BILL ANALYSIS Ó
SB 159
Page 1
SENATE THIRD READING
SB
159 (Nielsen)
As Amended August 19, 2016
Majority vote
SENATE VOTE: 38-0
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|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+-----------------------+---------------------|
|Jobs |9-0 |Eduardo Garcia, Kim, | |
| | |Brough, Brown, Chau, | |
| | |Chu, Gipson, Irwin, | |
| | |Mathis | |
| | | | |
|----------------+-----+-----------------------+---------------------|
|Veterans |8-0 |Irwin, Chávez, | |
|Affairs | |Achadjian, Alejo, | |
| | |Brown, Daly, Frazier, | |
| | |Salas | |
| | | | |
| | | | |
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SUMMARY: Clarifies the metrics to be used when calculating the
3% procurement participation goal for disabled veteran business
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enterprises (DVBEs). The bill includes legislative findings
that these changes are declaratory of existing law. The bill
also includes chaptering provisions in the case that this
measure and SB 1219 are both enacted.
EXISTING LAW:
1)Establishes the California Disabled Veteran Business
Enterprise Program (DVBE Program), administered by Department
of General Services (DGS), for the purpose of addressing the
special needs of disabled veterans seeking rehabilitation and
training through entrepreneurship, and to recognize the
sacrifices California's disabled veterans made during their
military service. Contracts for professional bond services
are administered through the State Treasurer's Office.
2)Applies the 3% DVBE participation goal on each awarding state
agency, department, officer, and any other state entity that
enters into a contract using state funds for construction,
professional services, materials, supplies, equipment,
alteration, repair, or improvement. Contracts with a DVBE for
equipment rentals do not count toward the goal.
3)Defines the following terms:
a) A DVBE contractor, subcontractor, or supplier is any
person or entity that has been certified by the
administering agency and that performs a commercially
useful function, as defined.
b) A disabled veteran is a veteran of the military, naval,
or air service of the United States who has a
service-connected disability of at least 10% and who is
domiciled in the state.
c) A DVBE is a business certified by the administering
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agency as meeting all of the following requirements:
i) The legal structure of the business is a:
(1) Sole proprietorship with at least 51% owned by
one or more disabled veterans;
(2) Publicly owned business with at least 51% of
its stock unconditionally owned by one or more
disabled veterans;
(3) Subsidiary that is wholly owned by a parent
corporation, but only if at least 51% of the voting
stock of the parent corporation is unconditionally
owned by one or more disabled veterans; or
(4) Joint venture in which at least 51% of the
joint venture's management, control, and earnings are
held by one or more disabled veterans.
ii) The management and control of the daily business
operations are by one or more disabled veterans. The
disabled veterans who exercise management and control are
not required to be the same disabled veterans as the
owners of the business.
iii) It has a home office located in the United States,
which is not a branch or subsidiary of a foreign
corporation, foreign firm, or other foreign-based
business.
4)Requires DGS to collect information from awarding state
departments on the level of DVBE procurement participation by
contract value awarded and a statistical summary detailing
each awarding department and the state's progress in achieving
the 3% procurement participation goal for DVBEs.
FISCAL EFFECT: None
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COMMENTS: The DVBE Program was established in 1989 for the
purpose of facilitating state contracting opportunities among
businesses owned by disabled veterans. Since 2000, the 3%
procurement participation goal has been met only five times.
All five of those years have been during the most recent report
periods. While this should be an indication of more effective
program implementation, there have also been growing concerns
over the accuracy of state agency reporting. Most recently, the
California State Auditor issued a report which found significant
reporting and management deficiencies in the manner state
agencies were implementing the DVBE Program. Among other
issues, was the inconsistent manner in which state agencies
calculated and reported DVBE participation data to DGS for
inclusion in the state consolidated report on procurement.
This bill clarifies that the 3% goal is to be based on the total
amount of dollars actually expended by each agency and received
by the DVBE during the fiscal year.
The policy committee analysis includes additional background on
the Small Business Procurement and Contract Act, current DVBE
Program activity, previous legislative efforts to improve
program accountability, recommendations from the 2014 State
Audit, and related legislation.
The DVBE Program: The 3% DVBE procurement participation goal is
applied to the state agency or department's overall contracting
activities in the given fiscal year and may be achieved by
awarding state contracts to DVBEs as prime contractors or when
DVBEs are used as a subcontractor.
Awarding departments have an option of including DVBE
participation in every contract or making alternative
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arrangements, as long as the 3% objective is met at the end of
the fiscal year. Each agency and department is required to
designate a small business and DVBE contracting liaison to
facilitate it in meeting the 3% DVBE goal and the 25% small
business and microbusiness goal. Approximately 90% of DVBEs
also hold a small business or microbusiness certification.
