Bill Text: CA SB1176 | 2015-2016 | Regular Session | Introduced

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Small Business Procurement and Contract Act: business size.

Spectrum: Partisan Bill (Democrat 5-0)

Status: (Vetoed) 2016-11-30 - Last day to consider Governor's veto pursuant to Joint Rule 58.5. [SB1176 Detail]

Download: California-2015-SB1176-Introduced.html

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BILL NUMBER: SB 1176	INTRODUCED
	BILL TEXT


INTRODUCED BY   Senators Galgiani and Hueso
   (Principal coauthor: Senator Hertzberg)
   (Principal coauthor: Assembly Member Jones-Sawyer)

                        FEBRUARY 18, 2016

   An act to amend Sections 14837 and 14838 of the Government Code,
relating to public contracts.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 1176, as introduced, Galgiani. Small Business Procurement and
Contract Act: business size.
   The Small Business Procurement and Contract Act requires the
Director of General Services and the heads of other state agencies
that enter into contracts for the acquisition of goods, services, and
information technology and for the construction of state facilities
to establish goals for the participation of small businesses and
microbusinesses in these contracts, to provide for a small business
preference in the award of these contracts, to give special
consideration and special assistance to small businesses, and,
whenever possible, to make awards to small businesses, as specified.
Existing law defines a "small business" for these purposes as, among
other things, an independently owned and operated business that is
not dominant in its field of operation that has average annual gross
receipts of $10 million, as may be adjusted to reflect changes in the
California Consumer Price Index, or less over the previous 3 years.
Existing law defines a "microbusiness" as a small business which,
together with affiliates, has average annual gross receipts of $2.5
million, as may be adjusted to reflect changes in the California
Consumer Price Index, or less over the previous 3 years. Existing law
requires the director to conduct a biennial review of those average
annual gross receipt levels and authorizes the director to adjust the
average annual gross receipts threshold to reflect changes in the
California Consumer Price Index for all items. Existing law requires
a contractor requesting a small business or microbusiness preference
to do so under penalty of perjury.
   This bill would revise those definitions by increasing the dollar
amount threshold for a small business to $30 million and for a
microbusiness to $5 million and would require those dollar amounts to
be adjusted to reflect changes in the California Consumer Price
Index biennially. The bill would allow directors of the department
and other state agencies to count contractors that would be
considered a small business or microbusiness under the changes made
by this bill for the year this bill is enacted if the directors are
unable to make the small business participation goals under the
existing laws. The bill would allow more contractors to qualify as a
small business or microbusiness, thus expanding the group of
contractors authorized to request a preference filed under penalty of
perjury. By expanding the crime of perjury, this bill would impose a
state-mandated local program.
   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.
State-mandated local program: yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  The Legislature hereby finds and declares all of the
following:
   (a) The essence of the American economic system of private
enterprise is to be free, open, and to have transparent competition.
Only through free, open, and transparent competition can free
markets, reasonable and just prices, free entry into business, and
opportunities for the expression and growth of personal initiative
and individual judgment be ensured. The preservation and expansion of
that competition are basic to the economic well-being of this state,
and that well-being cannot be realized unless the actual and
potential capacity of small business enterprises is encouraged and
developed.
   (b) It is the policy of the state to aid the interests of small
business enterprises in order to preserve reasonable and just prices
and free competitive enterprise, to ensure that a fair proportion of
the total purchases and contracts or subcontracts for commodities,
supplies, technology, property, and services, including, but not
limited to, renewable energy, wireless telecommunications, broadband,
smart grid, rail, and other mega infrastructure projects, for
regulated state departments are awarded to small business
enterprises, and to maintain and strengthen the overall economy of
the state.
   (c) The opportunity for full participation in our free enterprise
system by small business enterprises is essential if this state is to
attain social and economic equality for those businesses and improve
the functioning of the state economy.
   (d) State agencies that have established small business
contracting goals are awarding less than 25 percent of their mandated
goals.
   (e) Small business enterprises have traditionally received less
than their proportional share of public entity procurement contracts,
