BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Isadore Hall, III
Chair
2015 - 2016 Regular
Bill No: AB 1218 Hearing Date: 7/14/2015
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|Author: |Weber |
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|Version: |7/7/2015 Amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Arthur Terzakis |
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SUBJECT: Public contracts: disabled veteran business enterprise
DIGEST: This bill makes substantive modifications to
contracting performance goals and program participation
reporting requirements pertaining to the Disabled Veteran
Business Enterprise (DVBE) Program administered by the
Department of General Services (DGS).
ANALYSIS:
Existing law:
1)Grants DGS the authority to govern state procurement
activities, including acquisition of materials, supplies, and
services.
2)Stipulates that contracts awarded by state entities for
professional bond services, construction, and acquisition of
materials, supplies, and services are required to have annual
statewide participation goals of not less than 3% for DVBEs.
3)Provides that the 3% participation goal applies to the overall
dollar amount expended each year by the awarding department,
as defined.
4)Defines a DVBE as a business entity that is at least 51% owned
or controlled by one or more disabled veterans, as specified.
AB 1218 (Weber) Page 2 of ?
5)Requires DGS to make available a report on contracting
activity containing specified information, including a
statistical summary detailing each awarding department's goal
achievement under the DVBE program and a statewide total of
those goals.
This bill:
1)Specifies that, in order to meet the 3% annual goal, an
awarding department shall consider whether greater DVBE
participation in excess of 3% should actually be required on
contracts entered into for goods and services and for
professional bond services.
2)Modifies the existing DVBE incentive program by establishing a
greater participation incentive to the following:
a) A prime contractor who owns a DVBE and who has not
previously entered into any contracts with the state as a
prime contractor, rather than to a prime contractor who
commits to entering into subcontracts with DVBEs;
b) A DVBE that employs a workforce that is more than 50%
veterans;
c) A DVBE that has not previously entered into any
contracts with the state.
3)Requires the California Department of Veterans Affairs
(CalVet) to maintain additional information relative to its
promotional efforts of the DVBE program, as specified. Also,
specifies that in order to track the effectiveness of the
efforts to promote the DVBE program, CalVet must, at a
minimum, include an annual comparison of the list of
businesses participating in promotional efforts and those that
become a prime contractor or subcontractor under the program
so that the success of the promotional activities can be
measured.
4) Provides that a contractor that is not a DVBE yet
subcontracts with DVBEs shall, when submitting its
certification of expenditures to the awarding department,
comply with either of the following: (a) provide on the
certification of expenditures to the awarding department, the
AB 1218 (Weber) Page 3 of ?
signature of any DVBE that performed work for the contractor
acknowledging the authenticity of the expenditures or (b)
provide the certification of expenditures to any DVBE that
performed work for the contractor and proof of any amount of
expenditures to that subcontractor.
5)Requires awarding departments to maintain records of the
information provided by the prime contractor, including but
not limited to, the name of the prime contractor and
subcontractor and the amount awarded to and the amount paid
to, each prime and subcontractor. Also, requires awarding
departments to establish review procedures to ensure the
accuracy and completeness of the award amounts and the paid
amounts reported.
6)Makes other minor conforming changes and requires DGS to
establish guidelines for reporting multiyear contracts.
Background
Historical Note: In 1989, SB 1517 - Dills (Chapter 1207)
established a 3% participation goal for disabled veteran
business enterprises (DVBEs), applicable to all contracts
including those for professional bond services, to assist and
encourage DVBE participation in state contracting opportunities.
In 1990, SB 2398 - Dills (Chapter 516) extended the DVBE
participation program to contracts of the University of
California, the Department of Corrections and specified public
utilities. In 1993, SCR 18 - Dills, encouraged local entities
to enact ordinances and implement policies promoting the
participation of DVBEs in construction and procurement
contracts. Also, SJR 13 - Dills of 1993, requested that
Congress establish and maintain DVBE programs.
In 2001, Congress expressed support for service disabled and
prisoner of war veterans by enacting a 3% participation goal for
DVBEs that is modeled after California law.
To be eligible to become a certified DVBE, a business must be at
least 51% owned by a disabled veteran, have its daily operations
managed and controlled by a disabled veteran, and be located in
the United States.
The Problem: In February 2014, the State Auditor released a
report on the DVBE program entitled, "Disabled Veteran Business
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Enterprise Program: Meaningful Performance Standards and Better
Guidance by the California Departments of General Services and
Veterans Affairs Would Strengthen the Program." The Auditor
found that:
The State's current method of measuring the success of
the DVBE program may distort an assessment of whether the
program is meeting the legislative intent.
The data in the State Contract and Procurement
Registration System indicates that only a relatively small
subset of DVBE firms enjoy the major part of the State's
business - during fiscal year 2012-13, 83 percent of the
DVBE contract award amounts went to only 30 DVBE firms.
All five of the awarding departments we visited lacked
adequate supporting documentation for their reported fiscal
year 2012-13 DVBE contracting activity.
The California Department of General Services (General
Services) has not provided clear guidance as to what level
of support and documentation is sufficient to support their
reported DVBE performance data nor how to report DVBE
participation on multiyear contracts.
