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AB-1809 Disabled veteran business enterprises.(2019-2020)

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Date Published: 08/12/2019 02:00 PM
AB1809:v95#DOCUMENT

Amended  IN  Senate  August 12, 2019
Amended  IN  Senate  June 13, 2019
Amended  IN  Assembly  April 10, 2019
Amended  IN  Assembly  April 08, 2019

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill
No. 1809

Introduced by Assembly Member Cervantes

February 28, 2019

An act to amend Section 14838.5 of the Government Code, and to amend Sections 999.5, 999.9, 999.10, 999.11, and 999.12 of the Military and Veterans Code, relating to disabled veteran business enterprises.


LEGISLATIVE COUNSEL'S DIGEST


AB 1809, as amended, Cervantes. Disabled veteran business enterprises.

The

(1) The Small Business Procurement and Contract Act requires state agencies to provide for small business preference in the award of contracts for goods, information technology, services, and construction, with a 5% bid preference on applicable bid specifications. This act also authorizes a state agency to award a contract for the acquisition of goods, services, or information technology that has an estimated value of greater than $5,000, but less than $250,000, to a certified small business, including a microbusiness, or to a disabled veteran business enterprise (DVBE), as long as the agency obtains price quotations from 2 or more certified small businesses, including a microbusiness, or from a DVBE, without complying with specified competitive bidding requirements.
This bill, commencing March 1, 2020, and until March 1, 2024, would authorize a state agency to award a contract for services or information technology that has an estimated value of between $5,000 and $500,000 to a certified small business, including a microbusiness, or to a DVBE, as long as the agency obtains price quotations from 2 or more certified small businesses or 2 or more DVBEs. The bill would specify that a certified small business or DVBE that utilizes this process as an alternative to the competitive bidding requirements may not also receive the small business preference or the DVBE participation incentive, as specified.

Under

(2) Under existing law, the administering agency for the California Disabled Veteran Business Enterprise Program is the Department of General Services, except in the case of contracts for professional bond services. Existing law requires the Director of General Services to adopt written policies and guidelines establishing a uniform process for state contracting to provide a DVBE participation incentive to bidders, which all state agencies are required to use when awarding contracts. Existing law requires the Department of Veterans Affairs to maintain complete records of its promotional efforts regarding the program and requires the department to perform regular, periodic surveys of newly certified DVBEs.
This bill would require the department to establish a method an awarding department shall use to track and report adherence to specified goals and to provide guidance to awarding departments on how to process complaints regarding abuse of the DVBE program. The bill would also require the California Disabled Veteran Business Enterprise Program Advocate to promote and facilitate efforts to implement the program and to establish a system to track the effectiveness of the program, as specified. The bill would additionally repeal the requirement that the department perform regular, periodic surveys of newly certified DVBEs.

Existing

(3) Existing law requires a department, after completing an awarded contract for which a commitment to achieve a DVBE goal was made, to require the prime contractor that entered into a subcontract with a DVBE to certify to the awarding department that all payments under the contract have been made to the DVBE. Existing law requires the awarding department to keep that certification on file.
This bill would instead require the awarding department to post a list of its state contracts for which certification has been received on its internet website for no less than 3 years.
(4) Existing law makes it a crime to fraudulently represent participation of a disabled veteran business enterprise in order to obtain or retain a bid preference or a state contract. Existing law requires the Department of General Services to report certain violations to the Attorney General and requires the Attorney General to consider whether to bring a civil action against a person for the violation.
This bill would authorize any public prosecutor to bring a civil action for a violation involving a knowing fraudulent representation that a commercially useful function is being performed by a disabled veteran business enterprise in order to obtain or retain a bid preference for a state contract. The bill would prohibit the public prosecutor, other than the Attorney General, from bringing a civil action for that violation if the Department of General Services has concluded an administrative action for the violation.

