BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Isadore Hall, III
Chair
2015 - 2016 Regular
Bill No: SB 1219 Hearing Date: 4/12/2016
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|Author: |Hancock, et al. |
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|Version: |4/4/2016 Amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Felipe Lopez |
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SUBJECT: Small Business Procurement and Contract Act:
employment social enterprises
DIGEST: This bill includes employment social enterprises,
which are businesses that provide jobs for individuals who have
experienced significant barriers to employment, within the Small
Business Procurement and Contract Act, for the purpose of
allowing them to participate in state contracting bid
preferences.
ANALYSIS:
Existing law:
1)Grants, through the Small Business Procurement and Contract
Act, preference for small businesses and microbusinesses in
the award of a contract for goods, services, or information
technology to the state and in the construction of state
facilities.
2)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 disabled veteran business enterprises.
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3)Establishes the Office of Small Business and Disabled Veteran
Business Enterprise Services and prescribes duties for the
office, which include maintaining a bidders list of small
businesses and disabled veteran businesses and noting which
small businesses also qualify as microbusinesses.
4)Prescribes penalties for small businesses or microbusinesses
that provide incorrect information or withhold information
that leads to its incorrect classification as such an entity
and is awarded a contract because of the classification.
Penalties include the repayment of the amount of the bid
preference, in addition to a penalty up to 10 percent of the
contract amount, reimbursement of the costs of investigating
the fraud, prohibiting the business to participate in state
contracts for between 3-10 years, and, if the fraud is found
to be willful and knowing, the business is subject to a civil
penalty of between $10,000-$30,000 for the first offense, and
$30,000-$50,000 for subsequent offenses.
5)Defines a "small business" (SB) to mean 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 $10 million or
less over the previous three years, or is a manufacturer, as
defined, and has 100 or fewer employees.
6)Defines a "microbusiness" (MB) as a small business which,
together with affiliates, has average annual gross receipts of
$2.5 million or less over the previous three years, or is a
manufacturer, as defined, with 25 or fewer employees.
7)Defines a "disabled veteran business enterprise " (DVBE) to
mean an enterprise that is at least 51% owned by one or more
disabled veterans and the daily business operations are
managed and controlled by one or more disabled veterans. For
certification purposes a "disabled veteran" is a veteran of
the U.S. military, naval, or air service who resides in
California and has a service-connected disability of at least
10% or more.
This bill:
1)Includes employment social enterprises, which are businesses
SB 1219 (Hancock) Page 3 of ?
that provide jobs for individuals who have experienced
significant barriers to employment, within the Small Business
Procurement and Contract Act for the purposes of allowing them
to participate in state contracting bid preferences.
2)Defines an "employment social enterprise" as a nonprofit or
for profit business dedicated to hiring and assisting
individuals who face significant barriers to employment and at
least 51% of the business' employees have these barriers.
3)Defines "individuals who face significant barriers to
employment" to include, but are not limited to, individuals
who have been incarcerated, individuals who are, or have been,
homeless, youth and young adults disconnected from school or
work, and individuals with disabilities, including, but not
limited to, substance addictions and mental illness.
Background
Purpose of the bill. According to the author, "research has
shown that for every dollar invested in employment social
enterprises, there is a $1.31 savings to taxpayers and every
dollar social enterprises spend has a return on investment of
$2.23 in benefits to society."
The author further argues that, "employment social enterprises
cannot meet small business requirements due to their nonprofit
status or annual number of employees. This bill would create a
business designation for employment social enterprises to secure
state business development services and procurement
preferences."
Employment Social Enterprises. Employment Social Enterprises
are mission-driven businesses focused on hiring and assisting
people who face barriers to work. Some of these barriers can
include youth and inexperience, previous incarceration,
homelessness, or mental health disorders. Most social
enterprises, in addition to employment opportunities also
provide on the job skills development, counseling and other
support such as clothing, food, and housing.
A recent report by the Mathematica Policy Research found that
for every dollar spent by a social enterprise, there was a $2.23
return on investment to society. This includes benefits to
taxpayers from reductions in government aid. The study
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suggested that, "investing in the growth of social enterprises,
as well as their additional support services for workers, can
have a positive impact on people's lives, while lessening the
burden on government resources."
