BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      AB 1218


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          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,        |                     |








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          |                |      |Rendon, Wagner,      |                     |
          |                |      |Weber, Wood          |                     |
          |                |      |                     |                     |
          |                |      |                     |                     |
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          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  








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            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  








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          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  








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          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