Amended in Assembly August 19, 2016

Amended in Assembly August 15, 2016

Amended in Senate April 21, 2016

Senate Bill No. 1176

Introduced by Senators Galgiani and Hueso

(Principal coauthor: Senator Hertzberg)

(Principal coauthor: Assembly Member Jones-Sawyer)

(Coauthor: Assembly Member Gonzalez)

February 18, 2016

An act to amend Sections 14837 and 14838 of the Government Code, relating to public contracts.

LEGISLATIVE COUNSEL’S DIGEST

SB 1176, as amended, Galgiani. Small Business Procurement and Contract Act: business size.

The Small Business Procurement and Contract Act requires the Director of General Services and the heads of other state agencies that enter into contracts for the acquisition of goods, services, and information technology and for the construction of state facilities to establish goals for the participation of small businesses and microbusinesses in these contracts, to provide for a small business preference in the award of these contracts, to give special consideration and special assistance to small businesses, and, whenever possible, to make awards to small businesses, as specified. Existing law defines a “small business” for these purposes as, among other things, an independently owned and operated business that is not dominant in its field of operation that has average annual gross receipts of $10 million, as may be adjusted to reflect changes in the California Consumer Price Index, or less over the previous 3 years. Existing law defines a “microbusiness” as a small business which, together with affiliates, has average annual gross receipts of $2.5 million, as may be adjusted to reflect changes in the California Consumer Price Index, or less over the previous 3 years. Existing law requires the director to conduct a biennial review of those average annual gross receipt levels and authorizes the director to adjust the average annual gross receipts threshold to reflect changes in the California Consumer Price Index for all items. Existing law requires a contractor requesting a small business or microbusiness preference to do so under penalty of perjury.

This bill would revise those definitions by increasing the dollar amount threshold for a small business to $15 million and for a microbusiness to $5 million and would require those dollar amounts to be adjusted to reflect changes in the California Consumer Price Index biennially. The bill would further revise the definition of small business by specifying that, for the purposes of public works contracts, small business means a business with 200 or fewer employees and average annual gross receipts of $25 million or less. The bill would allow directors of the department and other state agencies to count contractors that would be considered a small business or microbusiness under the changes made by this bill for the year this bill is enacted if the directors are unable to make the small business participation goals under the existing laws. The bill would allow more contractors to qualify as a small business or microbusiness, thus expanding the group of contractors authorized to request a preference filed under penalty of perjury. By expanding the crime of perjury, this bill would impose a state-mandated local program.

begin insert

This bill would incorporate additional changes to Sections 14837 and 14838 of the Government Code proposed by SB 1219 that would become operative if this bill and SB 1219 are enacted and this bill is enacted last.

end insert

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

The people of the State of California do enact as follows:

SECTION 1.  

The Legislature hereby finds and declares all of
the following:

(a) The essence of the American economic system of private
enterprise is to be free, open, and to have transparent competition.
Only through free, open, and transparent competition can free
markets, reasonable and just prices, free entry into business, and
opportunities for the expression and growth of personal initiative
and individual judgment be ensured. The preservation and
expansion of that competition are basic to the economic well-being
of this state, and that well-being cannot be realized unless the
actual and potential capacity of small business enterprises is
encouraged and developed.

(b) It is the policy of the state to aid the interests of small
business enterprises in order to preserve reasonable and just prices
and free competitive enterprise, to ensure that a fair proportion of
the total purchases and contracts or subcontracts for commodities,
supplies, technology, property, and services, including, but not
limited to, renewable energy, wireless telecommunications,
broadband, smart grid, rail, and other mega infrastructure projects,
for regulated state departments are awarded to small business
enterprises, and to maintain and strengthen the overall economy
of the state.

(c) The opportunity for full participation in our free enterprise
system by small business enterprises is essential if this state is to
attain social and economic equality for those businesses and
improve the functioning of the state economy.

