Senate Bill No. 1219

Introduced by Senator Hancock

(Coauthor: Assembly Member Jones-Sawyer)

February 18, 2016

An act to amend Sections 14836, 14837, 14838, 14838.5, 14838.64, 14838.7, 14839, 14839.1, 14840, 14842, and 14842.5 of the Government Code, relating to state contracting.

LEGISLATIVE COUNSEL’S DIGEST

SB 1219, as introduced, Hancock. Small Business Procurement and Contract Act: employment social enterprises.

Existing law, the Small Business Procurement and Contract Act, grants a specified preference for small businesses and microbusinesses in the award a contract for goods, services, or information technology to the state and in the construction of state facilities. Existing law defines small business and microbusiness for these and other purposes. Existing law permits a state agency and the California State University to award specified types of contracts with a value of between $5,000 and $250,000 to a certified small business, including a microbusiness and a disabled veteran business enterprise, without complying with certain competitive bidding requirements, provided the agency obtains price quotations from at least 2 small businesses, including microbusinesses, or 2 or disabled veteran business enterprises. Existing law establishes the Office of Small Business and Disabled Veteran Business Enterprise Service and prescribes duties for the office, which include maintaining a bidders list of small businesses and disabled veteran businesses and is to identify which small businesses also qualify as microbusiness. Existing law prescribes penalties for a small business or microbusiness that provides incorrect information or withholds information that leads to its incorrect classification as such an entity and is awarded a contract because of that classification.

This bill would grant an employment social enterprise the preference and status that is provided to a microbusiness for purposes of the provisions described above. The bill would define an employment social enterprise as a nonprofit or for-profit mission-driven business focused on hiring and assisting people who have significant barriers to employment and at least 51% of the business’ employees have these barriers. The bill would define “people facing significant barriers to employment” to include people who have been incarcerated, people who are, or have been, homeless, youth and young adults disconnected from school or work, and people with disabilities such as substance addiction or mental illness.

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

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

SECTION 1.  

Section 14836 of the Government Code is
amended to read:

14836.  

(a) The Legislature hereby declares that it serves a
public purpose, and it is of benefit to the state, to promote and
facilitate the fullest possible participation by all citizens in the
affairs of the State of California in every possible way. It is also
essential that opportunity is provided for full participation in our
free enterprise system by small business enterprises.

(b) Further, it is the declared policy of the Legislature that the
state should aid, counsel, assist, and protect, to the maximum extent
possible, the interests of small business concerns, including
begin delete microbusinesses, end delete begin insert microbusinesses end insert begin insert and employment social
enterprises, end insert in order to preserve free competitive enterprise and
to ensure that a fair proportion of the total purchases and contracts
or subcontracts for property and services for the state be placed
with these enterprises.

SEC. 2.  

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) “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 ten million dollars ($10,000,000) or less over the
previous three years, or is a manufacturer, as defined in subdivision
(c), with 100 or fewer employees.

(2) “Microbusiness” is a small business which, together with
affiliates, has average annual gross receipts of two million five
hundred thousand dollars ($2,500,000) 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” is a nonprofit or for profit
mission-driven business focused on hiring and assisting people
who have significant barriers to employment and at least 51
percent of business’ employees have these barriers. “People who
have significant barriers to employment” includes, but is not
limited to, people who have been incarcerated, people who are,
or have been, homeless, youth and young adults disconnected from
school or work, and people with disabilities such as substance
addiction or mental illness.

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 and may
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 businesses that are dominant in their 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 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.

SEC. 3.  

Section 14838 of the Government Code is amended
to read:

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 begin delete microbusinesses, end delete
begin insert microbusinesses 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 small business 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 begin delete microbusinesses, end delete begin insert microbusinesses and employment social
enterprises end insert in the contract award.

(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).

SEC. 4.  

Section 14838.5 of the Government Code is amended
to read:

14838.5.  

