BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Isadore Hall, III
Chair
2015 - 2016 Regular
Bill No: SB 159 Hearing Date: 4/28/2015
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|Author: |Nielsen |
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|Version: |3/23/2015 |
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|Urgency: |No |Fiscal: |No |
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|Consultant:|Arthur Terzakis |
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SUBJECT: California Disabled Veteran Business Enterprise
Program: goal achievement
DIGEST: This bill clarifies that an awarding department's
Disabled Veteran Business Enterprise (DVBE) program
participation goal achievement is to be measured by the overall
dollar amount expended each year by the awarding department.
ANALYSIS:
Existing law:
1)Grants the Department of General Services (DGS) the authority
to govern state procurement activities, including acquisition
of materials, supplies, and services.
2)Stipulates that 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 DVBEs.
[Public Contract Code Section 10115]
3)Provides that the participation goal referenced in item #2
above applies to the overall dollar amount expended each year
by the awarding department, as defined. [Public Contract Code
Section 10115(c)]
4)Defines a DVBE as a business entity that is at least 51% owned
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or controlled by one or more disabled veterans, as specified.
5)Requires DGS to make available a report on contracting
activity containing specified information, including a
statistical summary detailing each awarding department's goal
achievement under the DVBE program and a statewide total of
those goals.
This bill:
1)Clarifies that a department's DVBE program participation goal
achievement is to be reported by dollars actually expended as
specified in existing sections of the Military and Veterans
Code and the Public Contract Code.
2)Contains a legislative finding and declaration that this bill
is clarifying and declaratory of existing law.
Background
Historical Note: 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.
In 2001, Congress expressed support for service disabled and
prisoner of war veterans by enacting a 3% participation goal for
DVBEs that is modeled after California law.
To be eligible to become a certified DVBE, a business must be at
least 51 percent owned by a disabled veteran, have its daily
operations managed and controlled by a disabled veteran, and be
located in the United States.
The Problem: In February 2014, the State Auditor released a
report on the DVBE program entitled, "Disabled Veteran Business
SB 159 (Nielsen) Page 3 of ?
Enterprise Program: Meaningful Performance Standards and Better
Guidance by the California Departments of General Services and
Veterans Affairs Would Strengthen the Program." The Auditor
found that the state's current method of measuring the success
of the DVBE program may distort an assessment of whether the
program is meeting the legislative intent. For instance, the
program goals are required to be measured in "dollars expended,"
but DGS guidelines allow awarding departments to report using
either "dollars awarded" or "dollars expended." The Auditor
concluded that, until the program is standardized at one metric
and that metric being "dollars expended," then there is no way
to know how the program is actually working.
Purpose of SB 159: According to the author's office, in
devising program guidelines for reporting DVBE participation,
DGS determined that statutory guidance is ambiguous as to
whether awarding departments should report their DVBE
participation based on "dollars awarded" or "dollars expended."
Thus, DGS decided to grant awarding departments the discretion
to choose which reporting metric to use. The result is that a
large proportion of state departments report to DGS based on
dollars awarded, while another major proportion reports based on
dollars expended. Because the state measures the success of the
DVBE program on the value of the contracts that departments
award - not necessarily the amounts actually paid - this may
distort how well the program is financially benefitting DVBE
firms because awarding departments may pay less than the value
stated on a particular contract. The author's office states
that SB 159 is intended to add clarity to existing law and
remedy this matter.
Additionally, the author's office emphasizes that this bill is
declaratory of existing law and will not impose any new
responsibilities onto DGS or awarding departments. The author's
office believes SB 159 will, however, eliminate DGS' concern
over ambiguity and allow consistent DVBE reporting that meets
existing statutory requirements.
Staff Comments: Both the Public Contract Code and the Military
and Veterans Code contain provisions regarding DVBE program
contracting goals that are identical. Specifically, both
establish statewide participation contracting goals of not less
than 3% for DVBE firms based on the overall dollar amount
expended each year by each awarding department.
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Under Public Contract Code Section 10115, 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 15%
for minority-owned firms, not less than 5% for women-owned
firms, and not less than 3% for DVBEs. Public Contract Code
Section 10115(c) stipulates that these goals apply to the
overall dollar amount "expended" each year by the awarding
department, as defined. [These statutes have essentially been
rendered inoperative as a result of the U.S. 9th Circuit Court
of Appeals decision - Monterey Mechanical v. State of
California. Unaffected by that court order are contracting
preferences for DVBEs.]
