BILL ANALYSIS                                                                                                                                                                                                    Ó




           ----------------------------------------------------------------- 
          |SENATE RULES COMMITTEE            |                        SB 159|
          |Office of Senate Floor Analyses   |                              |
          |(916) 651-1520    Fax: (916)      |                              |
          |327-4478                          |                              |
           ----------------------------------------------------------------- 


                                      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.  








                                                                     SB 159  
                                                                    Page  2



            (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.








                                                                     SB 159  
                                                                    Page  3




          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  








                                                                     SB 159  
                                                                    Page  4



          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 








                                                                     SB 159 
                                                                    Page  5



          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


                                   ****  END  ****