Existing

(5) Existing law requires that a person making a bid or offer to perform a contract shall, in the bid or offer, set forth specified information, including the name and the location of the place of business of each subcontractor certified as a DVBE.
This bill would also require the bid or offer to include the DVBE certification number and number, contact information of the subcontractors certified as DVBEs. DVBEs, and a certification, under penalty of perjury, that the work to be done by each subcontractor serves a commercially useful function, as specified. By expanding the scope of the crime of perjury, this bill would impose a state-mandated local program.

Existing

(6) Existing law requires the Secretary of Veterans Affairs to appoint the California Disabled Veteran Business Enterprise Program Advocate and requires the advocate to perform certain duties, including disseminating information on the program and coordinating specified reports. Existing law requires each awarding department to appoint an agency Disabled Veteran Business Enterprise Program Advocate and requires the agency advocate to meet regularly with the state advocate and contract and procurement staff to disseminate information about the program.
This bill would instead require the state advocate to support and facilitate the activities of administering agencies, including assisting awarding departments to identify certified DVBEs that can offer services and assisting DVBEs to clearly identify the products and services the DVBE has on offer. The bill would remove the requirement that the agency advocate meet regularly with the state advocate and would require the agency advocate to learn of future contracting opportunities and identify the types of goods, services, and information technology contracts for which the contract and procurement staff may have difficulty in identifying DVBE contractors and subcontractors.
(7) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NOYES  

The people of the State of California do enact as follows:


SECTION 1.

 (a) This act shall be known, and may be cited, as the Procurement Transparency Act of 2019.
(b) It is the intent of the Legislature in enacting this legislation to implement the recommendations of the California State Auditor Report 2018-114 on the California Disabled Veteran Business Enterprise Program, as well as other program improvements brought to the attention of the Assembly Committee on Jobs, Economic Development, and the Economy.

SEC. 2.

 The Legislature finds and declares all of the following:
(a) California’s dominance in many economic areas is based, in part, on the significant role small businesses play in the state’s $2.7 trillion economy.
(b) Two separate studies, one by the United States Census Bureau and another by the Kauffman Foundation, found that net job growth was strongest among businesses with fewer than 20 employees. California firms represented 12.6 percent of all businesses in the United States in 2015, with 88.3 percent of firms having fewer than 20 employees.
(c) The Small Business Procurement and Contract Act, administered through the Department of General Services, was implemented more than 30 years ago to establish a small business preference within the state’s procurement process that would increase the number of contracts between the state and small businesses. In 1998, a disabled veteran business enterprise (DVBE) component was added.
(d) California has a 30-year history of using state contracting to support business development within targeted business populations. State law sets an annual 3 percent DVBE procurement participation goal, and a 2006 executive order sets a 25-percent goal for small businesses and microbusinesses within state agencies, departments, boards, and commissions.
(e) The Small Business Procurement and Contract Act states that it is the policy of the State of California that the state aid the interests of small businesses in order to preserve free competitive enterprise and to ensure that a fair portion of the total purchases and contracts of the state be placed with these enterprises.
(f) California law further states that DVBE participation is strongly encouraged to recognize the sacrifices of California’s disabled military veterans and to address the special needs of disabled veterans seeking rehabilitation and training through entrepreneurship. A majority of DVBEs certified by the state are smaller size firms, with 75.4 percent having dual certifications as a DVBE and microbusiness and 9.6 percent having dual certifications as a DVBE and small business.
(g) Supporting small business development has shown to be a successful inclusive economic growth strategy advantaging businesses throughout the state, including historically underserved business groups including minority, women, and veteran-owned businesses, and hard-to-serve areas of the state, including low-wealth, rural, and disaster-impacted communities.
(h) In order for the state to fully leverage the economic opportunities represented by supporting small businesses and DVBEs, it is the intent of the Legislature that the Department of General Services, the Office of Small Business Advocate, and the department and agency level department-level and agency-level Small Business Ombudsmen actively promote small business and DVBE certifications, help DVBEs and small businesses market their products, goods, and services to the state, and promote the use of technologies and other innovative solutions for notifying small businesses and DVBEs of state contracting opportunities.

SEC. 3.