Under Military and Veterans Code Section 999.2(a), 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,
materials, supplies, equipment, alteration, repair, or
improvement are required to have statewide participation goals
of not less than 3 percent for DVBEs. These goals apply to the
overall dollar amount "expended" each year by the awarding
department.
Prior/Related Legislation
SB 839 (Correa), 2013-14 Session. Among other things, would
have established new requirements for the methodology state
departments use to track DVBE participation in their contracts
and to report the data to DGS. Also, with respect to contracts
with DVBE prime contractors, would have required that the
contracting activity report concerning participation by DVBEs in
state contracts include actual dollar amounts expended annually
on contracts pursuant to the DVBE program. (Held in Senate
Appropriations Committee)
SB 719 (Correa), 2013-2014 Session. Would have required
awarding departments that used the Financial Information System
for California (FI$Cal) to report statewide participation goals
for the DVBE program in the amount expended to DVBEs. (Held in
Assembly Appropriations Committee)
SB 382 (Roth), 2013-14 Session. Would have required the
Department of Veterans Affairs to create a California Veterans
Leadership Program to connect returning veterans of military
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operations in Iraq and Afghanistan with employment, housing, and
mental health resources. (Held in Senate Veterans Affairs
Committee)
SB 297 (Roth), 2013-14 Session. Would have increased the annual
statewide participation goal for DVBEs, applicable to certain
state contracts, from 3% to 5%. (Held in Assembly policy
committee at author's request)
SB 276 (Roth), 2013-14 Session. Would have modified the Small
Business Procurement and Contract Act by increasing the upper
limit (from $250,000 to $500,000) of the value of certain
contracts that a state agency may award to a certified small
business, including a microbusiness, or to a DVBE without
complying with specified competitive bidding requirements.
(Died in Senate Appropriations Committee)
SB 817 (Veterans Affairs Committee), 2011-2012 Session. Would
have allowed a vendor with state contracts to meet DVBE goals
with dollars from other than state contracts. Also, would have
modified the requirement for a DVBE business utilization plan so
that the plan's required listing of products and services
includes both direct and indirect costs. (Held in Senate
Appropriations Committee)
SB 115 (Florez), Chapter 451, Statutes of 2005. Created a DVBE
incentive program for state contracts.
SB 1008 (Machado), Chapter 632, Statutes of 2003. Among other
things, strengthened the sanctions that can be levied against
businesses that fraudulently misrepresent their eligibility for
DVBE certification.
AB 669 (Cohn), Chapter 623, Statutes of 2003. Among other
things, required DVBEs and small businesses, as defined, to
perform commercially useful functions, as defined, in relation
to any contract those businesses are awarded under certain
provisions of law. Also, imposed certain civil penalties for
fraudulent misrepresentations regarding DVBE and small business
state contracts.
SB 1033 (Knight), 2001-02 Session. Would have established an
additional 3% bid preference for a small business that is also
certified as a DVBE. (Held in Assembly Appropriations
Committee)
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FISCAL EFFECT: Appropriation: No Fiscal
Com.: No Local: No
SUPPORT:
AMVETS, Department of California
American Legion, Department of California
California Association of County Veterans Service Officers
California State Commanders Veterans Council
Military Officers Association of America, California-Council
Service Disabled Veteran-Owned Small Business Network
Veterans of Foreign Wars, Department of California
Vietnam Veterans of America, California State Council
OPPOSITION:
None received
ARGUMENTS IN SUPPORT: Proponents claim that "over the years
far too many state agencies have been reporting their compliance
with the DVBE contract participation goal in the form of total
dollars awarded, instead of total dollars expended, as required
by the Military & Veterans Code. Such practice is unacceptable
and has allowed the Department of General Services to inflate
the actual DVBE goal attainment." Proponents believe that "SB
159 will clarify existing law so that only dollars that are
actually spent with DVBE firms are reported for DVBE contracting
goal compliance purposes."
DUAL REFERRAL: Senate Veterans Affairs Committee