(a) Notwithstanding the advertising, bidding, and
protest provisions of Chapter 6 (commencing with Section 14825)
of this part and Chapter 2 (commencing with Section 10290) and
Chapter 3 (commencing with Section 12100) of Part 2 of Division
2 of the Public Contract Code, a state agency may award a contract
for the acquisition of goods, services, or information technology
that has an estimated value of greater than five thousand dollars
($5,000), but less than two hundred fifty thousand dollars
($250,000), to a certified small business, including a begin delete microbusiness, end delete
begin insert microbusiness or employment social enterprise, end insert or to a disabled
veteran business enterprise, as long as the agency obtains price
quotations from two or more certified small businesses, including
begin delete microbusinesses, end delete begin insert microbusinesses or employment social
enterprises, end insert or from two or more disabled veterans business
enterprises.

(b) In carrying out subdivision (a), a state agency shall consider
a responsive offer timely received from a responsible certified
small business, including a begin delete microbusiness, end delete begin insert microbusiness or
employment social enterprise, end insert or from a disabled veteran business
enterprise.

(c) If the estimated cost to the state is less than five thousand
dollars ($5,000) for the acquisition of goods, services, or
information technology, or a greater amount as administratively
established by the director, a state agency shall obtain at least two
price quotations from responsible suppliers whenever there is
reason to believe a response from a single source is not a fair and
reasonable price.

SEC. 5.  

Section 14838.64 of the Government Code is amended
to read:

14838.64.  

(a) Notwithstanding any other law, including, but
not limited to, the advertising, bidding, and protest provisions of
Chapter 6 (commencing with Section 14825) of this part and
Chapter 2.5 (commencing with Section 10700) and Chapter 3
(commencing with Section 12100) of Part 2 of Division 2 of the
Public Contract Code, the California State University may award
a contract for the acquisition of goods, services, or information
technology that has an estimated value of greater than five thousand
dollars ($5,000), but less than two hundred fifty thousand dollars
($250,000), to a certified small business, including a begin delete microbusiness, end delete begin insert end insert
begin insert microbusiness or employment social enterprise, end insert or to a disabled
veteran business enterprise, if the California State University
obtains price quotations from two or more certified small
businesses, including begin delete microbusinesses, end delete begin insert microbusinesses or
employment social enterprises, end insert or from two or more disabled
veteran business enterprises.

(b) In carrying out subdivision (a), the California State
University shall consider a responsive offer timely received from
a responsible certified small business, including a begin delete microbusiness, end delete begin insert end insert
begin insert microbusiness or employment social enterprise, end insert or from a disabled
veteran business enterprise.

SEC. 6.  

Section 14838.7 of the Government Code is amended
to read:

14838.7.  

(a) Notwithstanding the advertising and bidding
provisions of Chapter 6 (commencing with Section 14825) of this
code and Chapter 1 (commencing with Section 10100) of Part 2
of Division 2 of the Public Contract Code, a state agency may
award a contract for construction, including the erection,
construction, alteration, repair, or improvement of any state
structure, building, road, or other state improvement of any kind
that has an estimated value of greater than five thousand dollars
($5,000) but less than the cost limit, as specified in subdivision
(b) of Section 10105 of the Public Contract Code, to a certified
small business, including a begin delete microbusiness, end delete begin insert microbusiness or
employment social enterprise, end insert or to a disabled veteran business
enterprise, as long as the agency obtains written bid submittals
from two or more certified small businesses, including
begin delete microbusinesses, end delete begin insert microbusinesses or employment social
enterprises, end insert or from two or more disabled veteran business
enterprises.

(b) In implementing subdivision (a), state agencies shall consider
a responsive offer timely received from a responsible certified
small business, including a begin delete microbusiness, end delete begin insert microbusiness or
employment social enterprise, end insert or from a disabled veteran business
enterprise.

(c) If the estimated cost to the state is less than five thousand
dollars ($5,000) for the public work construction project, a state
agency shall obtain at least two written bid submittals from
responsible contractors whenever there is reason to believe a
response from a single source is not a fair and reasonable price.

SEC. 7.  

Section 14839 of the Government Code is amended
to read:

14839.  