(d) State agencies that have established small business
contracting goals are awarding less than 25 percent of their
mandated goals.

(e) Small business enterprises have traditionally received less
than their proportional share of public entity procurement contracts,
especially in renewable energy, wireless telecommunications,
broadband, smart grid, rail, and other mega infrastructure projects.

(f) It is in the interest of the state to expeditiously improve the
economically disadvantaged position of small business owners
and employees.

(g) The position of small business enterprises can be
substantially improved by expanding the definition of a small
business to allow these businesses to amass the capital and
expertise necessary to compete for state procurement of technology,
equipment, supplies, services, materials, and construction work,
especially in renewable energy, wireless telecommunications,
broadband, smart grid, rail, and other mega infrastructure projects.
This expansion also benefits the state departments and consumers
of the state by encouraging the expansion of the number of small
business enterprise suppliers for procurements, thereby encouraging
competition among the suppliers and promoting economic
efficiency in the process.

(h) The long-term economic viability of this state depends
substantially upon the ability of small businesses to be successful.

SEC. 2.  

It is the intent of the Legislature by enacting this
legislation to do all of the following:

(a) Encourage greater economic opportunity for small
businesses.

(b) Promote competition among state departments that issue
contracts in order to enhance economic efficiency in the
procurement of state services.

(c) Clarify and expand the program for the procurement by state
departments for small business enterprises.

SEC. 3.  

Section 14837 of the Government Code is amended
to read:

14837.  

As used in this chapter:

(a) “Department” means the Department of General Services.

(b) “Director” means the Director of General Services.

(c) “Manufacturer” means a business that meets both of the
following requirements:

(1) It is primarily engaged in the chemical or mechanical
transformation of raw materials or processed substances into new
products.

(2) It is classified between Codes 31 to 33, inclusive, of the
North American Industry Classification System.

(d) (1) (A) “Small business” means an independently owned
and operated business that is not dominant in its field of operation,
the principal office of which is located in California, the officers
of which are domiciled in California, and which, together with
affiliates, has 100 or fewer employees, and average annual gross
receipts of fifteen million dollars ($15,000,000) or less over the
previous three years, or is a manufacturer, as defined in subdivision
(c), with 100 or fewer employees.

(B) For the purposes of public works contracts, contracts
awarded through competitive bids or otherwise for the erection,
construction, alteration, repair, or improvement of any kind upon
real property, “small business” means an independently owned
and operated business that is not dominant in its field of operation,
the principal office of which is located in California, the officers
of which are domiciled in California, and which, together with
affiliates, has 200 or fewer employees, and average annual gross
receipts of twenty-five million dollars ($25,000,000) or less over
the previous three years.

(2) “Microbusiness” is a small business which, together with
affiliates, has average annual gross receipts of five million dollars
($5,000,000) or less over the previous three years, or is a
manufacturer, as defined in subdivision (c), with 25 or fewer
employees.

(3) The director shall conduct a biennial review of the average
annual gross receipt levels specified in this subdivision and shall
adjust that level to reflect changes in the California Consumer
Price Index for all items. To reflect unique variations or
characteristics of different industries, the director may establish,
to the extent necessary, either higher or lower qualifying standards
than those specified in this subdivision, or alternative standards
based on other applicable criteria.

(4) Standards applied under this subdivision shall be established
by regulation, in accordance with Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2, and shall preclude
the qualification of businesses that are dominant in their industry.
In addition, the standards shall provide that the certified small
business or microbusiness shall provide goods or services that
contribute to the fulfillment of the contract requirements by
performing a commercially useful function, as defined below:

(A) A certified small business or microbusiness is deemed to
perform a commercially useful function if the business does all of
the following:

(i) Is responsible for the execution of a distinct element of the
work of the contract.

(ii) Carries out its obligation by actually performing, managing,
or supervising the work involved.

(iii) Performs work that is normal for its business services and
functions.