 Section 14838.5 of the Government Code is amended to read:

14838.5.
 (a) (1) Notwithstanding the advertising, bidding, and protest provisions of Chapter 6 (commencing with Section 14825) of this part and Chapter 2 (commencing with Section 10290) and Chapter 3 (commencing with Section 12100) of Part 2 of Division 2 of the Public Contract Code, a state agency may award a contract for the acquisition of goods, services, or information technology that has an estimated value of greater than five thousand dollars ($5,000), but less than two hundred fifty thousand dollars ($250,000), to a certified small business, including a microbusiness, or to a disabled veteran business enterprise, as long as the agency obtains price quotations from two or more certified small businesses, including microbusinesses, or from two or more disabled veterans business enterprises.
(2) On and after March 1, 2020, and until March 1, 2024, for the purposes of contracts for services and information technology, a state agency may, notwithstanding the advertising, bidding, and protest provisions of Chapter 6 (commencing with Section 14825) and of Chapter 2 (commencing with Section 10290) and Chapter 3 (commencing with Section 12100) of Part 2 of Division 2 of the Public Contract Code, award a contract that has an estimated value greater than five thousand dollars ($5,000) but less than five hundred thousand dollars ($500,000) to a certified small business, including a microbusiness, or to a disabled veteran business enterprise, as long as the agency obtains price quotations from two or more certified small businesses, including microbusinesses, or from two or more disabled veterans business enterprises.
(b) In carrying out subdivision (a), a state agency shall consider a responsive offer timely received from a responsible certified small business, including a microbusiness, or from a disabled veteran business enterprise.
(c) If the estimated cost to the state is less than five thousand dollars ($5,000) for the acquisition of goods, services, or information technology, or a greater amount as administratively established by the director, a state agency shall obtain at least two price quotations from responsible suppliers whenever there is reason to believe a response from a single source is not a fair and reasonable price.
(d) A certified small business or disabled veteran business enterprise that submits a bid or cost estimate using the process in subdivision (a) or (c) shall not, on the same bid or cost estimate, also receive the small business preference set forth in subdivision (b) of Section 14838 or the disabled veteran business enterprise participation incentive provided in Section 999.5 of the Military and Veterans Code.

SEC. 4.

 Section 999.5 of the Military and Veterans Code is amended to read:

999.5.
 (a) The administering agency for the California Disabled Veteran Business Enterprise Program is the Department of General Services, except in the case of contracts for professional bond services. In carrying out these duties, the Department of General Services shall do all of the following:
(1) Consult with the California Disabled Veteran Business Enterprise Program Advocate, appointed by the Secretary of the Department of Veterans Affairs pursuant to Section 999.11, on all matters relating to the California Disabled Veteran Business Enterprise Program.
(2) Establish a method an awarding department shall use to track and report adherence to the goals specified in Sections 999.1 and 999.2.
(3) Provide guidance to awarding departments on how to process complaints regarding abuse of the program, including violations under Section 999.9.
(4) Adopt written policies and guidelines establishing a uniform process for state contracting that would provide a disabled veteran business enterprise participation incentive to bidders. The incentive program shall be used by all state agencies when awarding contracts.
(b) The California Disabled Veteran Business Enterprise Program Advocate, appointed pursuant to Section 999.11 by the Secretary of Veterans Affairs, shall do all of the following:
(1) Promote and facilitate efforts to implement the California Disabled Veteran Business Enterprise Program and the provisions of this article.
(2) Establish a system to track the effectiveness of its efforts to promote the California Disabled Veteran Business Enterprise Program, which may be used by CalVet and other state agencies in meeting the requirements of Section 999.12. The system shall include standards for recordkeeping as necessary to evaluate the effectiveness of promotional activities.
(c) An awarding department shall not credit toward the department’s 3-percent goal state funds expended on a contract with a disabled veteran business enterprise that does not meet and maintain the certification requirements.
(d) Upon completion of an awarded contract for which a commitment to achieve a disabled veteran business enterprise goal was made, an awarding department shall require the prime contractor that entered into a subcontract with a disabled veteran business enterprise to certify to the awarding department all of the following:
(1) The total amount the prime contractor received under the contract.
(2) The name and address of the disabled veteran business enterprise that participated in the performance of the contract.
(3) The amount each disabled veteran business enterprise received from the prime contractor.
(4) (A) That all payments under the contract have been made to the disabled veteran business enterprise. An awarding department shall post a list of its state contracts, by contract number, for which certification has been received, on its internet website for no less than three years.
(B) A person or entity that knowingly provides false information shall be subject to a civil penalty for each violation in the minimum amount of two thousand five hundred dollars ($2,500) and the maximum amount of twenty-five thousand dollars ($25,000). An action for a civil penalty under this subdivision may be brought by any public prosecutor in the name of the people of the State of California and the penalty imposed shall be enforceable as a civil judgment.
(e) A prime contractor may, subject to the approval of the Department of General Services, replace a disabled veteran business enterprise identified by the prime contractor in its bid or offer, pursuant to subdivision (a) of Section 999.10, with another disabled veteran business enterprise.
(f) The administering agency shall adopt rules and regulations, including standards for good faith efforts, for the purpose of implementing this section. Emergency regulations consistent with this section may be adopted.

