Low,  
            Maienschein, Mathis, Mayes, McCarty, Melendez, Mullin,  
            Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea,  
            Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago,  
            Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber,  
            Wilk, Williams, Wood, Atkins
          NO VOTE RECORDED:  Linder, Medina

          Prepared by:Wade Cooper Teasdale / V.A. / (916) 651-1503
          8/31/15 13:07:19


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