BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 817 (Correa)
Hearing Date: 05/09/2011 Amended: As Introduced
Consultant: Maureen Ortiz Policy Vote: V.A. 8-0
B.P.&E.D. 8-0
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BILL SUMMARY: SB 817 restructures the criteria for businesses
to qualify as a disabled veteran business enterprise (DVBE).
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
Admin expenses $283
$660 $660 General
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
According to the Department of General Services (DGS), this bill
will result in significant one-time workload and costs of
approximately $283,000 in FY 2011-12 as follows: $61,000
staffing costs for 1.3 PY to work with staff counsel to develop
regulations, coordinate the rulemaking hearing, and prepare the
rulemaking package; $61,000 in legal fees for consultation,
drafting, and review of proposed regulations; $11,000 for
services associated with the rulemaking hearing including
videography, Internet streaming, court reporter, sign language
interpreter, and other persons providing assistance to persons
with disabilities; and, $150,000 to modify the information
technology systems for small business and DVBE certification to
include Business Utilization Plan certifications, including
maintaining a database, online application system, and automated
query function on the department's Website.
Additionally, DGS anticipates the need for 14 PYs with annual
ongoing costs of approximately $660,000 to review, certify,
oversee, and audit BUPs, train departments on the BUP reporting
requirements, prepare legislative reports, and develop and
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implement forms, processes, and procedures. Cost estimates also
include expenses to prepare and distribute marketing materials
for the BUP program, organize and conduct outreach events,
handle telephone and Internet inquiries, and providing technical
assistance to contractors using BUPs. SB 817 will also result
in unknown costs to awarding departments associated with the
tracking and reporting requirements, additional expenses to DGS
to hold public hearings required for denial of plans, and an
increase in overall state contracting costs.
SB 817 expands the Business Utilization Plan (BUP) to allow
general contractors an alternative means of receiving Disabled
Veteran Business Enterprise participation credit on their state
contract solicitations. It will allow the use of the DVBE
bidding incentive to those general contractors that have an
approved BUP. However, the use of a BUP does not apply towards
a department's totals in meeting its required 3% DVBE
participation goals which means state departments will need to
offer additional incentives to achieve DVBE participation goals.
In 2008 the state awarded $185 million in contracts to DVBE
firms.
SB 817 will revise the requirements imposed on DVBE firms to
require a disabled veteran to have at least a 10%
service-connected disability and require a DVBE to submit income
tax information to the Office of Small Business and Disabled
Veteran Business Enterprise Services.
Specifically, SB 817 does the following:
a) Permits direct and indirect costs to be applied to BUP
goals.
b) Expands the list of contract types for which approved BUPs
must be accepted.
c) Permits bidders to amend their BUP in the event a
solicitation specifies higher participation goals than those in
the bidder's original BUP.
d) Provides definitions relating to DVBEs and criteria for
businesses to be classified as a DVBE in the Public Contract
Code.
e) Updates the statute to refer to the Office of Small and
Minority Business as the Office of Small Business and Disabled
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Veterans Business Enterprise Services.
Each state agency is required, when awarding contracts, to meet
or exceed an annual 3% DVBE participation goal. This goal,
however, is rarely reached and some areas of state contracting
do not have enough DVBEs in that particular line of work. A
provision in the 2009 Budget Act eliminated the ability of
contractors to get bid preference for providing a "good faith
effort" to engage DVBEs as subcontractors.
The intent of the BUP is to encourage prime contractors to use
DVBEs in routine day to day operations that may not be directly
associated with a specific state contract. It will allow those
contractors to still get some preference credit for indirect
costs by using a DVBE on a regular basis for items such as
insurance even though insurance is not a specific item of the
state contract itself, or overhead, administrative costs,
employee benefits, office supplies, landscaping, travel,
accounting, and security costs.
This bill is identical to AB 2627 (Nielsen) which was held in
this committee last year at the author's request.