especially in renewable energy, wireless telecommunications,
broadband, smart grid, rail, and other mega infrastructure projects.
   (f) It is in the interest of the state to expeditiously improve
the economically disadvantaged position of small business owners and
employees.
   (g) The position of small business enterprises can be
substantially improved by expanding the definition of a small
business that would allow these businesses to amass the capital and
expertise necessary to compete for state procurement of technology,
equipment, supplies, services, materials, and construction work,
especially in renewable energy, wireless telecommunications,
broadband, smart grid, rail, and other mega infrastructure projects.
This expansion also benefits the state departments and consumers of
the state by encouraging the expansion of the number of small
business enterprise suppliers for procurements, thereby encouraging
competition among the suppliers and promoting economic efficiency in
the process.
   (h) The long-term economic viability of this state depends
substantially upon the ability of small businesses to be successful.
  SEC. 2.  It is the intent of the Legislature by enacting this
legislation to do all of the following:
   (a) Encourage greater economic opportunity for small businesses.
   (b) Promote competition among state departments that issue
contracts in order to enhance economic efficiency in the procurement
of state services.
   (c) Clarify and expand the program for the procurement by state
departments for small business enterprises.
  SEC. 3.  Section 14837 of the Government Code is amended to read:
   14837.  As used in this chapter:
   (a) "Department" means the Department of General Services.
   (b) "Director" means the Director of General Services.
   (c) "Manufacturer" means a business that meets both of the
following requirements:
   (1) It is primarily engaged in the chemical or mechanical
transformation of raw materials or processed substances into new
products.
   (2) It is classified between Codes 31 to 33, inclusive, of the
North American Industry Classification System.
   (d) (1) "Small business" means an independently owned and operated
business that is not dominant in its field of operation, the
principal office of which is located in California, the officers of
which are domiciled in California, and which, together with
affiliates, has 100 or fewer employees, and average annual gross
receipts of  ten million dollars ($10,000,000)  
thirty million   dollars ($30,00,000)  or less over
the previous three years, or is a manufacturer, as defined in
subdivision (c), with 100 or fewer employees.
   (2) "Microbusiness" is a small business which, together with
affiliates, has average annual gross receipts of  two million
five hundred thousand dollars ($2,500,000)   five
million dollars ($5,000,000)  or less over the previous three
years, or is a manufacturer, as defined in subdivision (c), with 25
or fewer employees.
   (3) The director shall conduct a biennial review of the average
annual gross receipt levels specified in this subdivision and
 may   shall  adjust that level to reflect
changes in the California Consumer Price Index for all items. To
reflect unique variations or characteristics of different industries,
the director may establish, to the extent necessary, either higher
or lower qualifying standards than those specified in this
subdivision, or alternative standards based on other applicable
criteria.
   (4) Standards applied under this subdivision shall be established
by regulation, in accordance with Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2, and shall preclude
the qualification of businesses that are dominant in their industry.
In addition, the standards shall provide that the certified small
business or microbusiness shall provide goods or services that
contribute to the fulfillment of the contract requirements by
performing a commercially useful function, as defined below:
   (A) A certified small business or microbusiness is deemed to
perform a commercially useful function if the business does all of
the following:
   (i) Is responsible for the execution of a distinct element of the
work of the contract.
   (ii) Carries out its obligation by actually performing, managing,
or supervising the work involved.
   (iii) Performs work that is normal for its business services and
functions.
   (iv) Is responsible, with respect to products, inventories,
materials, and supplies required for the contract, for negotiating
price, determining quality and quantity, ordering, installing, if
applicable, and making payment.
   (v) Is not further subcontracting a portion of the work that is
greater than that expected to be subcontracted by normal industry
practices.
   (B) A contractor, subcontractor, or supplier will not be
considered to perform a commercially useful function if the
contractor's, subcontractor's, or supplier's role is limited to that
of an extra participant in a transaction, contract, or project
through which funds are passed in order to obtain the appearance of
small business or microbusiness participation.
   (e) "Disabled veteran business enterprise" means an enterprise
that has been certified as meeting the qualifications established by