General Services currently lacks the ability to obtain a
complete and accurate copy of the State's procurement data
- as currently maintained in the eProcurement data system.
The California Department of Veterans Affairs'
management confirmed that it has not taken an active role
in coordinating with awarding departments to promote DVBE
contracting opportunities.
The Auditor offered the following recommendations to the
Legislature:
To provide a more meaningful measure of how well disabled
veteran-owned businesses benefit financially from the DVBE
program, the Legislature should amend the DVBE reporting
requirements in the Public Contract Code to require that all
AB 1218 (Weber) Page 5 of ?
awarding departments report DVBE participation annually based on
amounts paid, and maintain accounting records and certifications
from DVBE subcontractors, as applicable, that support the DVBE
participation data reported.
If the Legislature chooses not to amend the DVBE reporting
requirements in the Public Contract Code - to require awarding
departments to report DVBE participation based on amounts paid,
not amounts awarded - the Legislature should amend the Public
Contract Code to do the following: (1) Require awarding
departments to maintain detailed support for their DVBE activity
and to establish review procedures to ensure the accuracy and
completeness of the amounts reported and (2) Include
instructions to awarding departments on how they should report
multiyear contracts, either at the time of the award or by an
equal distribution of the award over the life of the contract.
For the DVBE program to financially benefit a broad base of
disabled veteran-owned businesses, the Legislature should enact
legislation aimed at increasing the number of those DVBEs that
contract with the State, including increasing the amount of the
DVBE incentive that awarding departments can apply when
considering bids on state contracts. Such an incentive could
include additional preference points for certain bids when the
bidder is a DVBE firm that the department has not previously
used or when the firm is bidding as a prime contractor.
Purpose of AB 1218. According to the author's office, this bill
incorporates several of the Auditors recommendations referenced
above. Specifically, "this bill makes a number of changes to
improve access to the program and to improve program
accountability including, preferences for both new DVBEs, those
seeking to become prime contractors and those with a workforce
comprised of more than 50% veterans; more accuracy in measuring
performance toward 3% goals; and outcome-based measurements of
DVBE recruitment efforts."
Prior/Related Legislation
SB 159 (Nielson, 2015) clarifies that an awarding department's
DVBE program participation goal achievement is to be measured by
the overall dollar amount expended each year by the awarding
department. (Pending in Assembly policy committee)
SB 839 (Correa, 2013), among other things, would have
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established new requirements for the methodology state
departments use to track DVBE participation in their contracts
and to report the data to DGS. (Held in Senate Appropriations
Committee)
SB 719 (Correa, 2013) would have required awarding departments
that used the Financial Information System for California
(FI$Cal) to report statewide participation goals for the DVBE
program in the amount expended to DVBEs. (Held in Assembly
Appropriations Committee)
SB 382 (Roth, 2013) would have required the Department of
Veterans Affairs to create a California Veterans Leadership
Program to connect returning veterans of military operations in
Iraq and Afghanistan with employment, housing, and mental health
resources. (Held in Senate Veterans Affairs Committee)
SB 297 (Roth, 2013) would have increased the annual statewide
participation goal for DVBEs, applicable to certain state
contracts, from 3% to 5%. (Held in Assembly policy committee at
author's request)
SB 276 (Roth, 2013) would have modified the Small Business
Procurement and Contract Act by increasing the upper limit (from
$250,000 to $500,000) of the value of certain contracts that a
state agency may award to a certified small business, including
microbusiness, or to a DVBE without complying with specified
competitive bidding requirements. (Died in Senate
Appropriations Committee)
SB 817 (Veterans Affairs Committee, 2011) would have allowed a
vendor with state contracts to meet DVBE goals with dollars from
other than state contracts. Also, would have modified the
requirement for a DVBE business utilization plan so that the
plan's required listing of products and services includes both
direct and indirect costs. (Held in Senate Appropriations
Committee)
SB 115 (Florez, Chapter 451, Statutes of 2005) created a DVBE
incentive program for state contracts.
SB 1008 (Machado, Chapter 632, Statutes of 2003), among other
things, strengthened the sanctions that can be levied against
businesses that fraudulently misrepresent their eligibility for
DVBE certification.
AB 1218 (Weber) Page 7 of ?
AB 669 (Cohn, Chapter 623, Statutes of 2003), among other
things, required DVBEs and small businesses, as defined, to
perform commercially useful functions, as defined, in relation
to any contract those businesses are awarded under certain
provisions of law. Also, imposed certain civil penalties for
fraudulent misrepresentations regarding DVBE and small business
state contracts.
SB 1033 (Knight, 2002) would have established an additional 3%
bid preference for a small business that is also certified as a
DVBE. (Held in Assembly Appropriations Committee)
FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: No
SUPPORT:
American Federation of State, County and Municipal Employees,
AFL-CIO
American Legion-Department of California
American Veterans-Department of California
Military Officers Association of America, California Council
Disabled Veterans Business Alliance
State Council on Developmental Disabilities
Vietnam Veterans of America-California State Council
OPPOSITION:
None received