BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 159|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
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CONSENT
Bill No: SB 159
Author: Nielsen (R)
Amended: 3/23/15
Vote: 21
SENATE GOVERNMENTAL ORG. COMMITTEE: 7-0, 4/28/15
AYES: Hall, Block, Hernandez, Hill, Hueso, Lara, McGuire
NO VOTE RECORDED: Berryhill, Gaines, Galgiani, Vidak
SENATE VETERANS AFFAIRS COMMITTEE: 5-0, 5/12/15
AYES: Nielsen, Hueso, Allen, Nguyen, Roth
SUBJECT: California Disabled Veteran Business Enterprise
Program: goal achievement
SOURCE: Author
DIGEST: This bill clarifies that an awarding departments
Disabled Veteran Business Enterprise (DVBE) program
participation goal achievement is to be measured by the overall
dollar amount expended each year by the awarding department.
ANALYSIS:
Existing law:
1)Grants the Department of General Services (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.
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(Public Contract Code Section 10115)
3)Provides that the participation goal referenced in item #2
above applies to the overall dollar amount expended each year
by the awarding department, as defined. (Public Contract Code
Section 10115(c))
4)Defines a DVBE as a business entity that is at least 51% owned
or controlled by one or more disabled veterans, as specified.
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)Clarifies that a department's DVBE program participation goal
achievement is to be reported by dollars actually expended as
specified in existing sections of the Military and Veterans
Code and the Public Contract Code.
2)Contains a legislative finding and declaration that this bill
is clarifying and declaratory of existing law.
Background
The problem. In February 2014, the State Auditor released a
report on the DVBE program entitled, "Disabled Veteran Business
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. For instance, the
program goals are required to be measured in "dollars expended,"
but DGS guidelines allow awarding departments to report using
either "dollars awarded" or "dollars expended." The Auditor
concluded that, until the program is standardized at one metric
and that metric being "dollars expended," then there is no way
to know how the program is actually working.
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Purpose of SB 159. According to the author's office, in
devising program guidelines for reporting DVBE participation,
DGS determined that statutory guidance is ambiguous as to
whether awarding departments should report their DVBE
participation based on "dollars awarded" or "dollars expended."
Thus, DGS decided to grant awarding departments the discretion
to choose which reporting metric to use. The result is that a
large proportion of state departments report to DGS based on
dollars awarded, while another major proportion reports based on
dollars expended. Because the state measures the success of the
DVBE program on the value of the contracts that departments
award - not necessarily the amounts actually paid - this may
distort how well the program is financially benefitting DVBE
firms because awarding departments may pay less than the value
stated on a particular contract. The author's office states
that this bill is intended to add clarity to existing law and
remedy this matter.
Additionally, the author's office emphasizes that this bill is
declaratory of existing law and will not impose any new
responsibilities onto DGS or awarding departments. The author's
office believes SB 159 will, however, eliminate DGS' concern
over ambiguity and allow consistent DVBE reporting that meets
existing statutory requirements.
Comments
Both the Public Contract Code and the Military and Veterans Code
contain provisions regarding DVBE program contracting goals that
are identical. Specifically, both establish statewide
participation contracting goals of not less than 3% for DVBE
firms based on the overall dollar amount expended each year by
each awarding department.
Under Public Contract Code Section 10115, 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 15%
for minority-owned firms, not less than 5% for women-owned
firms, and not less than 3% for DVBEs. Public Contract Code
Section 10115(c) stipulates that these goals apply to the
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overall dollar amount "expended" each year by the awarding
department, as defined. [These statutes have essentially been
rendered inoperative as a result of the U.S. 9th Circuit Court
of Appeals decision - Monterey Mechanical v. State of
California. Unaffected by that court order are contracting
preferences for DVBEs.]
Under Military and Veterans Code Section 999.2(a), contracts
awarded by any state agency, department, officer, or other state
governmental entity, including school districts when they are
expending state funds for construction, professional services,
materials, supplies, equipment, alteration, repair, or
improvement are required to have statewide participation goals
of not less than 3% for DVBEs. These goals apply to the overall
dollar amount "expended" each year by the awarding department.
Prior/Related Legislation
SB 839 (Correa, 2014), 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. Also, with respect to contracts
with DVBE prime contractors, would have required that the
contracting activity report concerning participation by DVBEs in
state contracts include actual dollar amounts expended annually
on contracts pursuant to the DVBE program. (Held in the Senate
Appropriations Committee)
SB 719 (Correa, 2013) would have required awarding departments
that used the Financial Information System for California to
report statewide participation goals for the DVBE program in the
amount expended to DVBEs. (Held in the Assembly Appropriations
Committee)
FISCAL EFFECT: Appropriation: No Fiscal
Com.: No Local: No
SUPPORT: (Verified 5/12/15)
AMVETS, Department of California
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American Legion, Department of California
California Association of County Veterans Service Officers
California State Commanders Veterans Council
Disabled Veteran Business Alliance
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
OPPOSITION: (Verified 5/12/15)
None received
ARGUMENTS IN SUPPORT: Proponents claim that "over the years
far too many state agencies have been reporting their compliance
with the DVBE contract participation goal in the form of total
dollars awarded, instead of total dollars expended, as required
by the Military & Veterans Code. Such practice is unacceptable
and has allowed the Department of General Services to inflate
the actual DVBE goal attainment." Proponents believe that "SB
159 will clarify existing law so that only dollars that are
actually spent with DVBE firms are reported for DVBE contracting
goal compliance purposes."
Prepared by:Arthur Terzakis / G.O. / (916) 651-1530
5/15/15 15:24:26
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