BILL ANALYSIS
Bill No: SB
643
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2009-2010 Regular Session
Staff Analysis
SB 643 Author: Denham
As Introduced: February 27, 2009
Hearing Date: April 28, 2009
Consultant: Art Terzakis
SUBJECT
California Prompt Payment Act: DVBEs
DESCRIPTION
SB 643 adds "disabled veteran business enterprise" (DVBE)
to the definition of small business, found within the
California Prompt Payment Act (Government Code Section 927,
et seq.), so that certified DVBEs receive the same prompt
payment protections afforded other California small
businesses.
EXISTING LAW
Existing law, the Prompt Payment Act, requires state
agencies to pay properly submitted, undisputed invoices
within 45 calendar days of initial receipt. If the
requirement is not met, state departments must
automatically calculate and pay the appropriate late
payment penalties as specified in Government Code Section
927, et seq. Currently, the penalty rate for small
businesses (including non profits) with contracts less than
$500k and gross receipts of less than $5 million is 0.25%
per calendar day. Penalties are not allowed to be waived,
altered, or limited by the state agency or the contractor
except for non-profits when there is no state budget or a
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declaration of a major disaster. Prompt payment penalties
for construction firms are addressed separately under
Public Contract Code Section 10261.5.
Existing law provides that in state contracts for
construction, the procurement of goods, information
technology, or the delivery of services, a small business
(SB), as defined, shall receive a 5% bid preference.
Under existing law, contracts awarded by state entities for
professional bond services, construction, and acquisition
of materials, supplies, and services are required to have
annual statewide participation goals of not less than 3%
for disabled veteran-owned business enterprises (DVBEs).
Contractors must achieve these minimum participation goals
or demonstrate that they have made a "good faith effort" to
achieve participation.
Every year, each state agency must submit an annual report
that tracks contract award activity involving DVBEs and
SBs. The report must demonstrate that the various
participation goals have been met or exceeded. If the
minimum goals are not met, the agency must provide a sound
justification and specify remedial action that will be
taken to attain or exceed the goal(s) the following year.
BACKGROUND
History: In 1989, SB 1517 - Dills (Chapter 1207)
established a 3% participation goal for disabled veteran
business enterprises (DVBEs), applicable to all contracts
including those for professional bond services, to assist
and encourage DVBE participation in state contracting
opportunities. In 1990, SB 2398 - Dills (Chapter 516)
extended the DVBE participation program to contracts of the
University of California, the Department of Corrections and
specified public utilities. In 1993, SCR 18 - Dills,
encouraged local entities to enact ordinances and implement
policies promoting the participation of DVBEs in
construction and procurement contracts. Also, SJR 13 -
Dills of 1993, requested that Congress establish and
maintain DVBE programs. Several years ago, Congress
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expressed support for service disabled and prisoner of war
veterans by enacting a 3% participation goal for DVBEs that
is modeled after California law.
The DVBE and Small Business (SB) Programs were established
to increase business opportunities for the DVBE and SB
communities with the State of California; thereby
stimulating the state's overall economy. The programs are
designed to help DVBEs and SBs participate in a more level
playing field with certain advantages when competing
against other non-DVBEs and non-SBs for state contracts.
Purpose of SB 643: According to the author's office, this
measure is simply intended to give certified DVBEs the same
prompt payment protections that California now provides for
certified small businesses. The author's office states
that certified small businesses are guaranteed prompt
payment when they enter into business with the state under
the premise that many of these businesses cannot afford to
go long periods without payment.
Theoretically, DVBEs are guaranteed prompt payment, but
there is no penalty for violating this provision. The
author's office contends that there are fewer than 190
businesses in the state that qualify for DVBE status but
not small business status. This measure is intended to
assure that DVBEs receive the same prompt payment
protections that are available to small businesses.
Comments: This measure passed out of the Senate Committee
on Veterans Affairs on April 14, 2009 on a vote of 7-0. SB
643 is also identical to SB 159 (Wyland) of 2008 which
received a favorable vote (8-0) in the Senate G.O.
Committee but eventually succumbed to the Assembly
Appropriations Committee - Suspense File.
PRIOR/RELATED LEGISLATION
SB 642 (Denham) 2009-10 Session. Would make specified
changes to state procurement procedures for the purpose of
increasing small business and DVBE participation in state
contracts. (Pending in this Committee)
SB 553 (Wiggins) 2009-10 Session. Among other things,
would make nonprofit public benefit corporations eligible
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for late payment penalties under the Prompt Payment Act.
(Pending in this Committee)
SB 467 (Dutton) 2009-10 Session. Would authorize agencies
and departments to award contracts of less than $25,000 for
goods or services by California certified small businesses,
microbusinesses, or DVBEs without seeking an exemption of
the Prison Industries Authority (PIA) mandate. (Pending in
Senate Appropriations Committee)
AB 727 (Nielsen) 2009-10 Session. Would make resource
conservation districts (RCDs) eligible for specified late
payment penalties, pursuant to the state's Prompt Payment
Act, when state agencies are delinquent in making contract
payments to RCDs. (Pending in Assembly Appropriations
Committee)
AB 31 (Price) 2009-10 Session. Would make several changes
to state procurement procedures for the purpose of
increasing small business, including microbusiness and DVBE
participation rates. (Pending in Assembly Appropriations
Committee)
SB 159 (Wyland) 2007-08 Session. Identical to SB 643
(Denham) of 2009. (Died in Assembly Appropriations
Committee)
AB 2992 (LaMalfa) 2007-08 Session. Identical to AB 727
(Nielsen) of 2009. (Vetoed; The Governor vetoed a
substantial number of bills with the same message, as a
result of the delay in passing the 2008-09 State Budget, he
would only sign bills that were "the highest priority for
California.")
SUPPORT: None on file as of April 24, 2009.
OPPOSE: None on file as of April 24, 2009.
FISCAL COMMITTEE: Senate Appropriations Committee
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