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SB-588 Public contracts: Disabled Veteran Business Enterprise Program.(2019-2020)

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Date Published: 09/07/2019 04:00 AM
SB588:v95#DOCUMENT

Amended  IN  Assembly  September 06, 2019
Amended  IN  Assembly  August 12, 2019
Amended  IN  Assembly  June 27, 2019
Amended  IN  Senate  March 27, 2019

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Senate Bill
No. 588


Introduced by Senator Archuleta
(Principal coauthor: Assembly Member Cervantes)

February 22, 2019


An act to amend Sections 999.5 and 999.9 Section 999.5 of, and to add and repeal Section 999.7 of, the Military and Veterans Code, relating to public contracts.


LEGISLATIVE COUNSEL'S DIGEST


SB 588, as amended, Archuleta. Public contracts: Disabled Veteran Business Enterprise Program.
Under existing law, the Department of General Services, except in the case of contracts for professional bond services, is the administering agency of the California Disabled Veteran Business Enterprise Program, which requires state agencies and all other state entities contracting for materials, supplies, equipment, alteration, repair, or improvement to have at least 3% participation goals for disabled veteran business enterprises (DVBEs), as defined. Existing law requires an awarding department, upon completion of 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 specified information relating to amounts paid under the contract, as specified. Existing law subjects a person or entity that knowingly provides false information on this certification to certain criminal and civil penalties, as specified.

Existing law makes it a crime to, among other things, 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. Existing law requires the Department of General Services to suspend, for a specified period, any person who violates these provisions from bidding on, or participating as either a contractor, subcontractor, or supplier in, any state contract or project, as specified. Existing law requires the Department of General Services to monitor the status of all reported violations and 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. Existing law prohibits an awarding department from entering into any contract with any person suspended for violating these provisions during the person’s suspension and requires the awarding department to 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. Existing law requires the Director of General Services to adopt written policies and guidelines establishing a uniform process for state contracting that provides a DVBE participation incentive to bidders.

This bill would require the uniform process for state contracting under the DVBE program developed by the Director of General Services to require that a DVBE incentive is provided for all state agency contracts, even when the DVBE participation goal has been waived. The bill would additionally, until January 1, 2025, require an awarding department to give a prime contractor that fails to comply with the certification requirements described above reasonable opportunity, from 15 to 30 days, to cure the failure. The bill would, until January 1, 2025, require the awarding department to provide notice of the failure to the Department of General Services, if, after being provided with a reasonable opportunity, the prime contractor continues to fail to comply with the certification requirements. The bill would additionally, until January 1, 2025, make the prime contractor, upon being notified of the failure, subject to a civil penalty of $10,000 for a first violation. For a 2nd or subsequent violation, the bill would make the prime contractor subject to a civil penalty of $10,000, plus an additional $10,000 for each previous violation. The bill would authorize any public prosecutor to bring an action to enforce that civil penalty. The

This bill would require an awarding department, on a contract entered into on or after January 1, 2020, to withhold $10,000, or the full payment if it is less than $10,000, from the final payment on a contract until that certification is received by the awarding department. The bill would require the awarding department to give a prime contractor that fails to meet those certification requirements 15 to 30 calendar days to cure the defect. The bill would require the awarding department to permanently deduct $10,000 from the final payment, or the full payment if it is less than $10,000, from a contract with a contractor who does not comply with those requirements within the specified time period. The bill would exempt specified contractors from these provisions. The bill would require the Legislative Analyst’s Office to complete an assessment and report of the DVBE program, as specified, and submit that report to the Legislature on or before January 1, 2023.
This bill would incorporate additional changes to Section 999.5 of the Military and Veterans Code proposed by AB 230 to be operative only if this bill and AB 230 are enacted and this bill is enacted last.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

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


SECTION 1.

 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. The Department of General Services shall 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. The Director of General Services shall 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 process shall require that a disabled veteran business enterprise participation incentive be provided for all state agency contracts, even when the 3-percent goal specified in Sections 999.1 and 999.2 has been waived. incentive program shall be used by all state agencies when awarding contracts.
(b) The Department of Veterans Affairs shall do all of the following:
(1) Establish a method of monitoring adherence to the goals specified in Sections 999.1 and 999.2.
(2) Promote the California Disabled Veteran Business Enterprise Program to the fullest extent possible.
(3) Maintain complete records of its promotional efforts.
(4) Establish a system to track the effectiveness of its efforts to promote the California Disabled Veteran Business Enterprise Program, which shall include regular, periodic surveys of newly certified disabled veteran business enterprises to determine how they learned of the program, why they became certified, and what their experience with awarding departments has been.
(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 and the project name. contract number.
(3) The amount each disabled veteran business enterprise received from the prime contractor.
(4) That all payments specified under the contract with the awarding department and any subcontracts with a disabled veteran business enterprise entered into for the purpose of meeting the requirements of that contract have been made to the disabled veteran business enterprise.
(e) An awarding department shall keep the certification required pursuant to subdivision (d) on file.
(f) A person or entity that knowingly provides false information in the certification required by subdivision (d) 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.
(g) (1)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.

(2)The Department of General Services shall contact the certified disabled veteran business enterprise that a prime contractor is requesting to replace pursuant to this subdivision to verify the conditions stated for the substitution, if relevant.

(h) 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. 1.5.