SEC. 5.

 Section 999.9 of the Military and Veterans Code is amended to read:

999.9.
 (a) It shall be unlawful for a person to:
(1) Knowingly and with intent to defraud, fraudulently obtain, retain, attempt to obtain or retain, or aid another in fraudulently obtaining or retaining or attempting to obtain or retain, certification as a disabled veteran business enterprise for the purpose of this article.
(2) Willfully and knowingly make a false statement with the intent to defraud, whether by affidavit, report, or other representation, to a state official or employee for the purpose of influencing the certification or denial of certification of any entity as a disabled veteran business enterprise.
(3) Willfully and knowingly obstruct, impede, or attempt to obstruct or impede, any state official or employee who is investigating the qualifications of a business entity that has requested certification as a disabled veteran business enterprise.
(4) Knowingly and with intent to defraud, fraudulently obtain, attempt to obtain, or aid another person in fraudulently obtaining or attempting to obtain, public moneys, contracts, or funds expended under a contract, that are awarded by any state agency, department, officer, or other state governmental agency, to which the person is not entitled under this article.
(5) Knowingly and with intent to defraud, fraudulently represent participation of a disabled veteran business enterprise in order to obtain or retain a bid preference or a state contract.
(6) Knowingly and with intent to defraud, fraudulently represent that a commercially useful function is being performed by a disabled veteran business enterprise in order to obtain or retain a bid preference or a state contract.
(7) Willfully and knowingly make or subscribe to any statement, declaration, or other document that is fraudulent or false as to any material matter, whether or not that falsity or fraud is committed with the knowledge or consent of the person authorized or required to present the declaration, statement, or document.
(8) Willfully and knowingly aid or assist in, or procure, counsel, or advise, the preparation or presentation of a declaration, statement, or other document that is fraudulent or false as to any material matter, regardless of whether that falsity or fraud is committed with the knowledge or consent of the person authorized or required to present the declaration, statement, or document.
(9) Willfully and knowingly fail to file any declaration or notice with the awarding agency that is required by Section 999.2.
(10) Establish, or knowingly aid in the establishment of, or exercise control over, a firm found to have violated any of paragraphs (1) to (9), inclusive.
(b) Any person who violates any of the provisions of subdivision (a) shall be guilty of a misdemeanor punishable by imprisonment in the county jail not exceeding six months or by a fine not exceeding one thousand dollars ($1,000), or by both. In addition, the person shall be liable for a civil penalty of not less than ten thousand dollars ($10,000) nor more than thirty thousand dollars ($30,000) for the first violation, and a civil penalty of not less than thirty thousand dollars ($30,000) nor more than fifty thousand dollars ($50,000) for each additional or subsequent violation. A defendant who violates any of the provisions of subdivision (a) shall pay all costs and attorney’s fees incurred by the plaintiff in a civil action brought pursuant to this section, including costs incurred by the awarding department or and the Department of General Services.
(c) (1) The Department of General Services shall suspend any person who violates subdivision (a) from bidding on, or participating as either a contractor, subcontractor, or supplier in, any state contract or project for a period of not less than three years and not more than 10 years, and if certified as a disabled veteran business enterprise, the department shall revoke the business’s certification, and the small business or microbusiness enterprise certification if the business has both certifications, for a period of not less than five years. An additional or subsequent violation shall extend the periods of suspension and revocation for a period of not less than 10 years. The suspension and revocation of certification shall apply to the principals of the business and any subsequent business formed or financed by, or affiliated with, one or more of those principals.
(2) A person that violates any of the provisions of subdivision (a) shall pay all costs incurred by the awarding department and the Department of General Services for any investigations that led to the finding of the violation. Costs incurred shall include, but are not limited to, costs and attorney’s fees paid by the department or the Department of General Services related to hearings and court appearances.
(3)  The Department of General Services shall prohibit any business or person who fails to satisfy any of the penalties, costs, and attorney’s fees imposed pursuant to subdivisions (b) and (c) from further contracting with the state until all of the penalties, costs, and attorney’s fees are satisfied.
(d) In addition to the penalties imposed by this section, if a contractor is found to be in violation of paragraph (6) of subdivision (a), any existing contract between that contractor and any awarding department may be terminated at the discretion of the awarding department, and, where payment to the contractor is made directly by the state agency, the agency shall set off penalties and costs due to the state against any payments due to that contractor. In the event that the contracting state agency has forwarded the contract and invoices to the Controller for payment, the state agency shall reduce the amount due to the contractor as reflected in the claim schedule submitted to the Controller by the amount of the penalties and costs due the state. In addition, with regard to any penalties and costs due to the state that the state agency has not accounted for by either a set off against payments due to the contractor or a reduction reflected in the claim schedule submitted to the Controller, to the extent that the Controller is making payments to the contractor on behalf of any state agency, the Controller shall set off penalties and costs due against any invoices due to the contractor from any other contract awarded to the contractor.