(iv) Is responsible, with respect to products, inventories,
materials, and supplies required for the contract, for negotiating
price, determining quality and quantity, ordering, installing, if
applicable, and making payment.

(v) Is not further subcontracting a portion of the work that is
greater than that expected to be subcontracted by normal industry
practices.

(B) A contractor, subcontractor, or supplier will not be
considered to perform a commercially useful function if the
contractor’s, subcontractor’s, or supplier’s role is limited to that
of an extra participant in a transaction, contract, or project through
which funds are passed in order to obtain the appearance of small
business or microbusiness participation.

(e) “Disabled veteran business enterprise” means an enterprise
that has been certified as meeting the qualifications established by
paragraph (7) of subdivision (b) of Section 999 of the Military and
Veterans Code.

begin insert

begin insert SEC. 3.5. end insert   

end insert

begin insert Section 14837 of the end insert begin insert Government Code end insert begin insert is amended
to read: end insert

14837.  

As used in this chapter:

(a) “Department” means the Department of General Services.

(b) “Director” means the Director of General Services.

(c) “Manufacturer” means a business that meets both of the
following requirements:

(1) It is primarily engaged in the chemical or mechanical
transformation of raw materials or processed substances into new
products.

(2) It is classified between Codes 31 to 33, inclusive, of the
North American Industry Classification System.

(d) (1)  begin insert (A) end insert begin insert   end insert “Small business” means an independently owned
and operated business that is not dominant in its field of operation,
the principal office of which is located in California, the officers
of which are domiciled in California, and which, together with
affiliates, has 100 or fewer employees, and average annual gross
receipts of begin delete ten end delete begin insert fifteen end insert million dollars begin delete ($10,000,000) end delete begin insert ($15,000,000) end insert
or less over the previous three years, or is a manufacturer, as
defined in subdivision (c), with 100 or fewer employees.

begin insert

(B) For the purposes of public works contracts, contracts
awarded through competitive bids or otherwise for the erection,
construction, alteration, repair, or improvement of any kind upon
real property, “small business” means an independently owned
and operated business that is not dominant in its field of operation,
the principal office of which is located in California, the officers
of which are domiciled in California, and which, together with
affiliates, has 200 or fewer employees, and average annual gross
receipts of twenty-five million dollars ($25,000,000) or less over
the previous three years.

end insert

(2) “Microbusiness” is a small business which, together with
affiliates, has average annual gross receipts of begin delete two million five
hundred thousand dollars ($2,500,000) end delete begin insert five million dollars
($5,000,000) end insert or less over the previous three years, or is a
manufacturer, as defined in subdivision (c), with 25 or fewer
employees.

begin insert

(3) “Employment social enterprise” means an entity that meets
all of the following:

end insert begin insert

(A) Is organized as a social purpose corporation, a benefit
corporation, or a nonprofit corporation.

end insert begin insert

(B) Is a California-based entity that meets one or more of the
following:

end insert begin insert

(i) The entity has a principal office in California, and the officers
are domiciled in California.

end insert begin insert

(ii) The entity has a major office or manufacturing facility
located in California that has been licensed by the state on a
continuous basis to conduct business within the state and has
continuously employed California residents for work within the
state during the prior three years.

end insert begin insert

(iii) The entity is a nonprofit organization incorporated in
another state that has sponsored or co-sponsored substantive
economic and workforce development activities within this state
and has provided services to individuals who face multiple barriers
to employment in at least 20 of the prior 24 months.

end insert begin insert

(C) Earns 51 percent or more of its enterprise revenue from the
production or assembly of goods or the provision of services, or
a combination of both.

end insert begin insert

(D) Demonstrates evidence in its articles of incorporation,
bylaws, or both, of the employment social enterprise’s mission to
provide employment with on-the-job and life skills training to a
direct labor force, not including supervisors and administration,
that is comprised of at least 80 percent of enterprise participants
who face multiple barriers to employment. To document on-the-job
and life skills training, an employment social enterprise shall
provide documentation, under penalty of perjury, that one or more
of the following services is being offered to individuals who face
multiple barriers to employment:

end insert begin insert

(i) Basic skills and job readiness assessment.

