BILL ANALYSIS
AB 177
Page 1
ASSEMBLY THIRD READING
AB 177 (Ruskin)
As Amended January 4, 2010
Majority
ECONOMIC DEVELOPMENT 6-0 APPROPRIATIONS 17-0
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|Ayes:|V. Manuel Perez, Logue, |Ayes:|De Leon, Conway, Ammiano, |
| |Beall, | |Bradford, Charles |
| |Bill Berryhill, Block, | |Calderon, Coto, Davis, |
| |Salas | |Fuentes, Hall, Harkey, |
| | | |Miller, Nielsen, John A. |
| | | |Perez, Skinner, Solorio, |
| | | |Audra Strickland, |
| | | |Torlakson |
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SUMMARY : Increases and conforms penalties for persons who
falsely engage in activities relating to the Small Business
Procurement and Contract Act (Small Business Act), including
small businesses, microbusinesses, and disabled veteran-owned
business enterprises (DVBE). Specifically, this bill :
1)Extends revocation of small business certification and
prohibition on further state business for certain specified
fraudulent activities.
2)Adds a new penalty for making false statements on DVBE
participation in contracts.
3)Extends revocation of DVBE certification and prohibition on
further state business for certain specified fraudulent
activities.
4)Terminates other state contracts for certain specified
fraudulent activities related to small business, including
microbusiness, and DVBE procurement.
5)Authorizes the Department of General Services (DGS) and the
awarding department to recover costs incurred during their
investigation into specified violations under the Small
Business Act.
AB 177
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EXISTING LAW :
1)Requires each state agency to annually meet a 3% DVBE
procurement goal and a 25% small business goal, based on the
aggregate amount of contracts let over the year.
2)Establishes a 5% preference for bids made by a certified small
business, as defined. Non-small businesses that subcontract
at least 25% of their contracts with small businesses may also
qualify for the small business bidder's preference.
3)Establishes 5% preference for bids made a certified DVBE.
4)Defines a small business as a business that is independently
owned, not dominant in its field of operation, domiciled in
California, employing 100 or fewer employees, and earning $10
million or less in average annual gross revenues for the three
previous years.
5)Defines a DVBE as a business entity that is at least 51% owned
or controlled by one or more disabled veterans, as specified.
FISCAL EFFECT : According to the Assembly Appropriation
Committee, the costs associated with this legislation should be
minor and absorbable within existing resources.
COMMENTS :
1)The purpose of this bill is to address fraudulent behavior by
individuals and businesses who seek to improperly obtain or
retain small business and DVBE certification, bidding
preferences or participation in state contracts.
Testimony in legislative hearings by DGS, small business
groups and DVBE advocates has reported that some current and
prospective state contractors have fraudulently represented
that they are a certified small business, DVBE, or that they
will be utilizing the services of a certified small business
or DVBE subcontractor.
In other reported cases, individuals and businesses have made
false statements in order to assist an ineligible business to
become certified or to help them retain their improperly
obtained certification once the business is being investigated
AB 177
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by state officials. Still other individuals and businesses
have fraudulently submitted bid packages that commit to using
a certified DVBE or small business, but in actuality the
subcontract is never let or the contracted work is
inconsequential and only included in order to obtain a bid
preference.
Existing law contains penalties for contractors which
fraudulently bid; however, examples of contractor abuses in
the small business and DVBE programs are increasing. This
bill would substantially increase penalties for a variety of
fraudulent behaviors, including extending the term of
revocations of certification and suspensions from applying for
or participating in state contracts.
2)These provisions were originally included in SB 1942 (Ruskin)
from the 2007-08 Session, which was vetoed. According to the
Governor's message, "The historic delay in passing the
2008-2009 State Budget has forced me to prioritize the bills
sent to my desk at the end of the year's legislative session.
Given the delay, I am only signing bills that are the highest
priority for California. This bill does not meet that
standard and I cannot sign it at this time."
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916)
319-2090
FN: 0003602