(e)

(e) (1) The awarding department shall report all alleged violations of this section to the Department of General Services. After any review and investigation it deems necessary, the Department of General Services shall subsequently report all allegations which that have sufficient grounds to the Attorney General who shall determine whether to bring a civil action against any person or firm for a violation of this section. However, the Department of General Services may pursue administrative action and administrative penalties irrespective of whether the Attorney General chooses to bring a civil action.
(2) For alleged violations of paragraph (6) of subdivision (a), a civil action may be brought by any public prosecutor in the name of the people of the State of California and the penalty imposed shall be enforceable as a civil judgment. A person who violates paragraph (6) of subdivision (a) shall be subject to civil penalties provided for in subdivision (b), including all costs and attorney’s fees incurred by the public prosecutor and the costs incurred by the awarding department and the Department of General Services. A public prosecutor, other than the Attorney General, shall not bring an action for a civil penalty under this paragraph if the Department of General Services has concluded an administrative action for the same violation.
(f) The Department of General Services shall monitor the status of all reported violations and shall maintain and make available to all state departments a central listing of all firms and persons who have been determined to have committed violations resulting in suspension.
(g) No awarding department shall enter into any contract with any person suspended for violating this section during the period of the person’s suspension. No awarding department shall award a contract to any contractor utilizing the services of any person as a subcontractor suspended for violating this section during the period of the person’s suspension.
(h) The awarding department shall check the central listing provided by the Department of General Services to verify that the person or contractor to whom the contract is being awarded, or any person being utilized as a subcontractor or supplier by that person or contractor, is not under suspension for violating this section.

SEC. 5.SEC. 6.