end insert begin insert

(ii) Referral system to industry-recognized certificates and
training.

end insert begin insert

(iii) Linkage to community colleges, adult schools, or other
education institutions to gain an education diploma or certificate.

end insert begin insert

(iv) Partnership with local or regional workforce development
boards.

end insert begin insert

(v) Job placement and retention services.

end insert begin insert

(E) (i) Has two or more enterprise participants who face
multiple barriers to employment.

end insert begin insert

(ii) “Enterprise participant who faces multiple barriers to
employment” means an individual that meets two or more of the
following:

end insert begin insert

(I) Is an individual with employment barriers, as defined in
subdivision (j) of Section 14005 of the Unemployment Insurance
Code.

end insert begin insert

(II) Is or has been homeless, as defined by the United States
Department of Health and Human Services as of January 1, 2016.

end insert begin insert

(III) Is an out-of-school youth. “Out-of-school youth” means
an individual who meets the definition in Section 3164(a)(1)(B)
of Title 29 of the United States Code.

end insert begin delete

(3)

end delete

begin insert (4) end insert  The director shall conduct a biennial review of the average
annual gross receipt levels specified in this subdivision begin delete and may end delete
begin insert for small business and microbusiness and shall end insert adjust that level
to reflect changes in the California Consumer Price Index for all
items. To reflect unique variations or characteristics of different
industries, the director may establish, to the extent necessary, either
higher or lower qualifying standards than those specified in this
subdivision, or alternative standards based on other applicable
criteria.

begin delete

(4)

end delete

begin insert (5) end insert  Standards applied under this subdivision shall be established
by regulation, in accordance with Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2, and shall preclude
the qualification of begin delete businesses that are dominant in their end delete begin insert a small
business or microbusiness that is dominant in its end insert industry. In
addition, the standards shall provide that the certified small
begin delete business or microbusiness end delete begin insert business, microbusiness, or employment
social enterprise end insert shall provide goods or services that contribute
to the fulfillment of the contract requirements by performing a
commercially useful function, as defined below:

(A) A certified small begin delete business or microbusiness end delete begin insert business,
microbusiness, or employment social enterprise end insert is deemed to
perform a commercially useful function if the business does all of
the following:

(i) Is responsible for the execution of a distinct element of the
work of the contract.

(ii) Carries out its obligation by actually performing, managing,
or supervising the work involved.

(iii) Performs work that is normal for its business services and
functions.

(iv) Is responsible, with respect to products, inventories,
materials, and supplies required for the contract, for negotiating
price, determining quality and quantity, ordering, installing, if
applicable, and making payment.

(v) Is not further subcontracting a portion of the work that is
greater than that expected to be subcontracted by normal industry
practices.

(B) A contractor, subcontractor, or supplier will not be
considered to perform a commercially useful function if the
contractor’s, subcontractor’s, or supplier’s role is limited to that
of an extra participant in a transaction, contract, or project through
which funds are passed in order to obtain the appearance of small
begin delete business or microbusiness end delete begin insert business, microbusiness, or employment
social enterprise end insert participation.

(e) “Disabled veteran business enterprise” means an enterprise
that has been certified as meeting the qualifications established by
paragraph (7) of subdivision (b) of Section 999 of the Military and
Veterans Code.

begin insert

(f) The amendments made to this section by the act adding this
subdivision shall become operative on October 1, 2018.

end insert

SEC. 4.  

Section 14838 of the Government Code is amended
to read:

14838.  

In order to facilitate the participation of small business,
including microbusiness, in the provision of goods, information
technology, and services to the state, and in the construction
(including alteration, demolition, repair, or improvement) of state
facilities, the directors of the department and other state agencies
that enter those contracts, each within their respective areas of
responsibility, shall do all of the following:

(a) Establish goals, consistent with those established by the
Office of Small Business Certification and Resources, for the extent
of participation of small businesses, including microbusinesses,
in the provision of goods, information technology, and services to
the state, and in the construction of state facilities.

