Amended  IN  Senate  March 19, 2018

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Senate Bill No. 1179

Introduced by Senator Newman

February 14, 2018

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


LEGISLATIVE COUNSEL'S DIGEST


SB 1179, as amended, Newman. 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 (DVBE), 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 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.
This bill would require an awarding department to give a prime contractor that fails to comply with the certification requirements described above reasonable opportunity to cure the failure. The bill would require the awarding department to provide notice of the failure to the Department of General Services, if after providing reasonable opportunity, the prime contractor continues to fail to comply with the certification requirements. The bill would require the Department of General Services, upon notification of the failure, to suspend the prime contractor 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 2 years, 5 years for a first violation, as specified. The bill would require the Department of General Services to permanently suspend the prime contractor from the program for a 2nd violation. The bill would subject a suspension issued under these provisions to the monitoring, listing, and verification requirements, and contracting prohibitions, described above.
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 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.
(3) 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. An awarding department shall keep that certification on file.
(e) A prime contractor that fails to provide the certifications required by subdivision (d) shall be given a reasonable opportunity to cure the failure by the awarding department. If after providing 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. Upon notification, For a first violation, the Department of General Services Services, upon notification, shall suspend the prime contractor from bidding on, or participating as either a contractor, subcontractor, or supplier in, any state contract or project subject to this article for a period of not less than two five years. For a second violation, the Department of General Services, upon notification, shall permanently suspend the prime contractor from the program.The A suspension pursuant to this subdivision 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. The suspension principals, and shall be subject to all of the requirements set forth in subdivisions (f), (g), and (h) of Section 999.9.
(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) 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.
(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. 2.

 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 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) 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 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.
(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) No awarding department shall enter into any contract with any person suspended for violating this section or Section 999.5 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 or Section 999.5.