 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. The Department of General Services shall 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. The Director of General Services shall 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 Department of Veterans Affairs shall do all of the following:
(1) Establish a method of monitoring adherence to the goals specified in Sections 999.1 and 999.2.
(2) Promote the California Disabled Veteran Business Enterprise Program to the fullest extent possible.
(3) Maintain complete records of its promotional efforts.
(4) Establish a system to track the effectiveness of its efforts to promote the California Disabled Veteran Business Enterprise Program, which shall include regular, periodic surveys of newly certified disabled veteran business enterprises to determine how they learned of the program, why they became certified, and what their experience with awarding departments has been.
(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. is not certified at the time of the award or 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. contract and the contract number.
(3) The amount and percentage of work the prime contractor committed to provide to one or more disabled veteran business enterprises under the requirements of the contract and the amount each disabled veteran business enterprise received from the prime contractor.
(4) That all payments under the contract have been made to the disabled veteran business enterprise. Upon request by the awarding department, the prime contractor shall provide proof of payment for the work.
(e) An awarding department shall keep the certification required pursuant to subdivision (d) on file.

(4)That all payments under the contract have been made to the disabled veteran business enterprise. An awarding department shall keep that certification on file. A

(f) 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.

(g) After being awarded a contract, the prime contractor shall use the disabled veteran business enterprise subcontractors or suppliers proposed in the bid or proposal to the state unless a substitution is requested and approved. The prime contractor shall request the substitution in writing to the awarding department and receive approval from both the awarding department and the Department of General Services in writing prior to the commencement of any work by the proposed subcontractor or supplier. A substitution pursuant to this subdivision shall additionally comply with regulations adopted by the Department of General Services.

(f)

(h) The administering agency shall adopt rules and regulations, including standards for good faith efforts, regulations for the purpose of implementing this section. Emergency regulations consistent with this section may be adopted.

SEC. 2.

 Section 999.7 is added to the Military and Veterans Code, to read:
999.7.

(a)A prime contractor that fails to provide the certifications required by subdivision (d) of Section 999.5 shall be given a reasonable opportunity to cure the failure by the awarding department, which shall be at least 15 calendar days but no more than 30 calendar days. If, after being provided with a reasonable opportunity to cure, the prime contractor fails to comply with the certification requirements, the awarding department shall provide notice of the failure to the Department of General Services. For a first violation, the prime contractor, upon notification from the Department of General Services, shall be subject to a civil penalty of ten thousand dollars ($10,000). For each subsequent violation, the prime contractor, upon notification from the Department of General Services, shall be subject to a civil penalty equal to ten thousand dollars ($10,000) plus an additional ten thousand dollars ($10,000) for each prior violation. 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.

999.7.
 (a) The awarding department shall withhold, on a contract entered into on or after January 1, 2020, ten thousand dollars ($10,000) from the final payment, or the full final payment if less than ten thousand dollars ($10,000), until a prime contractor complies with the certification requirements of subdivision (d) of Section 999.5. A prime contractor that fails to comply with the certification requirement shall, after notice, be allowed to cure the defect. Notwithstanding any other law, if, after at least 15 calendar days but not more than 30 calendar days from the date of notice, the prime contractor refuses to comply with the certification requirements, the awarding department shall permanently deduct ten thousand dollars ($10,000) from the final payment, or the full payment if less than ten thousand dollars ($10,000). For contracts awarded for use by multiple state agencies, the Department of General Services may prescribe additional or alternative mechanisms for enforcing the certification requirement.
(b) (1) On or before January 1, 2023, the Legislative Analyst’s Office shall complete a comprehensive assessment of the disabled veteran business enterprise program and submit a report to the Legislature. All other state entities shall assist the Legislative Analyst’s Office in completing its assessment to the greatest extent practicable.
(2) The report submitted pursuant to paragraph (1) shall include, but is not limited to:
(A) Reports of noncompliance with the requirements of the disabled veteran enterprise program.
(B) Whether the Department of General Services is tracking complaints of abuse of the program, and information about those complaints, if available, including the type of abuse, how it was reported or discovered, dates that specific actions were taken on the case, and preventive measures taken by awarding departments.
(C) Whether the awarding departments notified disabled veteran business enterprise subcontractors when they were named on an awarded contract.
(D) Whether prime contractors received approval by the Department of General Services to replace a disabled veteran business enterprise subcontractor identified by the prime contractor in its bid or offer.
(E) Whether civil penalties assessed withholding payments have deterred prime contractors from failing to provide accurate certifications.
(3) A report to be submitted pursuant to this subdivision shall be submitted in compliance with Section 9795 of the Government Code.
(c) For the purposes of this section, “contractor” or “prime contractor” means any person that provides a commodity or product to the state and does not include a contractor, as defined by Section 7026 of the Business and Professions Code, for an awarded public works contract.

(c)

(d) This section shall remain in effect only until January 1, 2025, and as of that date is repealed.

SEC. 3.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 an entity as a disabled veteran business enterprise.

(3)Willfully and knowingly obstruct, impede, or attempt to obstruct or impede, a 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 a 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 a 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 a 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)A 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 the Department of General Services.

(c)(1)The Department of General Services shall suspend a 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 who 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 a 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), an existing contract between that contractor and an 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 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 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)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 that have sufficient grounds to the Attorney General who shall determine whether to bring a civil action against a 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.

(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 of this article resulting in suspension.

(g)An awarding department shall not enter into a contract with a person suspended for violating this section or Section 999.5 during the period of the person’s suspension. An awarding department shall not award a contract to a contractor utilizing the services of a 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 or Section 999.5.

SEC. 3.

 Section 1.5 of this bill incorporates amendments to Section 999.5 of the Military and Veterans Code proposed by both this bill and Assembly Bill 230. That section of this bill shall only become operative if (1) both bills are enacted and become effective on or before January 1, 2020, (2) each bill amends Section 999.5 of the Military and Veterans Code, and (3) this bill is enacted after Assembly Bill 230, in which case Section 1 of this bill shall not become operative.