(b) Provide for small business preference, or nonsmall business
preference for bidders that provide for small business and
microbusiness subcontractor participation, in the award of contracts
for goods, information technology, services, and construction, as
follows:

(1) In solicitations where an award is to be made to the lowest
responsible bidder meeting specifications, the preference to small
business and microbusiness shall be 5 percent of the lowest
responsible bidder meeting specifications. The preference to
nonsmall business bidders that provide for small business or
microbusiness subcontractor participation shall be, up to a
maximum of 5 percent of the lowest responsible bidder meeting
specifications, determined according to rules and regulations
established by the Department of General Services.

(2) In solicitations where an award is to be made to the highest
scored bidder based on evaluation factors in addition to price, the
preference to small business or microbusiness shall be 5 percent
of the highest responsible bidder’s total score. The preference to
nonsmall business bidders that provide for small business or
microbusiness subcontractor participation shall be up to a
maximum 5 percent of the highest responsible bidder’s total score,
determined according to rules and regulations established by the
Department of General Services.

(3) The preferences under paragraphs (1) and (2) shall not be
awarded to a noncompliant bidder and shall not be used to achieve
any applicable minimum requirements.

(4) The preference under paragraph (1) shall not exceed fifty
thousand dollars ($50,000) for any bid, and the combined cost of
preferences granted pursuant to paragraph (1) and any other
provision of law shall not exceed one hundred thousand dollars
($100,000). In bids in which the state has reserved the right to
make multiple awards, this fifty thousand dollar ($50,000)
maximum preference cost shall be applied, to the extent possible,
so as to maximize the dollar participation of small businesses,
including microbusinesses, in the contract award.

(c) Give special consideration to small businesses and
microbusinesses by both:

(1) Reducing the experience required.

(2) Reducing the level of inventory normally required.

(d) Give special assistance to small businesses and
microbusinesses in the preparation and submission of the
information requested in Section 14310.

(e) Under the authorization granted in Section 10163 of the
Public Contract Code, make awards, whenever feasible, to small
business and microbusiness bidders for each project bid upon
within their prequalification rating. This may be accomplished by
dividing major projects into subprojects so as to allow a small
business or microbusiness contractor to qualify to bid on these
subprojects.

(f) Small business and microbusiness bidders qualified in
accordance with this chapter shall have precedence over nonsmall
business bidders in that the application of a bidder preference for
which nonsmall business bidders may be eligible under this section
or any other provision of law shall not result in the denial of the
award to a small business or microbusiness bidder. In the event of
a precise tie between the low responsible bid of a bidder meeting
specifications of a small business or microbusiness, and the low
responsible bid of a bidder meeting the specifications of a disabled
veteran-owned small business or microbusiness, the contract shall
be awarded to the disabled veteran-owned small business or
microbusiness. This provision applies if the small business or
microbusiness bidder is the lowest responsible bidder, as well as
if the small business or microbusiness bidder is eligible for award
as the result of application of the small business and microbusiness
bidder preference granted by subdivision (b).

(g) If the directors of the department and other state agencies
that enter into those contracts are unable to reach the goals
established under subdivision (a) in the year in which the act that
added this subdivision takes effect, the directors of the department
and other state agencies may count towards that goal, contracts
with firms that would be considered a small business or
microbusiness under the amendments made to Section 14837 by
the act adding this subdivision.

begin insert

begin insert SEC. 4.5. end insert   

end insert

begin insert Section 14838 of the end insert begin insert Government Code end insert begin insert is amended
to read: end insert

14838.  