paragraph (7) of subdivision (b) of Section 999 of the Military and
Veterans Code.
  SEC. 4.  Section 14838 of the Government Code is amended to read:
   14838.  In order to facilitate the participation of small
business, including microbusiness, in the provision of goods,
information technology, and services to the state, and in the
construction (including alteration, demolition, repair, or
improvement) of state facilities, the directors of the department and
other state agencies that enter those contracts, each within their
respective areas of responsibility, shall do all of the following:
   (a) Establish goals, consistent with those established by the
Office of Small Business Certification and Resources, for the extent
of participation of small businesses, including microbusinesses, in
the provision of goods, information technology, and services to the
state, and in the construction of state facilities.
   (b) Provide for small business preference, or nonsmall business
preference for bidders that provide for small business and
microbusiness subcontractor participation, in the award of contracts
for goods, information technology, services, and construction, as
follows:
   (1) In solicitations where an award is to be made to the lowest
responsible bidder meeting specifications, the preference to small
business and microbusiness shall be 5 percent of the lowest
responsible bidder meeting specifications. The preference to nonsmall
business bidders that provide for small business or microbusiness
subcontractor participation shall be, up to a maximum of 5 percent of
the lowest responsible bidder meeting specifications, determined
according to rules and regulations established by the Department of
General Services.
   (2) In solicitations where an award is to be made to the highest
scored bidder based on evaluation factors in addition to price, the
preference to small business or microbusiness shall be 5 percent of
the highest responsible bidder's total score. The preference to
nonsmall business bidders that provide for small business or
microbusiness subcontractor participation shall be up to a maximum 5
percent of the highest responsible bidder's total score, determined
according to rules and regulations established by the Department of
General Services.
   (3) The preferences under paragraphs (1) and (2) shall not be
awarded to a noncompliant bidder and shall not be used to achieve any
applicable minimum requirements.
   (4) The preference under paragraph (1) shall not exceed fifty
thousand dollars ($50,000) for any bid, and the combined cost of
preferences granted pursuant to paragraph (1) and any other provision
of law shall not exceed one hundred thousand dollars ($100,000). In
bids in which the state has reserved the right to make multiple
awards, this fifty thousand dollar ($50,000) maximum preference cost
shall be applied, to the extent possible, so as to maximize the
dollar participation of small businesses, including microbusinesses,
in the contract award.
   (c) Give special consideration to small businesses and
microbusinesses by both:
   (1) Reducing the experience required.
   (2) Reducing the level of inventory normally required.
   (d) Give special assistance to small businesses and
microbusinesses in the preparation and submission of the information
requested in Section 14310.
   (e) Under the authorization granted in Section 10163 of the Public
Contract Code, make awards, whenever feasible, to small business and
microbusiness bidders for each project bid upon within their
prequalification rating. This may be accomplished by dividing major
projects into subprojects so as to allow a small business or
microbusiness contractor to qualify to bid on these subprojects.
   (f) Small business and microbusiness bidders qualified in
accordance with this chapter shall have precedence over nonsmall
business bidders in that the application of a bidder preference for
which nonsmall business bidders may be eligible under this section or
any other provision of law shall not result in the denial of the
award to a small business or microbusiness bidder. In the event of a
precise tie between the low responsible bid of a bidder meeting
specifications of a small business or microbusiness, and the low
responsible bid of a bidder meeting the specifications of a disabled
veteran-owned small business or microbusiness, the contract shall be
awarded to the disabled veteran-owned small business or
microbusiness. This provision applies if the small business or
microbusiness bidder is the lowest responsible bidder, as well as if
the small business or microbusiness bidder is eligible for award as
the result of application of the small business and microbusiness
bidder preference granted by subdivision (b). 
   (g) If the directors of the department and other state agencies
that enter into those contracts are unable to reach the goals
established under subdivision (a) in the year this measure is
enacted, the directors of the department and other state agencies may
count towards that goal, contracts with firms that would be
considered a small business or microbusiness under the amendments
made to Section 14837 by the act adding this subdivision. 
  SEC. 5.  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.