BILL ANALYSIS �
Bill No: SB
67
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2011-2012 Regular Session
SB 67 Author: Price
As Introduced: January 10, 2011
Hearing Date: March 22, 2011
Consultant: Paul Donahue
SUBJECT
Public Contracts: Small Business Participation
DESCRIPTION
This bill authorizes the Department of General Services
(DGS) to direct all state agencies to establish 25%
participation goal for California certified small
businesses in state procurement and contracts. If DGS
elects to so direct state agencies, the following apply:
1) All state agencies that engage in state procurement and
contracting must implement procurement and contract
processes in order to meet the 25% small business
participation goal each fiscal year.
2) DGS may establish policies and procedures to monitor the
progress of state agencies toward meeting the 25% goal, and
may regularly share information with the Small Business
Advocate on each agency's progress toward meeting the
annual goal, including providing copies of corrective
action plans.
3) DGS may require a state agency that has not achieved its
fiscal year goal of 25% small business participation goal
to submit an implementation and corrective action plan, and
may continue to require annual updates to the plan as long
as the agency fails to meet or exceed the goal. DGS may
establish criteria for these plans and publish them in the
State Administrative Manual (SAM).
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4) DGS may reasonably assist state agencies in improving
small business participation in their contracting,
including entering into memoranda of understanding with
agencies that haven't met the goal.
This bill directs DGS to establish policies for state
agencies on how to use the existing Small Business
Procurement and Contract Act, and to incorporate the
policies in the SAM and the State Contracting Manual.
This bill requires DGS to actively promote small business
certification.
The provisions of this bill would become operative on July
1, 2012.
EXISTING LAW
Existing law requires DGS and other state agencies that
award state contracts for goods, services, information
technology and for construction of state facilities to
establish goals for the extent of participation of small
businesses in the award of these public contracts.<1>
Existing law establishes a 25% small business participation
goal in all construction projects financed with proceeds of
the infrastructure bond acts of 2006.<2>
Governor's Executive Order S-02-06 , issued in March 2006,
requires all state agencies, departments, boards and
commissions to achieve a goal of 25% small business
participation in state procurements and contracts.<3>
Under current law , a state agency may award a contract for
the acquisition of goods, services, or information
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<1> Govt. Code � 14838
<2> Govt. Code � 14838.1, enacted by AB 761 (Coto), Chap.
611, Stats. 2007.
<3> The order directs state entities not achieving the 25%
participation goal to submit to DGS an Implementation and
Corrective Action Plan. The order also directs DGS to
actively promote small business certification and help
certified small businesses market their products, goods,
and services to the state.
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technology that has a value between $5000 and $250,000 to a
certified small business or to a disabled veteran business
enterprise (DVBE), as long as the agency obtains price
quotations from two or more certified small businesses, or
from two or more DVBEs. Contracts awarded pursuant to this
law are exempt from the advertising, bidding, and protest
provisions in the State Contract Act.<4>
BACKGROUND
Purpose : According to the author, small business is a key
economic driver of job growth and economic development and
continues to play a leading role in the state's economic
recovery efforts. By codifying in state law Executive Order
S-02-06, SB 67 would ensure that the state continues to
meet or exceed the 25% overall annual certified business
participation goal in the awarding of state contracts.
Small Business Procurement and Contract Act :<5> Enacted
over 30 years ago, this law directs DGS and other state
agencies that award state contracts to establish small
business participation goals. In 1989, the Legislature
added a disabled veteran business preference to state
procurement laws.
For purposes of the Act, a "small business" is defined as
an independently owned and operated business not dominant
in its field of operation, with its principal offices in
California, and which, together with affiliates, has 100 or
fewer employees, and average annual gross receipts of $14
million dollars or less over the previous three years, or
is a manufacturer with 100 or fewer employees.
Small businesses certified by DGS are entitled to a 5%
preference in bidding on state contracts for goods,
services, information technology and for state public
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<4> Govt. Code � 14838.5
<5> Govt. Code � 14835 et seq.
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construction contracts.<6> The state is also required to
award a 5% preference in contracts for goods to a
California-based company certifying that a certain amount
of labor required to perform the contract is performed at a
work site or work sites located in a distressed area or
within an enterprise zone.
Although the law doesn't specify a percentage small
business participation goal, there have been several
gubernatorial executive orders in recent years that have
set a 25% goal for small business and a 3% DVBE
participation in state procurement contracts.<7>
State efforts to effectively achieve small business and
DVBE participation in state contracting have been
inconsistent over the years. The 25% small business
participation goal was first established by executive order
in 2001, but that participation goal has been reached only
3 times in the last 11 years. Most recently, DGS reports
that in 2008-2009, the state reached its 25% small business
participation goal by awarding $2.5 billion of the $8.92
billion in total state contracts to small businesses.
Support : The California Small Business Association
believes that the bill will provide a more level playing
field for small businesses to compete in the state
procurement process. They believe that this goal setting
should be codified rather than be issued as an Executive
Order. The Kern Minority Contractors Association believes
this bill will benefit all small business owners throughout
California.
The National Federation of Independent Business supports
codification of the Executive Order that established the
goals to ensure that contracting officials have the tools
they need to promote robust small business in state
contracts. The Sacramento Black Chamber of Commerce
believes this bill would increase the level of involvement
of small businesses in state contracting. Small Business
California notes that information tracking provisions in
the bill are important so that compliance by the various
state agencies can be identified.
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<6> Govt. Code � 14838. Section 14838 also provides that
if an award is to be made to the lowest responsible bidder,
the small business preference is 5% of the lowest
responsible bidder meeting specifications. When the award
is to be made to the bidder with the highest score based on
evaluation factors in addition to price, the small business
preference is equal to 5% of the highest responsible
bidder's total score. In addition, preferences shall not
be given to a noncompliant bidder, shall not exceed $50,000
for any bid, and cannot exceed $100,000 in any case when
combined with preferences or considerations provided in
other laws.
<7> See D-37-01 (2001), D-43-01(2001), S-02-06 (2006) and
S-11-06 (2006).
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PRIOR/RELATED LEGISLATION
AB 150 (Perea) 2011-2012 Session. Authorizes DGS to direct
all state agencies to establish the goal to achieve 25%
small business participation in state procurements and
contracts, and would require state agencies to report to DGS
statistics regarding small business participation in agency
contract awards. (Pending in Assembly policy committee)
AB 309 (Price) 2009-2010 Session. Would have required
institution of a 25% small business participation goal for
all state entities and directed DGS to monitor the progress
of state agencies in meeting this goal. (Held in Assembly
Appropriations)
SB 1108 (Price) 2009-2010 Session. Would have established a
25% small business participation goal for all state
entities. (Held in Senate Appropriations)
AB 761 (Coto) Chap. 611, Stats. 2007. Established a 25%
small business participation goal for contracts related to
revenues expended from the 2006 infrastructure bond
measures.
SB 115 (Florez) Chap. 451, Stats. 2005. Created a DVBE
incentive program for state contracts.
SUPPORT:
California Small Business Association
Kern Minority Contractors Association
National Federation of Independent Business
Natoma Technologies
Sacramento Black Chamber of Commerce
Small Business California
OPPOSE:
Construction Employers' Association
FISCAL COMMITTEE: Senate Appropriations Committee
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