In order to facilitate the participation of small business,
including begin delete microbusiness, end delete begin insert microbusiness and employment social
enterprise end insert in the provision of goods, information technology, and
services to the state, and in the construction (including alteration,
demolition, repair, or improvement) of state facilities, the directors
of the department and other state agencies that enter those contracts,
each within their respective areas of responsibility, shall do all of
the following:

(a) Establish goals, consistent with those established by the
Office of Small Business Certification and Resources, for the extent
of participation of small businesses, including microbusinesses,
begin insert and employment social enterprises, end insert in the provision of goods,
information technology, and services to the state, and in the
construction of state facilities.

(b) Provide for begin insert a end insert small business begin insert or employment social enterprise end insert
preference, or nonsmall business preference for bidders that provide
for small begin delete business and microbusiness end delete begin insert business, microbusiness, and
employment social enterprise end insert subcontractor participation, in the
award of contracts for goods, information technology, services,
and construction, as follows:

(1) In solicitations where an award is to be made to the lowest
responsible bidder meeting specifications, the preference to small
begin delete business and microbusiness end delete begin insert business, microbusiness, and
employment social enterprise end insert shall be 5 percent of the lowest
responsible bidder meeting specifications. The preference to
nonsmall business bidders that provide for small begin delete business or
microbusiness end delete begin insert business, microbusiness, or employment social
enterprise end insert subcontractor participation shall be, up to a maximum
of 5 percent of the lowest responsible bidder meeting specifications,
determined according to rules and regulations established by the
Department of General Services.

(2) In solicitations where an award is to be made to the highest
scored bidder based on evaluation factors in addition to price, the
preference to small begin delete business or microbusiness end delete begin insert business,
microbusiness, or employment social enterprise end insert shall be 5 percent
of the highest responsible bidder’s total score. The preference to
nonsmall business bidders that provide for small begin delete business or
microbusiness end delete begin insert business, microbusiness, or employment social
enterprise end insert subcontractor participation shall be up to a maximum
5 percent of the highest responsible bidder’s total score, determined
according to rules and regulations established by the Department
of General Services.

(3) The preferences under paragraphs (1) and (2) shall not be
awarded to a noncompliant bidder and shall not be used to achieve
any applicable minimum requirements.

(4) The preference under paragraph (1) shall not exceed fifty
thousand dollars ($50,000) for any bid, and the combined cost of
preferences granted pursuant to paragraph (1) and any other
provision of law shall not exceed one hundred thousand dollars
($100,000). In bids in which the state has reserved the right to
make multiple awards, this fifty thousand dollar ($50,000)
maximum preference cost shall be applied, to the extent possible,
so as to maximize the dollar participation of small businesses,
including microbusinesses, begin insert and employment social enterprises end insert in
the contract award.

begin insert

(5) A bidder may be awarded a preference for both of the
following in a single bid:

end insert begin insert

(A) A small business preference or a nonsmall business
preference for bidders that provide for small business or
microbusiness subcontractor participation.

end insert begin insert

(B) An employment social enterprise preference or a nonsmall
business preference for bidders that provide for employment social
enterprise subcontractor participation.

end insert

(c) Give special consideration to small begin delete businesses and
microbusinesses end delete begin insert businesses, microbusinesses, and employment
social enterprises end insert by both:

(1) Reducing the experience required.

(2) Reducing the level of inventory normally required.

(d) Give special assistance to small begin delete businesses and
microbusinesses end delete begin insert businesses, microbusinesses, and employment
social enterprises end insert in the preparation and submission of the
information requested in Section 14310.

(e) Under the authorization granted in Section 10163 of the
Public Contract Code, make awards, whenever feasible, to small
begin delete business and microbusiness end delete begin insert business, microbusiness, and
employment social enterprise end insert bidders for each project bid upon
within their prequalification rating. This may be accomplished by
dividing major projects into subprojects so as to allow a small
begin delete business or microbusiness end delete begin insert business, microbusiness, or employment
social enterprise end insert contractor to qualify to bid on these subprojects.