Departments also have the option of offering a 1% to 5% DVBE
contracting incentive to assist bidders in helping to meet the
state DVBE goal. Although not currently being utilized, bidders
that are unable or unwilling to include a DVBE in a contract
also have the option of submitting a DGS approved utilization
plan that commits the businesses to using DVBEs in the future.
DGS is authorized to audit businesses that submit utilization
plans to ensure compliance.
State departments that fail to meet the annual 3% goal can have
their delegated contracting authority removed, although DGS has
never removed program authority solely based on an agency or
department's failure to meet its DVBE contracting goal.
DGS has a range of responsibilities relating to the
implementation of the DVBE Program including:
1)Certification of DVBEs (1,537 DVBEs certified in 2013-14).
2)Certification of small businesses and microbusinesses (1,289
small businesses and microbusinesses certified in 2013-14).
3)Outreach to the potential bidders and the veteran community
(150 events in Fiscal Year (FY) 2013-14).
4)Marketing of the DVBE program to state agencies.
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5)Consulting with the California Procurement Contracting Academy
on the DVBE training of state contracting staff.
6)Preparation of an annual consolidated report on DVBE, small
business, and microbusiness participation within state
contracting activities.
7)Program oversight to identify abuses by bidders and failures
to preform by state agencies.
Below are charts displaying three years of DVBE participation
rates. The charts include information on mandatory reporting
entities and all reporting entities. Under both reporting
metrics, it appears that the state consistently met its DVBE
procurement participation goals for the report years.
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---------------------------------------------------------------
|DVBE Three-Year Contracting Activity - Mandated Agencies |
| |
| |
---------------------------------------------------------------
|------------+------------+------------+------------+------------|
|Fiscal Year | Total | Total DVBE | Total DVBE | Total DVBE |
| | Contract | Dollars | Percent | Contracts |
| | Dollars | | | |
| | | | | |
| | | | | |
|------------+------------+------------+------------+------------|
|2013-14 |$6,566,406,9|$241,002,566| 3.67% | 12,777 |
| | 79| | | |
| | | | | |
| | | | | |
|------------+------------+------------+------------+------------|
|2012-13 |$7,151,257,0|$216,903,765| 3.03% | 14,907 |
| | 13| | | |
| | | | | |
| | | | | |
|------------+------------+------------+------------+------------|
|2011-12 |$7,173,594,3|$340,156,464| 4.74% | 16,246 |
| | 29| | | |
| | | | | |
| | | | | |
|------------+------------+------------+------------+------------|
|Average |$6,963,752,7|$266,020,932| 3.82% | 14,643 |
| | 74| | | |
| | | | | |
| | | | | |
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---------------------------------------------------------------
|2013-14 DGS Consolidated |
|Report |
| |
| |
| |
| |
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| |
---------------------------------------------------------------
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| DVBE Three-Year Contracting Activity - All Reporting Agencies |
| |
| |
---------------------------------------------------------------
|------------+------------+------------+------------+------------|
|Fiscal Year | Total | Total DVBE | Total DVBE | Total DVBE |
| | Contract | Dollars | Percent | Contracts |
| | Dollars | | | |
| | | | | |
| | | | | |
|------------+------------+------------+------------+------------|
|2013-14 |$8,233,113,6|$299,683,794| 3.64% | 14,305 |
| | 60| | | |
| | | | | |
| | | | | |
|------------+------------+------------+------------+------------|
|2012-13 |$8,573,498,6|$267,285,324| 3.12% | 16,776 |
| | 23| | | |
| | | | | |
| | | | | |
|------------+------------+------------+------------+------------|
|2011-12 |$8,508,477,5|$373,936,941| 4.39% | 17,835 |
| | 96| | | |
| | | | | |
| | | | | |
|------------+------------+------------+------------+------------|
|Average |$8,438,363,2|$313,635,353| 3.7% | 16,305 |
| | 93| | | |
| | | | | |
| | | | | |
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|2013-14 DGS Consolidated |
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|Report |
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While the year-to-year percentages are useful to review, it is
also important to note that consistency among which agencies
report varies. As an example, in 2011-12, 86% of the mandatory
reporting entities reported their contracting activity to DGS.
In 2012-13, 79% reported their contracting activity and in
2013-14, 80% reported.
Further challenges were identified in a 2014 State Audit
[2013-115], which reported significant inconsistencies in the
reporting protocols among different state agencies. Some
agencies reported only contracts where the DVBE served as the
prime contractor and other departments reported both DVBE prime
and subcontracts. Some awarding departments only reported DVBE
participation based on the initial contract bid, while others
more accurately reported the actual amount paid to the DVBE.
This bill clarifies one of the central issues of the 2014 State
Audit by cross-referencing the 3% goal provisions with the
reporting requirements.
Analysis Prepared by:
Toni Symonds / J., E.D., & E. / (916) 319-2090
FN:
0004546
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