There is hereby established within the department the
Office of Small Business and Disabled Veteran Business Enterprise
Services. The duties of the office shall include:

(a) Compiling and maintaining a comprehensive bidders list of
qualified small businesses and disabled veteran business
enterprises, and noting which small businesses also qualify as
begin delete microbusinesses. end delete begin insert microbusinesses or employment social
enterprises. end insert

(b) Coordinating with the Federal Small Business
Administration, the Minority Business Development Agency, and
the Office of Small Business Development of the Department of
Economic and Business Development.

(c) Providing technical and managerial aids to small businesses,
microbusinesses, begin insert employment social enterprises, end insert and disabled
veteran business enterprises, by conducting workshops on matters
in connection with government procurement and contracting.

(d) Assisting small businesses, microbusinesses, begin insert employment
social enterprises, end insert and disabled veteran business enterprises, in
complying with the procedures for bidding on state contracts.

(e) Working with appropriate state, federal, local, and private
organizations and business enterprises in disseminating information
on bidding procedures and opportunities available to small
businesses, microbusinesses, begin insert employment social enterprises, end insert and
disabled veteran business enterprises.

(f) Making recommendations to the department and other state
agencies for simplification of specifications and terms in order to
increase the opportunities for small business, microbusiness,
begin insert employment social enterprises, end insert and disabled veteran business
enterprise participation.

(g) Developing, by regulation, other programs and practices
that are reasonably necessary to aid and protect the interest of small
businesses, microbusinesses, begin insert employment social enterprises, end insert and
disabled veteran business enterprises in contracting with the state.

(h) Making efforts to develop, in cooperation with associations
representing counties, cities, and special districts, a core statewide
small business certification application that may be adopted by all
participating entities, with any supplemental provisions to be added
as necessary by the respective entities.

(i) The information furnished by each contractor requesting a
small begin delete business or microbusiness end delete begin insert business, microbusiness, or
employment social enterprise end insert preference shall be under penalty of
perjury.

SEC. 8.  

Section 14839.1 of the Government Code is amended
to read:

14839.1.  

(a) The department shall have sole responsibility for
certifying and determining the eligibility of small begin delete businesses and
microbusinesses end delete begin insert businesses, microbusinesses, and employment
social enterprises, end insert under this chapter.

(b) Local agencies shall have access to the department’s list of
certified small businesses on the department’s Internet Web site,
which is available to the public, for use as a reference guide to
confirm a small business certification.

SEC. 9.  

Section 14840 of the Government Code is amended
to read:

14840.  

(a) In the process of certifying and determining the
eligibility of a disabled veteran business enterprise or a small
business enterprise, including a begin delete microbusiness, end delete begin insert microbusiness and
employment social enterprise, end insert the department shall require the
applicant or certified firm to submit a written declaration, under
penalty of perjury, that the information submitted to the department
pursuant to this chapter, and in the case of a disabled veteran
enterprise all information submitted to the department pursuant to
Section 999.2 of the Military and Veterans Code, is true and
correct.

(b) (1) If the department determines that just cause exists, it
may require the owner of the disabled veteran business enterprise,
microbusiness, begin insert employment social enterprise, end insert or small business,
the applicant, or the certified firm to complete and submit to the
department a federal Form 4506-T from the Internal Revenue
Service, United States Department of the Treasury, requesting a
transcript of a tax return.

(2) For the purposes of this subdivision, “just cause” means
either of the following circumstances exists:

(A) The department receives a complaint regarding the certified
firm.

(B) The department determines, based on its findings during
the course of any certification eligibility review of the applicant
or certified firm, that the action described in paragraph (1) is
necessary.

SEC. 10.  

Section 14842 of the Government Code is amended
to read:

14842.  

(a) A business that has obtained classification as a
small begin delete business or microbusiness end delete begin insert business, microbusiness, or
employment social enterprise, end insert by reason of having furnished
incorrect supporting information or by reason of having withheld
information, and that knew, or should have known, the information
furnished was incorrect or the information withheld was relevant
to its request for classification, and that by reason of that
classification has been awarded a contract to which it would not
otherwise have been entitled, shall do all of the following:

(1) Pay to the state any difference between the contract amount
and what the state’s costs would have been if the contract had been
properly awarded.

