BILL NUMBER: AB 2627 AMENDED
BILL TEXT
AMENDED IN SENATE JUNE 17, 2010
AMENDED IN ASSEMBLY APRIL 8, 2010
INTRODUCED BY Assembly Member Nielsen
FEBRUARY 19, 2010
An act to amend Section 999.2 of the Military and
Veterans Code, relating to veterans. An act to amend
Sections 10115.1, 10115.4, 10115.10, and 10115.15 of the Public
Contract Code, relating to state contracts.
LEGISLATIVE COUNSEL'S DIGEST
AB 2627, as amended, Nielsen. Veterans: contracts:
disabled veteran business enterprises. State
contracts: participation goals.
Existing law establishes participation goals for certain state
contracts with minority business enterprises, women business
enterprises, and disabled veteran business enterprises. These
provisions, with respect to minority and women business enterprises,
were held unconstitutional on the basis of not meeting equal
protection requirements.
The bill would also revise the requirements imposed on disabled
veteran business enterprises to, among other changes, require a
disabled veteran to have at least a 10% service-connected disability
and require a disabled veteran business enterprise to submit
specified income tax information to the Office of Small Business and
Disabled Veteran Business Enterprise Services.
Existing law further requires an awarding state department for
contracts for materials, supplies, or equipment to accept the
submission by a bidder of a minority, women, or disabled veteran
business enterprise utilization plan that has been approved prior to
the solicitation due date by the Department of General Services in
accordance with certain criteria.
This bill would revise the minimum criteria for a business
utilization plan to be approved by the Department of General
Services, as specified. The bill would also expand the types of
contracts to which these provisions apply to include contracts for
commodities, property, goods, professional services, construction
work, or equipment, including information technology goods and
services.
Under existing law, any state governmental entity that awards
contracts for construction and certain related purposes has annual
statewide participation goals of not less than 3% for disabled
veteran business enterprises, as defined. For purposes of these
provisions, existing law defines a "disabled veteran" as a veteran,
as specified, with a service-connected disability who is a resident
of the state.
Existing law deems any disabled veteran business enterprise that
rents equipment to an awarding department to be an equipment broker,
as defined, unless one or more certified disabled veterans have 51%
ownership of the equipment and evidence is submitted in support of
that fact.
This bill would also deem a disabled veteran business enterprise
that rents equipment to a contractor to be an equipment broker, as
specified. The bill would also revise various related definitions
pursuant to those provisions, including "broker" or "agent,"
"equipment," and "equipment broker."
Existing law also prohibits state funds expended for equipment
rented from equipment brokers, as specified, from being credited
toward the 3% goal.
This bill would instead require the broker's commission fees of
state funds expended through a broker or equipment broker to be
credited toward the participation goals as established for disabled
veteran business enterprises.
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 10115.1 of the
Public Contract Code is amended to read:
10115.1. As used in this article, the following definitions
apply:
(a) "Awarding department" 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) "Contract" includes any agreement or joint development
agreement to provide labor, services, material, supplies, or
equipment in the performance of a contract, franchise, concession, or
lease granted, let, or awarded for and on behalf of the State of
California.
(c) "Contractor" means any person or persons, regardless of race,
color, sex, ethnic origin or ancestry, or any firm, partnership,
corporation, or combination thereof, whether or not a minority or
women business enterprise, 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.
(d) "Disabled veteran" means a veteran of the United States
military, naval, or air service who has a service-connected
disability of at least 10 percent or more and who is domiciled in
this state.
(e) "Disabled veteran business enterprise" means a business that
meets all of the following criteria:
(1) The business is at least 51 percent owned by one or more
disabled veterans, except that if the business is a limited liability
company, it is wholly owned by one or more disabled veterans.
(2) The daily business operations are managed and controlled by
one or more disabled veterans. For purposes of this paragraph, the
disabled veteran who manages and controls the business is not
required to be the owner of the disabled veteran business enterprise.
(3) The home office of the business is located in the United
States and is not a branch or subsidiary of a foreign corporation,
foreign firm, or other foreign-based business.
(4) The business has submitted the following income tax
information, as applicable, to the Office of Small Business and
Disabled Veteran Business Enterprise Services:
(A) Complete copies of its federal income tax returns for the
previous year after initial approval by the Department of General
Services. If in operation for less than three years, the business
shall submit its federal income tax returns for each year that it has
operated as a business.