Small Business Procurement and Contract Act. The Small Business
Procurement and Contract Act was implemented in 1973 to
establish a small business preference within the state's
procurement process. The goal is to increase the number of
contracts between the state and small businesses. The Act
states that it is the policy of the State of California to aid
the interests of small businesses in order to preserve free
competitive enterprise and to ensure that a fair portion of the
total purchases and contracts of the state be placed with these
enterprises.
Upon meeting eligibility requirements, certified small
businesses (SBs) and micro- businesses (MBs) are entitled to a
five percent bid preference on applicable state solicitations.
Certified small businesses and microbusinesses are eligible for
the State's Small Business Participation Program. The program
sets a goal for the use of small businesses in at least 25% of
the State's overall annual contract dollars.
In addition, under the Prompt Payment Act, the State must pay a
certified small business or microbusiness higher interest
penalties for late payment of an undisputed invoice. The Act
also permits state agencies to use a streamline process, known
as the SB/DVBE Option, by contracting directly with California
certified SBs/MBs for goods, services, information technology
and Public Works Projects. The solicitation must be valued at
more than $5000 and the State agency must obtain price quotes
from at least two California certified SBs/MBs.
Prior/Related Legislation
SB 1176 (Galgiani, 2016) would revise the definition of a small
business and microbusiness by increasing the dollar amount
threshold for a small business to $30 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. (Pending in Senate
Governmental Organization Committee)
AB 1218 (Weber, 2015) would make significant adjustments to
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contracting performance goals and program participation
reporting associated with the DVBE Program. (Held on the Senate
Suspense File)
AB 1568 (Grove, 2014) would have required state agencies that
opt to acquire goods, services, or information technology
through a specified SB/DVBE contracting option to solicit at
least three quotes, and obtain at least two quotes before
awarding the contracts. (Held on the Senate Suspense File)
SB 297 (Roth, 2014) would have increased the annual statewide
participation goal for DVBE state contracts from three percent
to five percent. (Held in Assembly Jobs, Economic Development
and the Economy Committee)
AB 218 (Dickinson, Chapter 699, Statutes of 2013) prohibits a
state or local agency from asking employment applicants to
disclose information regarding their conviction history until
the agency has determined an applicant meets the position's
minimum employment qualifications.
AB 177 (Ruskin, Chapter 342, Statutes of 2010) increased and
conformed penalties for persons who falsely engage in activities
relating to the Act.
AB 31 (Price, Chapter 212, Statutes of 2009) increased the
maximum contract threshold amount for awards to small
businesses, including microbusinesses, and DVBEs under the
state's streamlined procurement process, from $100,000 to
$250,000, as specified.
FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: No
SUPPORT:
Roberts Enterprise Development Fund (Sponsor)
The Bread Project
California Association of Local Conservation Corps
California Black Chamber of Commerce
Center for Employment Opportunities
Civicorps
Coalition for Responsible Community Development
Conservation Corps North Bay
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Fresno Economic Opportunities Commission
Fresno Local Conservation Corps
The Giving Keys
Goodwill Industries of San Francisco, San Mateo, and Marin
Counties
Goodwill of Southern California
Homeboy Industries
Jewish Vocational Services
Juma Ventures
Kingdom Causes Bellflower
LA Conservation Corp
L.A. Kitchen
LittleFootprint Lighting, Inc.
Los Angeles County
Neighborhood Industries
New Door Ventures
Rubicon Programs
San Jose Conservation Corps & Charter School.
Third Sector Capital Partners
Urban Corps of San Diego County
Weingart Center Association
OPPOSITION:
None received
ARGUMENTS IN SUPPORT: The California Association of Local
Conservation Corps argues that, "currently, it is difficult for
our members to contract directly with the State because they do
not meet State small business requirements as a result of their
nonprofit status and annual number of employees. Even when the
State recognizes the benefits of contracting directly with Corps
due to their expertise and social mission, the current rules
make it virtually impossible. This bill would enable the Corps
to secure state business development services and procurement
preferences which will expand the opportunities for individuals
facing barriers to employment."
Goodwill Industries argues that, "a significant contributor to
poverty is a set of barriers that keep millions of youth and
adults off career pathways. Educational failure, criminal
backgrounds, and substance abuse take millions of Americans out
of the workforce, while transportation barriers, language and
literacy, physical and mental disability, lack of affordable
child care, and homelessness prevent millions more from
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achieving economic success."