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SECTION 14835-14843

CALIFORNIA CODES
GOVERNMENT CODE
SECTION 14835-14843

(Posted on 3/11/03)

14835. This chapter shall be known and may be cited as the Small
Business Procurement and Contract Act.

14836. (a) The Legislature hereby declares that it serves a public
purpose, and it is of benefit to the state, to promote and facilitate
the fullest possible participation by all citizens in the affairs of
the State of California in every possible way. It is also essential
that opportunity is provided for full participation in our free
enterprise system by small business enterprises.
(b) Further, it is the declared policy of the Legislature that the
state should aid, counsel, assist, and protect, to the maximum
extent possible, the interests of small business concerns, including
microbusinesses, in order to preserve free competitive enterprise and
to ensure that a fair proportion of the total purchases and
contracts or subcontracts for property and services for the state be
placed with these enterprises.

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 is both of the following:

(1) Primarily engaged in the chemical or mechanical transformation
of raw materials or processed substances into new products.
(2) Classified between Codes 2000 to 3999, inclusive, of the
Standard Industrial Classification (SIC) Manual published by the
United States Office of Management and Budget, 1987 edition.
(d) (1) "Small business" means an independently owned and operated
business, which 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) 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 that, together with
affiliates, has average annual gross receipts of two million five
hundred thousand dollars ($2,500,000) 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
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, and shall preclude the qualification of
businesses that are dominant in their industry.


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 General Services 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) may not be
awarded to a noncompliant bidder and may not be used to achieve any
applicable minimum requirements.
(4) The preference under paragraph (1) may 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 may 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 microbusiness, 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 the provisions of this chapter shall have precedence
over nonsmall business bidders in that the application of any bidder
preference for which nonsmall business bidders may be eligible under
this provision 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).

14838.2. The Legislature finds and declares all of the following:
(a) Market demand is a driving factor in determining profitability
of California companies and the ability of those companies to invest
in business growth.
(b) Recent unemployment figures indicate that California's
employment has declined by more than 420,000 jobs since the middle of
1990, with up to 133,000 of those jobs in the manufacturing sector.

(c) The current economic recession, coupled with losses of federal
contracts by our defense and aerospace industries, is causing an
economic crisis in California.
(d) California companies are often at a competitive disadvantage
when responding to public contract proposals from government agencies
because of factors associated with higher taxes, wages, rents, labor
benefits, and insurance rates.
(e) The competitiveness of California companies is also impacted
as a result of in-state business preference policies that exist in
other states.

14838.4. No small business preference shall be allowed if allowing
the small business preference would result in a computed bid of the
preference recipient which would exceed the amount of funds
appropriated by the Legislature for the construction project, plus
any augmentation that may be made by the State Public Works Board
pursuant to authority granted in the annual Budget Act.

14838.5. (a) Notwithstanding the advertising, bidding, and protest
provisions of Chapter 6 (commencing with Section 14825) of this code
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 one hundred thousand dollars ($100,000) , 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 disabled veterans business enterprises.
(b) In carrying out subdivision (a), state agencies 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.


14838.6. (a) For purposes of this chapter, "disabled veteran-owned
small business" means a small business concern which is all of the
following:
(1) At least 51 percent owned by one or more disabled veterans.
(2) Managed by, and the daily business operations are controlled
by, one or more disabled veterans.
(b) For purposes of this section, "disabled veteran" means a
person to whom both of the following apply:
(1) The person has served in the United States Air Force, Army,
Navy, Marine Corps, or Coast Guard in time of war, or national
emergency declared by the President of the United States of America,
and who has been discharged or released under honorable conditions.
(2) The person is currently declared by the United States Veterans
Administration to be 10 percent or more disabled as a result of
service in the armed forces.


14838.7. (a) Notwithstanding the advertising and bidding provisions
of Chapter 6 (commencing with Section 14825) of this code and
Chapter 1 (commencing with Section 10100) of Part 2 of Division 2 of
the Public Contract Code, a state agency may award a contract for
construction, including the erection, construction, alteration,
repair, or improvement of any state structure, building, road, or
other state improvement of any kind that has an estimated value of
greater than five thousand dollars ($5,000) but less than the cost
limit for State Contract Act projects, as specified in subdivision
(b) of Section 10105 of the Public Contract Code, to a certified
small business, including a microbusiness, or to a disabled veteran
business enterprise, as long as the agency obtains written bid
submittals from two or more certified small businesses, including
microbusinesses, or from disabled veteran business enterprises.
(b) In implementing subdivision (a), state agencies 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 public work construction project, a state
agency shall obtain at least two written bid submittals from
responsible contractors whenever there is reason to believe a
response from a single source is not a fair and reasonable price.