(B) A business that is not a sole proprietorship and rents
equipment to the state shall provide its federal income tax returns
for each disabled veteran owner or the firm shall be deemed to be an
equipment broker.
(d)
(f) "Minority," for purposes of this section, means a
citizen or lawful permanent resident of the United States who is an
ethnic person of color and who is: Black (a person having origins in
any of the Black racial groups of Africa); Hispanic (a person of
Mexican, Puerto Rican, Cuban, Central or South American, or other
Spanish or Portuguese culture or origin regardless of race); Native
American (an American Indian, Eskimo, Aleut, or Native Hawaiian);
Pacific-Asian (a person whose origins are from Japan, China, Taiwan,
Korea, Vietnam, Laos, Cambodia, the Philippines, Samoa, Guam, or the
United States Trust Territories of the Pacific including the Northern
Marianas); Asian-Indian (a person whose origins are from India,
Pakistan, or Bangladesh); or any other group of natural persons
identified as minorities in the respective project specifications of
an awarding department or participating local agency.
(g) "Minority business enterprise" means a business
concern that meets all of the following criteria:
(1) The business is an individual proprietorship, partnership,
corporation, or joint venture at least 51 percent owned by one or
more minorities or, in the case of any business whose stock is
publicly held, at least 51 percent of the stock is owned by one or
more minorities.
(2) A business whose management and daily operations are
controlled by one or more minorities who own the business.
(3) A business concern with its home office located in the United
States which is not a branch or subsidiary of a foreign corporation,
firm, or other business.
(f)
(h) "Women business enterprise" means a business
concern that meets all of the following criteria:
(1) The business is an individual proprietorship, partnership,
corporation, or joint venture at least 51 percent owned by one or
more women or, in the case of any business whose stock is publicly
held, at least 51 percent of the stock is owned by one or more women.
(2) A business whose management and daily operations are
controlled by one or more women who own the business.
(3) A business concern with its home office located in the United
States which is not a branch or subsidiary of a foreign corporation,
firm, or other business.
(g)
(i) "Goal" means a numerically expressed objective that
awarding departments and contractors are required to make efforts to
achieve.
SEC. 2. Section 10115.4 of the Public
Contract Code is amended to read:
10115.4. In implementing this article, the awarding department
shall utilize existing resources such as the Office of Small
and Minority Business and Disabled Veteran Business
Enterprise Services , the federal Minority Business
Development Agency, and the federal Small Business
Administration.
SEC. 3. Section 10115.10 of the Public
Contract Code is amended to read:
10115.10. (a) It shall be unlawful for a person or firm to:
(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, acceptance
or certification as a minority, women, or disabled veteran business
enterprise, for the purposes of this article.
(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
acceptance or certification or denial of acceptance or certification
of any entity as a minority, women, or disabled veteran business
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 which has
requested acceptance or certification as a minority, women, or
disabled veteran business enterprise.
(4) Knowingly and with intent to defraud, fraudulently obtain,
attempt to obtain, or aid another person or firm in fraudulently
obtaining or attempting to obtain, public moneys to which the person
is not entitled under this article.
(5) Establish, or cooperate in the establishment of, or exercise
control over, a firm found to have violated any of paragraphs (1) to
(4), inclusive. Any person or firm who violates this paragraph is
guilty of a misdemeanor and shall be liable for a civil penalty not
to exceed fifty thousand dollars ($50,000) for the first violation,
and a civil penalty not to exceed two hundred thousand dollars
($200,000) for each additional, or subsequent violation.
(6) This section shall not apply to minority and women business
enterprise programs conducted by public utility companies pursuant to
the California Public Utilities Commission's General Order 156.
(b) Any person who violates paragraphs (1) to (4), inclusive, of
subdivision (a) is guilty of a misdemeanor and shall be liable for a
civil penalty not to exceed five thousand dollars ($5,000) for the
first violation, and a civil penalty not to exceed twenty thousand
dollars ($20,000) for each additional or subsequent violation.
(c) Any person or firm that violates subdivision (a) shall, in
addition to the penalties provided for in subdivision (b), be
suspended from bidding on, or participating as either a contractor,
subcontractor, or supplier in, any state contract or project for a
period of not less than 30 days nor and not
more than one year. However, for an additional or subsequent
violation the period of suspension shall be extended for a period of
up to three years. Any person or firm that fails to satisfy the
penalties imposed pursuant to subdivisions (b) and (c) shall be
prohibited from further contracting with the state until the
penalties are satisfied.