 Section 999.10 of the Military and Veterans Code is amended to read:

999.10.
 (a) An awarding department taking bids in connection with the award of a contract shall provide, in the general conditions under which bids will be received, that a person making a bid or offer to perform a contract shall, in the bid or offer, set forth the following information:
(1) The name, disabled veteran business enterprise certification number, contact information, and the location of the place of business of each subcontractor certified as a disabled veteran business enterprise who will perform work or labor or render service to the prime contractor in connection with the performance of the contract and who will be used by the prime contractor to fulfill disabled veteran business enterprise participation goals.
(2) The portion of work that will be done by each subcontractor under paragraph (1). Except in cases of emergency when a contract is necessary for the immediate preservation of the public health, welfare, or safety, or protection of state property, the prime contractor shall list only one subcontractor for each portion of work as is defined by the prime contractor in the contractor’s bid or offer.
(3) A certification, signed under penalty of perjury, that the portion of work that will be done by each subcontractor under paragraph (1) serves a commercially useful function, as defined in clause (i) of subparagraph (B) of paragraph (5) of subdivision (b) of Section 999.
(b) The Subletting and Subcontracting Fair Practices Act (Chapter 4 (commencing with Section 4100) of Part 1 of Division 2 of the Public Contract Code) shall apply to the information required by subdivision (a) relating to subcontractors certified as disabled veteran business enterprises.
(c) For purposes of this section, “subcontractor” and “prime contractor” shall have the same meaning as those terms are defined in Section 4113 of the Public Contract Code.
(d) As used in this section, “contract” does not include a contract negotiated pursuant to Chapter 10 (commencing with Section 4525) of Division 5 of Title 1 of the Government Code.

SEC. 6.SEC. 7.

 Section 999.11 of the Military and Veterans Code is amended to read:

999.11.
 The Secretary of the Department of Veterans Affairs shall appoint the California Disabled Veteran Business Enterprise Program Advocate. The California Disabled Veteran Business Enterprise Program Advocate shall report directly to the secretary and shall do all of the following:
(a) Serve as a resource for information on this article.
(b) Support and facilitate the activities of administering agencies and existing and potential disabled veteran business enterprises to achieve the goals specified in Sections 999.1 and 999.2, including, but not limited to, both of the following:
(1) Assisting awarding departments to identify certified disabled veteran business enterprises that can offer their services for contracts that contract procurement staff have difficulty in identifying.
(2) Assisting disabled veteran business enterprises to effectively utilize certification documents and the state electronic procurement system to clearly identify which products and services businesses have on offer.
(c) Coordinate with the California Disabled Veteran Business Enterprise Program Advocate appointed in all awarding departments pursuant to Section 999.12.

SEC. 7.SEC. 8.

 Section 999.12 of the Military and Veterans Code is amended to read:

999.12.
 Each awarding department shall appoint an agency Disabled Veteran Business Enterprise Program Contract Advocate. This person shall be the same individual appointed pursuant to Section 14846 of the Government Code. The agency Disabled Veteran Business Enterprise Program Contract Advocate shall do all of the following:
(a) Assist certified disabled veteran business enterprises in participating in that agency’s contracting process.
(b) Assist contract officers in seeking disabled veteran business enterprises to participate in the agency’s contract and procurement opportunities by performing outreach efforts to recruit certified disabled veteran business enterprises to offer their services as either a prime contractor or subcontractor on any contract proposed by the awarding department that requires disabled veteran business enterprise participation, and by other feasible means.
(c) Meet regularly with the contract and procurement staffs of their departments to disseminate information about the California Disabled Veteran Business Enterprise Program, learn of future contracting opportunities, and identify the types of goods, services, and information technology contracts for which the contract and procurement staff may have difficulty in identifying certified disabled veteran business enterprise contractors or subcontractors.
(d) Serve as an advocate for the disabled veteran business enterprises that are utilized as the agency’s contractors or subcontractors.
(e) Report to the Office of Small Business and Disabled Veteran Business Enterprise Services regarding any violation of this article.
(f) Coordinate and meet, on a regular basis, with the California Disabled Veteran Business Enterprise Program Advocate at the Department of Veterans Affairs in an effort to meet the statewide 3-percent goal provided for in Section 999.2.

SEC. 9.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.