(2) Pay to the awarding state agency and the department an
amount that is equal to the costs incurred for investigating the
small business or microbusiness certification that led to the finding
that the contract had been improperly awarded. Costs incurred
shall include, but are not limited to, costs and attorney’s fees paid
by the awarding state agency or the department related to hearings
and court appearances.

(3) In addition to the amounts described in paragraphs (1) and
(2), be assessed a penalty in an amount of not more than 10 percent
of the amount of the contract involved.

(b) The department shall suspend any person who violates
subdivision (a) from transacting any business with the state either
directly as a prime contractor or indirectly as a subcontractor, for
a period of not less than three years and not more than 10 years.
State agencies may reject the bid of a supplier offering goods,
information technology, or services manufactured or provided by
a subcontractor if that subcontractor has been declared ineligible
to transact any business with the state under this chapter, even
though the bidder is a business in good standing.

(c) All payments to the state pursuant to paragraphs (1) and (2)
of subdivision (a) shall be deposited in the fund or funds out of
which payments on the contract involved were made, except
payments to the department made pursuant to paragraph (2) of
subdivision (a) shall be deposited in the Service Revolving Fund.

(d) All payments to the state pursuant to paragraph (3) of
subdivision (a) shall be deposited in the state General Fund.

(e) The small business certification, and the disabled veteran
business enterprise certification if the business has both
certifications, of a business found to have violated subdivision (a)
shall be revoked by the department for a period of not less than
five years. For an additional or subsequent violation, the period
of certification revocation or suspension shall be extended for a
period of up to 10 years. The certification revocation shall apply
to the principals of the business and any subsequent businesses
formed by one or more of those principals.

(f) Prior to the imposition of any sanctions under this article, a
business shall be entitled to a public hearing and to at least five
working days’ notice of the time and place thereof. The notice
shall state the reasons for the hearing.

(g) Any business or person that fails to satisfy any of the
amounts specified in paragraphs (1) to (3), inclusive, of subdivision
(a) shall be prohibited from further contracting with the state until
all amounts are satisfied.

(h) For purposes of this section, “awarding state agency” means
a state agency or other state governmental entity that awarded the
contract, if it was not awarded by the department.

SEC. 11.  

Section 14842.5 of the Government Code is amended
to read:

14842.5.  

(a) It shall be unlawful for a person to do any of the
following:

(1) Knowingly and with intent to defraud, fraudulently obtain,
retain, attempt to obtain or retain, or aid another in fraudulently
obtaining or retaining or attempting to obtain or retain, certification
as a small business or microbusiness enterprise for the purposes
of this chapter.

(2) Willfully and knowingly make a false statement with the
intent to defraud, whether by affidavit, report, or other
representation, to a state official or employee for the purpose of
influencing the certification or denial of certification of any entity
as a small business or microbusiness enterprise.

(3) Willfully and knowingly obstruct, impede, or attempt to
obstruct or impede, any state official or employee who is
investigating the qualifications of a business entity that has
requested certification as a small business or microbusiness
enterprise.

(4) Knowingly and with intent to defraud, fraudulently obtain,
attempt to obtain, or aid another person in fraudulently obtaining
or attempting to obtain, public moneys, contracts, or funds
expended under a contract, that are awarded by any state agency,
department, officer, or other state governmental agency, to which
the person is not entitled under this chapter.

(5) Knowingly and with intent to defraud, fraudulently represent
certified small business or microbusiness participation in order to
obtain or retain a bid preference or a state contract.

(6) Knowingly and with intent to defraud, fraudulently represent
that a commercially useful function is being performed by a
certified small business or microbusiness in order to obtain or
retain a bid preference or a state contract.

(7) Willfully and knowingly make or subscribe to any statement,
declaration, or other document that is fraudulent or false as to any
material matter, whether or not that falsity or fraud is committed
with the knowledge or consent of the person authorized or required
to present the declaration, statement, or document.