(f) Small begin delete business and microbusiness end delete begin insert business, microbusiness,
and employment social enterprise end insert bidders qualified in accordance
with this chapter shall have precedence over nonsmall business
bidders in that the application of a bidder preference for which
nonsmall business bidders may be eligible under this section or
any other provision of law shall not result in the denial of the award
to a small begin delete business or microbusiness end delete begin insert business, microbusiness, or
employment social enterprise end insert bidder. In the event of a precise tie
between the low responsible bid of a bidder meeting specifications
of a small begin delete business or microbusiness, end delete begin insert business, microbusiness, or
employment social enterprise end insert and the low responsible bid of a
bidder meeting the specifications of a disabled veteran-owned
small begin delete business or microbusiness, end delete begin insert business, microbusiness, or
employment social enterprise, end insert the contract shall be awarded to the
disabled veteran-owned small begin delete business or microbusiness. end delete begin insert business,
microbusiness, or employment social enterprise. end insert This provision
applies if the small begin delete business or microbusiness end delete begin insert business,
microbusiness, or employment social enterprise end insert bidder is the lowest
responsible bidder, as well as if the small begin delete business or microbusiness end delete
begin insert business, microbusiness, or employment social enterprise end insert bidder
is eligible for award as the result of application of the small
begin delete business and microbusiness end delete begin insert business, microbusiness, and
employment social enterprise end insert bidder preference granted by
subdivision (b).

begin insert

(g) In order to qualify for the incentives under this section, an
employment social enterprise shall demonstrate and certify under
penalty of perjury the following:

end insert begin insert

(1) Not less than 70 percent of the total labor hours, excluding
supervisors and administration, required to perform the
information technology or construction contract shall be completed
by an enterprise participant who faces multiple barriers to
employment.

end insert begin insert

(2) Not less than 70 percent of the total labor hours, excluding
supervisors and administration, required to manufacture the goods
and perform the contract shall be completed by an enterprise
participant who faces multiple barriers to employment. For an
employment social enterprise with 25 or fewer total employees,
50 percent of the total labor hours, excluding supervisors and
administration, required to manufacture the goods and perform
the contract shall be completed by an enterprise participant who
faces multiple barriers to employment.

end insert begin insert

(3) Not less than 80 percent of the total labor hours, excluding
supervisors and administration, required to provide services and
perform the contract shall be completed by an enterprise
participant who faces multiple barriers to employment.

end insert begin insert

(h) If the directors of the department and other state agencies
that enter into those contracts are unable to reach the goals
established under subdivision (a) in the year in which the act that
added this subdivision takes effect, the directors of the department
and other state agencies may count towards that goal, contracts
with firms that would be considered a small business or
microbusiness under the amendments made to Section 14837 by
the act adding this subdivision.

end insert begin insert

(i) The amendments made to this section by the act adding this
subdivision shall become operative on October 1, 2018.

end insert

begin insert

begin insert SEC. 5. end insert   

end insert begin insert

Section 3.5 of this bill incorporates amendments to
Section 14837 of the Government Code proposed by both this bill
and Senate Bill 1219. It shall only become operative if (1) both
bills are enacted and become effective on or before January 1,
2017, (2) each bill amends Section 14837 of the Government Code,
and (3) this bill is enacted after Senate Bill 1219, in which case
Section 3 of this bill shall not become operative.

end insert

begin insert

begin insert SEC. 6. end insert   

end insert begin insert

Section 4.5 of this bill incorporates amendments to
Section 14838 of the Government Code proposed by both this bill
and Senate Bill 1219. It shall only become operative if (1) both
bills are enacted and become effective on or before January 1,
2017, (2) each bill amends Section 14838 of the Government Code,
and (3) this bill is enacted after Senate Bill 1219, in which case
Section 4 of this bill shall not become operative.

end insert

begin delete SEC. 5. end delete

begin insert SEC. 7. end insert   

No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of
the Government Code, or changes the definition of a crime within
the meaning of Section 6 of Article XIII B of the California
Constitution.