BILL ANALYSIS Ó
SENATE COMMITTEE ON VETERANS AFFAIRS
Senator Jim Nielsen, Chair
2015 - 2016 Regular
Bill No: SB 159 Hearing Date: 5/12/15
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|Author: |Nielsen |
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|Version: |3/23/15 Amended |
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|Urgency: |No |Fiscal: |No |
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|Consultant:|Wade Cooper Teasdale |
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Subject: California Disabled Veteran Business Enterprise
Program: goal achievement.
DESCRIPTION
Summary:
Clarifies existing law, which requires an awarding department's
goal achievement under the Disabled Veteran Business Enterprise
(DVBE) program to be reported by overall dollar amount expended
each year by the awarding department.
Existing law:
1.Grants the Department of General Services (DGS) the authority
to govern state procurement activities, including
administration of the DVBE program.
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
certified DVBEs.
3.Provides that the 3% participation goal applies to the overall
dollar amount expended each year by the awarding department,
as defined.
4.Requires DGS to make available an annual report on contracting
activity containing specified information, including a
statistical summary detailing each awarding department's goal
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achievement under the DVBE program and a statewide total of
those goals.
This bill:
1.Inserts references to two existing provisions of the Military
and Veterans Code (MVC) and the Public Contract Code (PCC)
that establish and define DVBE goals. (The references clarify
that reporting on DVBE participation 3% goal achievement is to
be in the same "dollars expended" metric that actually defines
the 3% goal.)
2.Contains a legislative finding and declaration that this bill
is clarifying and declaratory of existing law.
BACKGROUND
In 1989, the Legislature enacted the DVBE program to address the
special needs of disabled military veterans seeking
rehabilitation and training through entrepreneurship.
Existing law:
Requires each state agency, in awarding contracts
throughout the year, to take all practical actions
necessary to meet or exceed an annual 3% DVBE participation
goal. [Military and Veterans (MVC) Code Sec. 999]
Explicitly defines the program goal as being measured as
a percentage of the overall dollar amount expended in its
contracting each year by the awarding department. [MVC Sec.
999.2(a); Public Contract Code (PCC) Sec. 10115(c)].
Assigns DGS to serve as administering agency for the
DVBE program. [MVC Sec. 999.5(a)].
Directs DGS to adopt regulations to implement the
program. [MVC Sec. 999.5(f)]
Requires DGS to report the goal achievement each fiscal
year, for individual awarding departments and in aggregate,
as one of the components of DGS' "Statewide Consolidated
Annual Report." [PCC Sec. 10111(d)]
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Specifically, in laying out the reporting requirements,
subdivision (d) of Public Contract Code Section 10111 states:
(d) The level of participation, by agency, of disabled
veteran business enterprises in statewide contracting and
shall include dollar values of contract award for the
following categories:
(1) Construction.
(2) Architectural, engineering, and other professional
services.
(3) Procurement of materials, supplies, and equipment.
(4) Information technology procurements.
Additionally, the report shall include a statistical
summary detailing each awarding department's goal
achievement and a statewide total of those goals.
DGS claims that PCC Sec. 10111(d) is ambiguous as to the metric
that DVBE program reporting should use. In interpreting the
statute and promulgating its program guidelines, DGS opts for a
"dollars awarded" basis for reporting - rather than "dollars
expended" as DVBE program goals are defined in statute.
"Dollars awarded" is the amount for which a contract is
authorized. It is a ceiling on how much prime contractors and
their subcontractors potentially may be paid under the contract.
But the actual utilization of services provided by the
contractors and subcontractors often is less than initially
anticipated, meaning that the actual payments (dollars expended)
to the contractors and subcontractors is lower, sometimes
substantially lower, than the authorized contract amount
(dollars awarded). "Dollars awarded" is an inaccurate measure of
actual program participation.
The explicit requirement for a statistical summary detailing
goal achievement originated in MVC Sec. 999.7, closely proximate
to the DVBE goal defining sections, where it existed from
1999-2006. MCV Sec. 999.7 was repealed when the Legislature
moved the reporting requirement into the Public Contract Code as
the second element in the current PCC Sec. 10111(d).
DGS claims that its reporting guideline (2 CCR § 1896.78)
requires awarding departments to report on a "dollars awarded"
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basis; however, in practice, DGS allows awarding departments to
choose whether to report based either on the "awarded" or
"expended" standard. The administrative result is that a major
proportion of California's approximately 180 state departments
report to DGS based on dollars expended, while the other major
proportion reports based on dollars awarded. DGS leaves the
decision to the awarding departments.
COMMENT
State Auditor's Report 2013-115 (Feb 2014) determined that (1)
the failure to report at the "dollars expended" metric and (2)
the mixing of "dollars awarded" and "dollars expended" has
created an informational morass that leaves analysts unable to
determine if the DVBE program is actually meeting the program
goals as intended by the Legislature. It also leaves analysts
unable to determine the causes for two key audit findings that
generate concern:
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.
The largest deficiency in program reporting concerns
DVBE that subcontract to non-DVBE firms. (According to
General Services' annual report for fiscal year 2011-12,
DVBE subcontractors accounted for nearly 41 percent - or
$151.5 million - of the State's total reported DVBE
participation of$373.9 million.)
POSITIONS
Sponsor: Author.
Support:
AMVETS, Department of California
American Legion, Department of California
California Association of County Veterans Service Officers
California State Commanders Veterans Council
Disabled Veteran Business Alliance
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Military Officers Association of America, California-Council
Service Disabled Veteran-Owned Small Business Network
Veterans of Foreign Wars, Department of California
Vietnam Veterans of America, California State Council
Numerous small DVBE firms
Oppose: None on file.
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