(8) Willfully and knowingly aid or assist in, or procure, counsel,
or advise, the preparation or presentation of a declaration,
statement, or other document that is fraudulent or false as to any
material matter, regardless of whether that falsity or fraud is
committed with the knowledge or consent of the person authorized
or required to present the declaration, statement, or document.

(9) Establish, or knowingly aid in the establishment of, or
exercise control over, a firm found to have violated any provision
of paragraphs (1) to (8), inclusive.

(b) (1) Any person who is found by the department to have
violated any of the provisions of subdivision (a) is subject to a
civil penalty of not less than ten thousand dollars ($10,000) nor
more than thirty thousand dollars ($30,000) for the first violation,
and a civil penalty of not less than thirty thousand dollars ($30,000)
nor more than fifty thousand dollars ($50,000) for each additional
or subsequent violation.

(2) A person who violates any of the provisions of subdivision
(a) shall pay all costs incurred by the awarding department and
the Department of General Services for any investigations that led
to the finding of the violation. Costs incurred shall include, but
are not limited to, costs and attorney’s fees paid by the awarding
state agency or the department related to hearings and court
appearances. All payments to the state pursuant to this paragraph
shall be deposited in the fund or funds out of which payments on
the contract involved were made, except payments to the
department shall be deposited in the Service Revolving Fund.

(c) The department shall revoke the small begin delete business or
microbusiness end delete begin insert business, microbusiness, or employment social
enterprise end insert certification, and the disabled veteran business enterprise
certification if the business has both certifications, of any person
that violates subdivision (a) for a period of not less than five years,
and shall, in addition to the penalties provided for in subdivision
(b), suspend the person from bidding on, or participating as a
contractor, a subcontractor, or a supplier in, any state contract or
project for a period of not less than three years nor more than 10
years. However, for an additional or subsequent violation, the
period of certification revocation or suspension shall be extended
for a period of up to three years. The certification revocation shall
apply to the principals of the business and any subsequent
businesses formed by one or more of those principals. Any business
or person who fails to satisfy any of the penalties imposed pursuant
to paragraphs (1) and (2) of subdivision (b) shall be prohibited
from further contracting with the state until the penalties are
satisfied.

(d) If a contractor, subcontractor, supplier, subsidiary, or affiliate
thereof, has been found by the department to have violated
subdivision (a) and that violation occurred within three years of
another violation of subdivision (a) found by the department, the
department shall prohibit that contractor, subcontractor, supplier,
subsidiary, or affiliate thereof, from entering into a state project
or state contract and from further bidding to a state entity, and
from being a subcontractor to a contractor for a state entity, and
from being a supplier to a state entity.

(e) (1) In addition to the penalties imposed by this section, if
a contractor is found to be in violation of paragraph (6) of
subdivision (a), any existing contract between that contractor and
any awarding department may be terminated at the discretion of
the awarding state agency, and, where payment to the contractor
is made directly by the state agency, the agency shall set off
penalties and costs due to the state against any payments due to
that contractor. In the event that the contracting state agency has
forwarded the contract and invoices to the Controller for payment,
the state agency shall reduce the amount due to the contractor as
reflected in the claim schedule submitted to the Controller by the
amount of the penalties and costs due the state. In addition, with
regard to any penalties and costs due to the state that the state
agency has not accounted for by either a set off against payments
due to the contractor or a reduction reflected in the claim schedule
submitted to the Controller, to the extent that the Controller is
making payments to the contractor on behalf of any state agency,
the Controller shall set off penalties and costs due against any
invoices due to the contractor from any other contract awarded to
the contractor.

(2) For purposes of this section:

(A) “Awarding state agency” means any state agency,
department, governmental entity, or other officer or entity
empowered by law to enter into contracts on behalf of the State
of California.

(B) “Contractor” means any person or persons, firm, partnership,
corporation, or combination thereof who submits a bid and enters
into a contract with a representative of a state agency, department,
governmental entity, or other officer empowered by law to enter
into contracts on behalf of the State of California.