(d) The awarding department shall report all alleged violations of
this section to the Office of Small and Minority
Business and Disabled Veteran Business Enterprise Services
. The office Office of Small Business and
Disabled Veteran Business Enterprise Services shall
subsequently report all alleged violations to the Attorney General
who shall determine whether to bring a civil action against any
person or firm for violation of this section.
(e) The office Office of Small Business
and Disabled Veteran Business Enterprise Services shall monitor
the status of all reported violations and shall maintain and make
available to all state departments a central listing of all firms and
persons who have been determined to have committed violations
resulting in suspension.
(f) No awarding department shall enter into any contract with any
person or firm suspended for violating this section during the period
of the person's or firm's suspension. No awarding department shall
award a contract to any contractor utilizing the services of any
person or firm as a subcontractor suspended for violating this
section during the period of the person's or firm's suspension.
(g) The awarding department shall check the central listing
provided by the office to verify that the person, firm, or contractor
to whom the contract is being awarded, or any person or firm being
utilized as a subcontractor by that person, firm, or contractor, is
not under suspension for violating this section.
SEC. 4. Section 10115.15 of the Public
Contract Code is amended to read:
10115.15. (a) Notwithstanding Section 10115.2, when awarding
contracts for commodities, materials, property,
goods, supplies, professional services, construction work,
or equipment, including electronic data processing
information technology goods and services, an
awarding department shall accept the submission by a bidder of a
minority, women, and disabled veteran business enterprise utilization
plan that has been approved prior to the solicitation due date by
the Department of General Services. A business utilization plan shall
be considered approved by the Department of General Services as of
the date submitted to the department so long as the plan meets the
minimum criteria established in paragraphs (1) to (12)
(11) , inclusive, and shall be valid for a
period of one year, unless the department has audited the utilization
plan, as authorized under subdivision (b), and disapproves it for
reasons specified under subdivision (c). The decision of whether to
establish a minority, women, and disabled veteran business enterprise
utilization plan shall be at the option of the vendor. If a bidder
cites an approved utilization plan in response to the minority,
women, and disabled veteran business enterprise participation
requirements of a solicitation that calls for 15 percent
minority-owned, 5 percent women-owned, and 3 percent disabled
veteran-owned business participation, then that utilization plan
shall be considered responsive to the participation goals of the
solicitation document. If a solicitation specifies higher
participation goals than those in the bidder's utilization plan, the
bidder shall meet the goals in the solicitation or submit an
amendment to increase the percentage of specified goals . At a
minimum, the utilization plan shall include the following
information:
(1) A statement of the vendor's minority, women, and disabled
veteran business enterprise utilization plan, including the primary
objectives of the utilization plan.
(2) An If applicable, an explanation
showing sufficient business reasons why the vendor did not meet
minority, women, and disabled veteran business enterprise
participation goals set forth in the vendor's minority, women, and
disabled veteran business utilization plan submitted to, and approved
by, the Department of General Services in the previous year
, if applicable . Further, if the vendor did not meet the
minority, women, and disabled veteran business participation goals in
the previous year, the vendor shall also identify remedial steps it
will take to meet the goals in the current utilization plan.
(3) A statement of the vendor's minority, women, and disabled
veteran business utilization goals for the succeeding year. At a
minimum, these utilization goals shall be equal to the statewide
participation goals set forth in subdivision (c) of Section 10115.
(4) Estimated total dollars to be subcontracted
contracted by the vendor for sales within the
United States for the succeeding year with the State
of California .
(5) Estimated total dollars to be subcontracted by the vendor for
sales within the State of California for the succeeding year.
(6)
(5) Total dollars , expressed as a
percentage of the amount estimated pursuant to paragraph (4),
intended to be subcontracted with each of the following:
(A) Minority business enterprises.
(B) Women business enterprises.
(C) Disabled veteran business enterprise.
(7) Total dollars, expressed as a percentage of the amount
estimated pursuant to paragraph (5), intended to be subcontracted
with disabled veteran-owned business enterprises.
(8)
(6) A representative listing of the products and
services that the vendor anticipates subcontracting, including
an direct and indirect funding. An
identification of the types of subcontracting and overhead costs
planned for minority, women, and disabled veteran business
enterprises.
