BILL ANALYSIS Ó AB 1218 Page 1 ASSEMBLY THIRD READING AB 1218 (Weber) As Amended April 23, 2015 Majority vote ------------------------------------------------------------------- |Committee |Votes |Ayes |Noes | | | | | | | | | | | |----------------+------+---------------------+---------------------| |Jobs |8-0 |Eduardo Garcia, Kim, | | | | |Brough, Brown, Chau, | | | | |Chu, Gipson, Irwin | | | | | | | |----------------+------+---------------------+---------------------| |Accountability |9-0 |Salas, Lackey, | | | | |Brough, Burke, | | | | |Frazier, Beth | | | | |Gaines, Irwin, | | | | |Medina, Rodriguez | | | | | | | |----------------+------+---------------------+---------------------| |Appropriations |17-0 |Gomez, Bigelow, | | | | |Bonta, Calderon, | | | | |Chang, Daly, Eggman, | | | | |Gallagher, | | | | | | | | | | | | | | |Eduardo Garcia, | | | | |Gordon, Holden, | | | | |Jones, Quirk, | | AB 1218 Page 2 | | |Rendon, Wagner, | | | | |Weber, Wood | | | | | | | | | | | | ------------------------------------------------------------------- SUMMARY: This bill harmonizes the statutory provisions of the existing 3% goal for contracting with disabled veteran-owned business enterprises (DVBE) and the related reporting requirements. This bill addresses other program deficiencies, as identified by a 2014 audit of the DVBE Program. Specifically, this bill: 1)Modifies the existing DVBE incentive program to provide for a higher incentive when the bid is submitted by: a DVBE prime contractor; a DVBE prime or subcontractor who employs a workforce that is comprised of more than 50% veterans; or a DVBE prime or subcontractor who has not previously participated in a state contract. 2)Requires the California Department of Veterans Affairs (CalVet) to establish a system for tracking the effectiveness of its efforts to promote the DVBE program and maintain complete records of its promotional events, as specified. 3)Requires departments to retain DVBE payment records for at least five years and establish review procedures to ensure the accuracy and completeness of the records. 4)Expands the type of information the Department of General Services (DGS) is required to report on DVBE contracting activity to include the dollar amount of state funds that were actually paid to DVBEs, the number of DVBEs that served as prime contractors, and the number of DVBE's who served as AB 1218 Page 3 subcontractors during the report period. 5)Directs DGS to establish guidelines for reporting multiyear contracts. FISCAL EFFECT: According to the Assembly Appropriations Committee: 1)Ongoing General Fund costs of approximately $430,000 for DGS workload related to reporting requirements for awarding departments. DGS anticipates at least two staff would be needed to enter, analyze, and evaluate the information DGS receives. Further, DGS indicates they may need to contract for the design of an information technology (IT) solution to analyze the data. While DGS would need to conduct a formal analysis, it is not unlikely a data system would result in costs of approximately $1 million to $2 million. Absent an IT system, this information would have to be tracked manually on a spreadsheet and would result in increased staffing costs. 2)Minor/absorbable costs for DGS to collect the amounts awarded and paid to DVBE prime contractors and subcontractors, and to engage in the rulemaking process. COMMENTS: This bill implements changes to the DVBE Program in response to a 2014 State Auditor Report which found, among other things, that DVBE participation was limited to a fairly small segment of the certified DVBE contractors, compliance data was potentially misleading, and awarding departments failed to maintain sufficient records on contracts involving DVBEs to allow for effective oversight of the program. Concerns with DVBE Program: While DVBE participation rates are AB 1218 Page 4 generally up, programmatic challenges continue to plague the program. A February 2014 State Audit found the following: 1)The objective of the program "to increase DVBE participation in state procurement," is not appropriately being measured through the current reporting system. The system measurers the award value and not the actual amount DVBEs' receive. 2)Only a small percentage of certified DVBEs serve as prime contractors. As an example, only 19% of certified DVBEs served as primes and, of those, 30 firms received 83% funding. 3)There is inadequate documentation by state contracting agencies on DVBE participation. 4)Reporting methodologies differ by state agencies on DVBE participation. 5)DGS has inadequate control over the state's procurement vendor, Bidsync. 6)CalVet needs to take a more active role in working with state agencies and tracking outreach activities. Based on these findings, the State Auditor recommended key actions for the Legislature, DGS, and CalVet. These recommendations focused on better and more consistent reporting including: verification of DVBE status before finalizing the contract, increasing the number of DVBEs that participate in state contracting, better management by the state vendor, and a heightened role and accountability for CalVet. Implementing legislation, SB 839 (Correa) of 2014 was held in Senate AB 1218 Page 5 Appropriations Committee and AB 1734 (Jones-Sawyer) of 2014 was held in Assembly Appropriations Committee. In January 2015, the State Auditor again highlighted the deficiencies in the program and encouraged the Legislature to take action. This bill addresses concerns identified in the 2014 audit, improves program accountability, and requires DGS and state awarding agencies to take actions to better meet the important mission of the DVBE program. The Assembly Jobs, Economic Development and The Economy Committee analysis includes additional information on the Small Business Procurement and Contract Act, current DVBE Program activity, and related legislation. Analysis Prepared by: Toni Symonds / J., E.D., & E. / (916) 319-2090 FN: 0000610