BILL ANALYSIS �
AB 1734
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Date of Hearing: April 30, 2014
ASSEMBLY COMMITTEE ON ACCOUNTABILITY AND ADMINISTRATIVE REVIEW
Jim Frazier, Chair
AB 1734 (Jones-Sawyer) - As Amended: April 23, 2014
SUBJECT : Public contracts: small business participation:
disabled veterans
SUMMARY : Requires each state agency to establish and achieve a
goal of 25% small business (SB) participation and an annual
phased-in goal of 5% disabled veteran business enterprises
(DVBE) participation in state contracting. Specifically, this
bill:
1)Requires all state agencies to establish and achieve an annual
goal of 25% SB participation.
2)Makes heads of agencies responsible for meeting the 25% annual
goal and reporting to the Department of General Services (DGS)
on their agency's progress.
3)Requires agencies that fail to meet the 25% annual goal to
submit a corrective action plan to DGS within 45 days of the
close of any fiscal year.
4)Requires DGS to regularly monitor agencies' progress in
meeting the 25% annual goal and regularly share related
information with the Office of the Small Business Advocate
(OSBA), including corrective action plans.
5)Directs DGS and the OSBA to assist agencies in implementing
their corrective action plans to the extent feasible.
6)Requires all state agencies to apply the existing SB/DVBE
contracting option to contracts under $100,000 and
construction contracts under $120,000.
7)Requires DGS to collaborate with the OSBA to provide outreach
and actively promote SB certification.
8)Clarifies that the SB provisions of this bill apply to the
University of California, the California State University, and
the California Community Colleges when contracting with state
funds.
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9)Increases the state's annual DVBE procurement participation
goal to 5% over a four year period as follows: 3.5% in Fiscal
Year (FY) 2014-15, 4% in FY 2015-16, 4.5% in FY 2016-17, and
5% in FY 2017-18 and thereafter.
10)Requires DGS to modify the existing DVBE incentive program to
provide for a higher incentive when the bid comes from a DVBE
than from a non-DVBE prime contractor that commits to using a
DVBE subcontractor.
11)Requires the California Department of Veterans Affairs
(CalVet) to establish a system for tracking the effectiveness
of its efforts to promote the DVBE program and maintain
complete records of its promotional events, as specified.
12)Increases the advocacy and reporting responsibilities of the
California DBVE Program Advocate, a position appointed by the
Secretary of CalVet to oversee promotion of the DVBE program.
13)Requires agency-level DVBE liaisons to track the impact of
their promotional events.
14)Requires DGS, for contracts over $100 million, to certify,
prior to the issuance of the bid request, that the awarding
agency has met their DVBE participation goals in two of the
last three years and will likely meet their DVBE goal in the
current year.
15)Requires DGS to report on the use of DVBE utilization plans,
as specified. Current law allows agencies to use these plans
to fulfill their DVBE participation goals if certain
conditions are met.
EXISTING LAW :
1)Designates the DGS as the lead purchasing and procurement
agency for the State of California tasked with administering
the SB and DVBE certification programs.
2)Requires certain state contracts to have annual statewide
participation goals of at least 3% for DVBEs and 25% for small
businesses (through executive order).
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3)Establishes the SB/DVBE state contracting option, which allows
state agencies to award a contract valued between $5,000 and
$250,000 to a SB or DVBE if quotes are obtained from two or
more certified firms.
FISCAL EFFECT : Unknown
COMMENTS : According to the author, the state has rarely
achieved a 25% SB participation rate in state procurement
contracts since an executive order requiring the rate was issued
in 2001. The author notes that small businesses comprise over
98% of all California businesses and, as a result, play an
important role in stimulating state's economy. The author
states that codifying a statewide procurement goal of 25% SB
participation in statute sends a strong message to potential
investors that the state supports small businesses. The author
adds that increasing the participation goal for businesses owned
by disabled veterans within the state's procurement process from
3% to 5% can also provide significant economic support to
disabled veteran business owners.
The Small Business Procurement and Contract Act, enacted over 30
years ago, directs DGS and other state agencies that award
contracts to establish SB participation goals. Both the SB and
DVBE programs were established to increase economic
opportunities for these businesses by granting preferences
within the state's procurement process. Current law sets an
annual 3% DVBE participation goal, and, through executive order,
a 25% goal for small and micro-businesses. According to the
most report on procurement for FY 2011-12 by DGS, the state had
entered into $7.4 billion in contracts, with approximately 24%
being awarded to small businesses and nearly 5% to DVBEs.
A February 2014 comprehensive report on the DVBE program by the
California State Auditor (CSA) concluded that the DVBE program
would be strengthened by more meaningful performance standards
and better guidance from DGS and CalVet in promoting DVBE
contracting opportunities. Specifically, the CSA recommended
key actions for DGS and CalVet that focus on better and more
consistent reporting, increasing the number of DVBEs that
participate in state contracting, and heightening CalVet's role
in performing outreach.
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This bill addresses the issue of how to increase DVBE
participation in state contracting and seeks to apply greater
pressure on state agencies to include DVBE participation in
every contract with a DVBE goal above 3%. It also places
greater administrative oversight on the performance of poor
performing agencies by requiring mitigation plans from
departments that fail to meet the 25% SB participation goal.
RELATED LEGISLATION :
1)AB 1568 (Grove), pending in the Assembly Appropriations
Committee, would increase the number of quotes from two to
three before a state agency can enter into certain contracts
valued between $5,000 and $250,000.
2)SB 839 (Correa), pending in the Assembly Government
Organization Committee, would make a number of DVBE program
improvements relating to reporting, documentation, and
oversight of state contracts that include DVBE participation.
DOUBLE REFERRAL : This measure has been double referred. It was
previously heard in the Assembly Jobs, Economic Development and
the Economy Committee on April 22, 2014, with a vote of 6-0.
REGISTERED SUPPORT / OPPOSITION :
Support
American Federation of State, County, and Municipal Employees,
AFL-CIO
CalAsian Chamber of Commerce
Coalition of Small and Disabled Veteran Businesses
Disabled Veteran Business Enterprise Alliance
National Federation of Independent Business
Small Business California
Opposition
None on file.
Analysis Prepared by : Cassie Royce / A. & A.R. / (916)
319-3600
AB 1734
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