(7) Direct and indirect costs, as related to disabled veteran
business enterprise participation, may be applied to business
utilization plan goals. For purposes of this paragraph:
(A) "Direct subcontract awards" are subcontracts that are directly
attributable to a specific state contract.
(B) "Indirect costs" are those which, because incurred for common
or joint purposes, are not directly related to a specific contract.
These indirect costs include, but are not limited to, overhead,
general, and administrative costs, such as employee fringe benefits,
health insurance, retirement contributions, janitorial expenses,
office supplies, landscaping, travel costs, accounting, and security
costs. These indirect costs shall not be used for services and
commodities of any direct subcontract award.
(9)
(8) The name of the individual employed by the vendor
who will administer the vendor's utilization plan, including a
description of the duties of the individual.
(10)
(9) A description of the efforts that the vendor will
undertake to ensure that minority, women, and disabled veteran
business enterprises will have an equitable opportunity to compete
for contracts.
(11)
(10) A listing of the records and reports that the
vendor will maintain to demonstrate the practices and procedures that
have been adopted to comply with the requirements and goals of the
utilization plan.
(12)
(11) Affirmation that the vendor met the statewide
minority, women, and disabled veteran business enterprise utilization
goals for the previous year, if applicable.
(b) The Department of General Services shall conduct random audits
of the submitted business utilization plans to determine
compliance with this article, and shall retain on file all submitted
business utilization plans for auditing purposes. During
any audit of a submitted business utilization plan, the
Department of General Services may ask a vendor to submit a list of
all the minority, women, and disabled veteran business enterprises
included as subcontractors in the vendor's business utilization
plan for the previous year. This information shall remain
confidential. Nothing in this section shall be construed to require
the Department of General Services to audit all of the minority,
women, and disabled veteran business enterprise utilization plans
submitted by individual vendors. The Department of General Services
may establish appropriate fees to cover the actual costs of
conducting random audits and retaining on file all submitted plans.
(c) (1) At any time, the Department of General Services may
disapprove a vendor's minority, women, and disabled veteran business
enterprise utilization plan for any of the following reasons:
(A) The business utilization plan fails to evidence a
vendor's intention to comply fully with the statewide minority,
women, and disabled veteran business enterprise goals for the
succeeding year, as indicated by failure of the business
utilization plan to contain the information specified in subdivision
(a).
(B) The business utilization plan fails to evidence
sufficient business reasons for failure to achieve the minority,
women, and disabled veteran business enterprise goals set forth in a
business utilization plan submitted in the previous year,
if applicable.
(C) The business utilization plan fails to evidence
sufficient remedial steps the vendor will take if the vendor did not
meet the minority, women, and disabled veteran business participation
goals in the previous year, if applicable.
(2) If a vendor's business utilization plan is
disapproved, the vendor may not submit a new business
utilization plan to the department for a period of one year from the
date of disapproval. Prior to disapproval of a vendor's business
utilization plan, the vendor shall be entitled to a public
hearing and to five days' notice of the time and place thereof. The
notice shall state the reasons for the hearing.
(3) A vendor that submits a minority, women, and disabled veteran
business utilization plan that is approved by the Department of
General Services, and that is subsequently awarded a contract to
which the vendor would not otherwise have been entitled, and
who that fails to evidence intention to fully
comply with the minority, women, and disabled veteran business
enterprise goals in the business utilization plan, or
fails to evidence sufficient business reasons for failing to achieve
the minority, women, and disabled veteran business enterprise goals
set forth in the business utilization plan, shall:
(A) Pay to the state any difference between the contract amount
and what the state's cost would have been if the contract had been
properly awarded.
(B) In addition to the amount specified in subparagraph (A), be
assessed a penalty in an amount of not more than 10 percent of the
amount of the contract involved.
(C) Be ineligible to transact any business with the state for a
period of not less than three months and not more than 24 months.
Prior to imposition of any sanction under this chapter, the
contractor or vendor shall be entitled to a public hearing and to
five days' notice of the time and place thereof. The notice shall
state the reasons for the hearing.
