BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 1218 (Weber) - Public contracts: disabled veteran business
enterprise.
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|Version: July 7, 2015 |Policy Vote: V.A. 5 - 0, G.O. |
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|Urgency: No |Mandate: No |
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|Hearing Date: August 17, 2015 |Consultant: Robert Ingenito |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: AB 1218 would make specified 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).
Fiscal
Impact:
DGS indicates that the administrative costs related to
this bill could reach the low millions of dollars annually
(See Staff Comments).
AB 1218 (Weber) Page 1 of
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The Department of Veterans Affairs (CalVet) would
require three positions and $390,000 ongoing General Fund
support to implement its provisions of the bill.
Background: Established in 1989, the Disabled Veteran Business Enterprise
(DVBE) program sets a goal for most awarding state departments
to expend a minimum of three percent of their overall contract
dollars on DVBEs certified by DGS. Departments that award
contracts may meet this goal by either contracting directly with
certified DVBE firms or requiring winning bidders to use them as
subcontractors. 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.
Since the three percent goal applies to an awarding department's
overall contract expenditures each year, the awarding department
has the discretion to decide whether or not the DVBE
requirements will apply on a contract-by-contract basis. It may
exempt some eligible contracts from the DVBE requirements while
establishing goals in excess of three percent on others.
Additionally, when these departments do establish DVBE
participation requirements on a contract, they may still award
the contract to a bidder who does not intend to use a DVBE.
Under state law, a bidder can satisfy a contract's DVBE
participation requirements by demonstrating a good-faith effort
to find and use a DVBE. Bidders submit documentation of their
good-faith effort to the awarding department, which in turn
ultimately decides in its sole discretion if a good-faith effort
was made. Bidders may provide listings of the DVBEs they
solicited and considered for participation on the contract,
along with the business reasons why a DVBE could not be used.
State regulations dictate that certain contracts cannot be
subject to DVBE requirements. These contracts include subvention
funding, local aid contracts, and agreements with other
government entities. Although the dollar value of these
contracts may be significant at certain awarding departments, it
does not have an impact on their ability to attain three percent
DVBE participation. This is the case since each awarding
department's performance is based on the value of the
AB 1218 (Weber) Page 2 of
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DVBE-eligible contracts.
Proposed Law:
This bill would, among other things, do the following:
Specify that, in order to meet the 3 percent annual
goal, an awarding department shall consider whether greater
DVBE participation in excess of 3 percent should actually
be required on contracts entered into for goods and
services and for professional bond services.
Modify the existing DVBE incentive program by
establishing a greater participation incentive to the
following:
o 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;
o A DVBE that employs a workforce that is more than 50
percent veterans;
o A DVBE that has not previously entered into any
contracts with the state.
Require CalVet to maintain additional information
relative to its promotional efforts of the DVBE program, as
specified. Also, the bill 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.
AB 1218 (Weber) Page 3 of
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Provide 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 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.
Require 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.
Require DGS to establish guidelines for reporting
multiyear contracts.
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. The bill is currently in the Assembly
Veterans Affairs Committee.
SB 839 (Correa, 2013), among other things, would have
established new requirements for the methodology state
departments use to track DVBE participation in their contracts
and to report the data to DGS. The bill was held on the
Suspense File of this Committee.
AB 1218 (Weber) Page 4 of
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Staff Comments: DGS notes that the cost of establishing a
process for the collection of DVBE subcontractor information
would likely cost a minimum of $5 million if FI$Cal is used;
this figure is consistent with other similar scope changes made
to FI$Cal. Given the advanced state of FI$Cal's development and
deployment, new customizations would be significantly more
costly to implement than if included in the original scope of
the project. If a parallel information technology system is
procured to collect this information, that system would likely
have a similar or potentially greater cost.
The requirements of the bill is likely to result in increased
personnel costs across all state departments. Departments would
be required to have staff identify contracts with DVBE
subcontractor participation. These employees would then be
required to work with the prime contractor to determine which
portions of any specific payment to prime contractors went to a
specific DVBE subcontractor. Departments would also have to
establish subcontractors in the system. Department personnel
will then have to reconcile the amount paid to subcontractors,
with the amount specified in the contract, and against the
overall amount paid to the prime contractor. This represents a
significant new workload across all departments. Some
departments may be able to use existing resources; however, many
large and medium sized departments that are managing a large
number of contracts would require additional positions. The
number of positions and their classifications are unknown.
However, given that this requirement would apply to in excess of
170 state departments, even a minimal increase in the number of
personnel required would have significant cost.
Thus, DGS estimates that the provisions of this bill, requiring
state agencies to collect information about payments made by
prime contractors to DVBE subcontractors, will potentially cost
several million dollars annually.
AB 1218 (Weber) Page 5 of
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