BILL ANALYSIS Ó
-----------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 1219|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
-----------------------------------------------------------------
UNFINISHED BUSINESS
Bill No: SB 1219
Author: Hancock (D), et al.
Amended: 8/19/16
Vote: 21
SENATE GOVERNMENTAL ORG. COMMITTEE: 11-0, 4/12/16
AYES: Hall, Berryhill, Block, Gaines, Galgiani, Glazer,
Hernandez, Hueso, Lara, McGuire, Vidak
NO VOTE RECORDED: Hill, Runner
SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/27/16
AYES: Lara, Bates, Beall, Hill, McGuire, Mendoza, Nielsen
SENATE FLOOR: 38-0, 6/1/16
AYES: Allen, Anderson, Bates, Beall, Berryhill, Block, De
León, Fuller, Gaines, Galgiani, Glazer, Hall, Hancock,
Hernandez, Hertzberg, Hill, Hueso, Huff, Jackson, Lara, Leno,
Leyva, Liu, McGuire, Mendoza, Mitchell, Monning, Moorlach,
Morrell, Nguyen, Nielsen, Pan, Pavley, Roth, Stone, Vidak,
Wieckowski, Wolk
NO VOTE RECORDED: Cannella, Runner
ASSEMBLY FLOOR: 79-1, 8/23/16 - See last page for vote
SUBJECT: Small Business Procurement and Contract Act:
employment social enterprises
SOURCE: Roberts Enterprise Development Fund
DIGEST: This bill establishes a new procurement preference for
employment social enterprises, as defined, under the Small
Business Procurement and Contract Act, as specified.
SB 1219
Page 2
Assembly Amendments (1) redefine "employment social enterprise,"
(2) redefine "enterprise participant who faces multiple barriers
to employment," (3) specify that in order to qualify for
incentives, an employment social enterprise shall meet specified
criteria, (4) require the Department of General Services (DGS)
to include in their annual report, the level of participation by
employment social enterprises in state contracting, (5) delay
the implementation date from July 1, 2017, to October 1, 2018,
(6) add language which would incorporate amendments should this
bill and SB 1176 (Galgiani, 2016) both be enacted, (7) make
legislative findings in support of the bill, (8) add coauthors,
and (9) make technical changes.
ANALYSIS:
Existing law:
1)Grants, through the Small Business Procurement and Contract
Act, preference for small businesses (SBs) and microbusinesses
(MBs) 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 SB, including a MB and a
disabled veteran business enterprise (DVBE), without complying
with certain competitive bidding requirements, provided the
agency obtains price quotations from at least two SBs,
including MBs, or two DVBEs.
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 SBs and
disabled veteran businesses and noting which SBs also qualify
as MBs.
SB 1219
Page 3
4)Prescribes penalties for SBs or MBs 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" 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" 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 " 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.
SB 1219
Page 4
This bill:
1)Establishes a new procurement preference for employment social
enterprises, as defined, under the Small Business Procurement
and Contract Act, as specified.
2)Defines "employment social enterprises," as a social
corporation, benefit corporation, or nonprofit corporation
based in California, as specified. Requires, among other
things, that the enterprise earn 51% or more of its revenue
from the production or assembly of goods or the provision of
services, or a combination of both and be comprised of at
least 80% of enterprise participants who face multiple
barriers to employment, as defined.
3)Requires state agencies to expand procurement goals to include
employment social enterprises and give the same special
consideration as currently provided to small businesses and
microbusinesses, including the reduction of required
experience and the level of inventory normally required for
state contracting, among other potential adjustments.
4)Provides a 5% bid preference to employment social enterprises
for state contract bid packages, including a contract with the
California State University. A single preference may not
exceed $50,000 or when added to other preferences, the total
value cannot exceed $100,000. These are the same provisions
as apply to small businesses and microbusinesses.
5)Expands the duties of the Office of the Small Business and
Disabled Veteran Business Enterprise Services to include
support to employment social enterprises.