SECTION 1. Section 999.2 of the Military and
Veterans Code is amended to read:
999.2. (a) Notwithstanding any other provision of law, contracts
awarded by any state agency, department, officer, or other state
governmental entity, including school districts when they are
expending state funds for construction, professional services (except
those subject to Chapter 6 (commencing with Section 16850) of Part 3
of Division 4 of Title 2 of the Government Code), materials,
supplies, equipment, alteration, repair, or improvement shall have
statewide participation goals of not less than 3 percent for disabled
veteran business enterprises. These goals apply to the overall
dollar amount expended each year by the awarding department.
(b) For purposes of this section:
(1) "Broker" or "agent" means any individual, entity, contractor,
or any combination thereof, that does not have title, possession,
control, and risk of loss of materials, supplies, services, or
equipment provided to an awarding department, unless one or more
certified disabled veterans has 51 percent ownership of the quantity
and value of the materials, supplies, services, and of each piece of
equipment, materials, or supplies provided under the contract or
subcontract.
(2) "Equipment" means any piece of equipment that is used or
provided for sale or rental to any state agency, department, officer,
other state governmental entity, or contractor, including equipment
for which operators are provided.
(3) "Equipment broker" means any broker or agent who rents
equipment to an awarding department or contractor.
(c) A disabled veteran business enterprise that rents equipment to
an awarding department or contractor shall be deemed to be an
equipment broker unless one or more disabled veterans has 51-percent
ownership of the quantity and the value of each piece of equipment.
If the equipment is owned by one or more disabled veterans, each
disabled veteran owner, prior to performance under any contract or
subcontract, shall submit to the awarding department a declaration
signed by the disabled veteran owner stating that the owner is a
disabled veteran and providing the name, address, telephone number,
and tax identification number of the disabled veteran owner. Each
disabled veteran owner shall submit his or her federal income tax
returns to the administering agency pursuant to subdivision (g) as if
he or she were a disabled veteran business enterprise. The disabled
veteran business enterprise of a disabled veteran owner who fails to
submit his or her tax returns will be deemed to be an equipment
broker.
(d) A disabled veteran business enterprise that rents equipment to
an awarding department or contractor shall, prior to performing the
contract, submit to the awarding department a declaration signed by
each disabled veteran owner and manager of the enterprise stating
that the enterprise obtained the contract by representing that the
enterprise was a disabled veteran business enterprise meeting and
maintaining all of the requirements of a disabled veteran business
enterprise. The declaration shall include the name, address,
telephone number, and tax identification number of the owner of each
piece of equipment identified in the contract.
(e) Of state funds expended through a broker or equipment broker,
pursuant to contracts awarded under this section, the broker's
commission fees only shall be credited toward the participation goals
established for disabled veteran business enterprises.
(f) A disabled veteran business enterprise that is a broker or
agent and that obtains a contract pursuant to subdivision (a) shall,
prior to executing the contract, disclose to the awarding department
or contractor that the business is a broker or agent. The disclosure
shall be made in a declaration signed and executed by each disabled
veteran owner and manager of the enterprise, declaring that the
enterprise is a broker or agent, and identifying the name, address,
and telephone number of the principal for whom the enterprise is
acting as a broker or agent.
(g) (1) A disabled veteran business enterprise, and each owner
thereof, shall, at the time of certification, submit to the
administering agency complete copies of the enterprise's federal
income tax returns for the three previous tax years.
(2) A disabled veteran business enterprise, and each owner
thereof, shall submit to the administering agency complete copies of
the enterprise's federal income tax returns that have a
postcertification due date, on or before the due date, including
extensions.
(3) A disabled veteran business enterprise that, and each owner
thereof who, has not submitted to the administering agency complete
copies of the enterprise's federal income tax returns for the three
tax years preceding certification nor for each postcertification tax
year for which a return was required to be filed, shall have 90 days
to submit those returns.
(4) A disabled veteran business enterprise that fails to comply
with any provision of this subdivision shall be prohibited from
participating in any state contract until the disabled veteran
business enterprise complies with the provisions of this subdivision.
Funds expended involving a disabled veteran business enterprise
during any period in which that enterprise is not in compliance with
the provisions of this subdivision shall not be credited toward the
awarding department's 3-percent goal.
(h) A disabled veteran business enterprise that fails to maintain
the certification requirements set forth in this article shall
immediately notify the awarding department and the administering
agency of that failure by filing a notice of failure that states with
particularity each requirement the disabled veteran business
enterprise has failed to maintain.