14839. There is hereby established within the department the Office
of Small Business Certification and Resources. The duties of the
office shall include:
(a) Compiling and maintaining a comprehensive bidders list of
qualified small businesses, and noting which small businesses also
qualify as microbusinesses.
(b) Coordinating with the Federal Small Business Administration,
the Minority Business Development Agency, and the Office of Small
Business Development of the Department of Economic and Business
Development.
(c) Providing technical and managerial aids to small businesses
and microbusinesses by conducting workshops on matters in connection
with government procurement and contracting.
(d) Assisting small businesses and microbusinesses in complying
with the procedures for bidding on state contracts.
(e) Working with appropriate state, federal, local, and private
organizations and business enterprises in disseminating information
on bidding procedures and opportunities available to small businesses
and microbusinesses.
(f) Making recommendations to the department and other state
agencies for simplification of specifications and terms in order to
increase the opportunities for small business and microbusiness
participation.
(g) Develop, by regulation, other programs and practices that are
reasonably necessary to aid and protect the interest of small
businesses and microbusinesses in contracting with the state.
(h) The information furnished by each contractor requesting a
small business or microbusiness preference shall be under penalty of
perjury.

14839.1. The department shall have sole responsibility for
certifying and determining the eligibility of small businesses and
microbusinesses under this chapter.

14840. The department shall submit an annual report to the
Legislature no later than January 1 of each year containing the
following information:
(a) Upon request, an up-to-date list of eligible small business
bidders by general procurement and construction contract categories,
noting company names and addresses and also noting which small
businesses also qualify as microbusinesses.
(b) By general procurement and construction contract categories,
statistics comparing the small business and microbusiness contract
participation dollars to the total state contract participation
dollars.
(c) By awarding department and general procurement and
construction categories, statistics comparing the small business and
microbusiness contract participation dollars to the total state
contract participation dollars.
(d) Any recommendations for changes in statutes or state policies
to improve opportunities for small businesses and microbusinesses.
(e) A statistical summary of small businesses and microbusinesses
certified for state contracting by the number of employees at the
business for each of the following categories: 0-25, 26-50, 51-75,
and 76-100.
(f) To the extent feasible, beginning in the year 2002, the number
of contracts awarded by the department in the categories specified
in subdivision (e).
(g) The number of contracts and dollar amounts awarded annually
pursuant to Section 14838.5 to small businesses, microbusinesses, and
disabled veteran business enterprises.


14842. (a) A business that has obtained classification as a small
business or microbusiness by reason of having furnished incorrect
supporting information or by reason of having withheld information,
and which knew, or should have known, the information furnished was
incorrect or the information withheld was relevant to its request for
classification, and which by reason of that classification has been
awarded a contract to which it would not otherwise have been
entitled, shall do all of the following:
(1) Pay to the state any difference between the contract amount
and what the state's costs would have been if the contract had been
properly awarded.
(2) In addition to the amount described in subdivision (a), be
assessed a penalty in an amount of not more than 10 percent of the
amount of the contract involved.
(3) Be ineligible to transact any business with the state for a
period of not less than three months and not more than 24 months.
(b) All payments to the state pursuant to paragraph (1) of
subdivision (a) shall be deposited in the fund out of which the
contract involved was awarded.
(c) All payments to the state pursuant to paragraph (2) of
subdivision (a) shall be deposited in the state General Fund.
(d) Prior to the imposition of any sanctions under subdivision
(a), a business shall be entitled to a public hearing and to at least
five working days' notice of the time and place thereof. The notice
shall state the reasons for the hearing.

14842.5. (a) It shall be unlawful for a person to do any of the
following:
(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 small business or microbusiness enterprise for the
purposes of this chapter.
(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 small
business or microbusiness 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 small business or microbusiness
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 to which the person is not
entitled under this chapter.
(b) Any person who is found by the department to have violated any
of the provisions of subdivision (a) is subject to a civil penalty
of not more than five thousand dollars ($5,000).
(c) If a contractor, subcontractor, supplier, subsidiary, or
affiliate thereof, has been found by the department to have violated
subdivision (a) and that violation occurred within three years of
another violation of subdivision (a) found by the department, the
department shall prohibit that contractor, subcontractor, supplier,
subsidiary, or affiliate thereof, from entering into a state project
or state contract and from further bidding to a state entity, and
from being a subcontractor to a contractor for a state entity and
from being a supplier to a state entity.

14843. The department may make all rules and regulations consistent
with the law for the purpose of carrying into effect the provisions
of this chapter. Rules and regulations shall be adopted, amended, or
repealed in accordance with the provisions of Chapter 3.5
(commencing with Section 11340) of Part 1.

Official California legislative information is available through the
Legislative Counsel of California.