6)Requires DGS to certify and determine eligibility of
employment social enterprises, and provide access to a public
list of certified employment social enterprises online for
SB 1219
Page 5
local agencies to confirm certification. Authorizes DGS to
assign certification requirements, as specified, to another
state or local entity.
7)Makes related changes to legislative intent and findings and
declarations.
8)Specifies that the changes to the state procurement process
made by this bill become operative on October 1, 2018.
9)Adds a new section to the bill that incorporates amendments to
various sections of the Government Code should SB 1219 and SB
1176 both be enacted.
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
SB 1219
Page 6
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
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 SB preference within the state's procurement
process. The goal is to increase the number of contracts
between the state and SBs. The Act states that it is the policy
of the State of California to aid the interests of SBs 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 SBs and MBs are
entitled to a five percent bid preference on applicable state
solicitations. Certified SBs and MBs are eligible for the
State's Small Business Participation Program. The Program sets
a goal for the use of SBs 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 SB or MB 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.
SB 1219
Page 7
Related/Prior Legislation
SB 1176 (Galgiani, 2016) revises the definition of "small
business" and "microbusiness" for purposes of the Small Business
Procurement and Contract Act by increasing the dollar amount
threshold for a small business to $15 million and for a
microbusiness to $5 million and requires those dollar amounts to
be adjusted to reflect changes in the California Consumer Price
Index, biennially. (Pending on the Assembly Floor)
AB 1218 (Weber, 2015) would have made significant adjustments to
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 the Assembly Jobs, Economic
Development and the Economy Committee)
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: Yes
According to the Assembly Appropriations Committee, one-time
General Fund costs, in the range of $5.5 million to $7.5
million, to make programming changes to FI$Cal to modify system
functionality to accommodate employment social enterprises in
the processing of procurements. As a point of comparison,
developing the certification systems for the small business and
SB 1219
Page 8
disabled veteran business enterprise programs cost roughly $8
million.
In addition, DGS indicates they would need three positions and
$406,000 (special funds) to conduct outreach to employment
social enterprises and departments to make them aware of the new
status, assist employment social enterprises through the
certification process, and review applications and certify
employment social enterprises.
SUPPORT: (Verified8/23/16)
Roberts Enterprise Development Fund (source)
Alliance for Boys and Men of Color
California Association of Local Conservation Corps
California Black Chamber of Commerce
Center for Employment Opportunities
Chrysalis Enterprises
Civicorps
Coalition for Responsible Community Development
Community Housing Partnership
Con10uOu2Farm L3C
Conservation Corps North Bay
Conservation Corps of Long Beach
County of Los Angeles
Fresno Economic Opportunities Commission
Goodwill Industries of San Francisco, San Mateo and Marin, Inc.
Goodwill Industries of Southern California
Homeboy Industries
Insight Center for Community and Economic Development
Isadore Electronics Recycling
Jewish Vocational Services
Juma Ventures
Kingdom Causes, Bellflower
Kitchens for Good
L.A. Kitchen
LA Conservation Corps
SB 1219
Page 9
Legal Services for Prisoners with Children
LittleFootprint Lighting, Inc.
Los Angeles Area Chamber of Commerce
Neighborhood Industries
New Door Ventures
Rubicon Bakers
Rubicon Programs, Inc.
San Jose Conservation Corps
The Bread Project
The Giving Keys
Third Sector Capital Partners
Urban Corps of San Diego County
Weingart Center Association
OPPOSITION: (Verified8/23/16)
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
achieving economic success."
ASSEMBLY FLOOR: 79-1, 8/23/16
SB 1219
Page 10
AYES: Achadjian, Alejo, Arambula, Atkins, Baker, Bigelow,
Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos,
Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh,
Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher,
Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez,
Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger
Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey,
Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes,
McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte,
O'Donnell, Olsen, Patterson, Quirk, Ridley-Thomas, Rodriguez,
Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting,
Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon
NOES: Travis Allen
Prepared by:Felipe Lopez / G.O. / (916) 651-1530
8/23/16 20:19:28
**** END ****