Bill Text: CA AB177 | 2009-2010 | Regular Session | Amended

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

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Bill Title: Public contracts: small businesses and disabled veteran

Spectrum: Moderate Partisan Bill (Democrat 9-1)

Status: (Passed) 2010-09-27 - Chaptered by Secretary of State - Chapter 342, Statutes of 2010. [AB177 Detail]

Download: California-2009-AB177-Amended.html

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BILL NUMBER: AB 177	AMENDED
	BILL TEXT

	AMENDED IN SENATE  JUNE 24, 2010
	AMENDED IN SENATE  JUNE 2, 2010
	AMENDED IN ASSEMBLY  JANUARY 4, 2010
	AMENDED IN ASSEMBLY  APRIL 23, 2009
	AMENDED IN ASSEMBLY  APRIL 13, 2009

INTRODUCED BY   Assembly Members Ruskin and V. Manuel Perez
   (Coauthors: Assembly Members Beall, Block, Logue, and Salas)
   (Coauthors: Senators Negrete McLeod and Price)

                        FEBRUARY 2, 2009

   An act to amend Sections 14842 and 14842.5 of the Government Code,
and to amend Section 999.9 of the Military and Veterans Code,
relating to public contracts.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 177, as amended, Ruskin. Public contracts: small businesses and
disabled veteran business enterprises.
   (1) Existing law provides for various programs to encourage the
participation of small businesses and disabled veteran business
enterprises, as certified by the Department of General Services, in
state agency contracts. Existing law revokes, for a specified period,
the small business or microbusiness certification of a business that
obtained the classification as a small business or microbusiness by
reason of having furnished incorrect supporting information or
withholding relevant information, and suspends that business from
transacting with the state, as specified. Existing law extends the
period of revocation and suspension for additional or subsequent
violations  and requires the business to pay specified costs to
the state related to the contract  .
   This bill would increase the period of certification revocation
and suspension for such violations,  revise the types of costs
payable to the state,  and additionally require the revocation
of the business' seller's permit for additional or subsequent
violations.
   (2) Existing law also revokes, for a specified period, the small
business or microbusiness or disabled veteran business enterprise
certification of a person who, among other activities, fraudulently
attempts to become certified as a disabled veteran business
enterprise or as a small business or microbusiness  and imposes
civil penalties upon those persons  . Existing law additionally
suspends, for a specified period, that person from bidding on or
participating in any state contract or project. Existing law extends
the period of revocation and suspension for additional and subsequent
violations  , and requires the person to pay specified costs to
the state related to the contract  .
   This bill would increase the period of certification revocation
and suspension for such violations  , and additionally
require the revocation of the business' seller's permit for
additional or subsequent violations  .
   This bill would impose civil penalties against any person who
knowingly and fraudulently represents 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,
and would subject that person to revocation of the disabled veteran
business enterprise certification and suspension from bidding on or
participating in any state contract or project for a specified
period.
   This bill would additionally  require that any existing
contract between any   authorize an  awarding
department and contractor  be terminated   to
terminate a contract  if the contractor knowingly and
fraudulently represents that a commercially useful function is being
performed by a disabled veteran business enterprise or by a small
business or microbusiness, and require the Controller to 
withhold any payments to that contractor except for outstanding
invoices   set off penalties and costs awarded to the
state   against payments due to the contractor .
   This bill would require persons or businesses found to have
obtained small business or disabled veteran business enterprise
certification by fraudulent or improper means to pay costs incurred
by the awarding department or the Department of General Services, as
specified.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


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

  SECTION 1.  Section 14842 of the Government Code is amended to
read:
   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 that knew, or should have known, the information furnished was
incorrect or the information withheld was relevant to its request for
classification, and that 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) Pay to the awarding  state agency and the  department
an amount that is equal to the costs incurred for investigating the
small business or microbusiness certification that led to the finding
that the contract had been improperly awarded.  Costs incurred
shall include, but are not limited to, costs and attorney's fees paid
by the awarding state agency or the department related to hearings
and court appearances. 
   (3) In addition to the  amount   amounts
 described in  subdivision (a)   paragraphs
(1) and (2)  , be assessed a penalty in an amount of not more
than 10 percent of the amount of the contract involved.
   (b)  Suspend   The department shall suspend
 any person who violates subdivision (a) from transacting any
business with the state either directly as a prime contractor or
indirectly as a subcontractor, for a period of not less than three
years and not more than 10 years. State agencies may reject the bid
of a supplier offering goods, information technology, or services
manufactured or provided by a subcontractor if that subcontractor has
been declared ineligible to transact any business with the state
under this chapter, even though the bidder is a business in good
standing.
   (c) All payments to the state pursuant to paragraphs (1) and (2)
of subdivision (a) shall be deposited in the fund  or funds 
out of which  payments on  the contract involved 
was awarded   were made, except payments to the
department made pursuant to paragraph (2) of subdivision (a) shall be
deposited in the Service Revolving Fund  .
   (d) All payments to the state pursuant to paragraph (3) of
subdivision (a) shall be deposited in the state General Fund.
   (e) The small business certification of a business found to have
violated subdivision (a) shall be revoked by the department for a
period of not less than five years. For an additional or subsequent
violation, the period of certification revocation or suspension shall
be extended for a period of up to 10 years and shall result in the
revocation of the business' seller's permit. The certification
revocation shall apply to the principals of the business and any
subsequent businesses formed by  one or more of  those
principals.
   (f) Prior to the imposition of any sanctions under this article, 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. 
   (g) Any business or person that fails to satisfy any of the
amounts specified in paragraphs (1) to (3), inclusive, of subdivision
(a) shall be prohibited from further contracting with the state
until all amounts are satisfied.  
   (h) For purposes of this section, "awarding state agency" means a
state agency or other state governmental entity that awarded the
contract, if it was not awarded by the department. 
  SEC. 2.  Section 14842.5 of the Government Code is amended to read:

   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  , 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 chapter.
   (5) Knowingly and with intent to defraud, fraudulently represent
certified small business or microbusiness participation 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 certified
small business or microbusiness 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) Establish, or knowingly aid in the establishment of, or
exercise control over, a firm found to have violated any provision of
paragraphs (1) to (8), inclusive. 
   (b) (1) 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 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.
   (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 awarding state
agency or the department related to hearings and court appearances.
All payments to the state pursuant to this paragraph shall be
deposited in the fund or funds out of which payments on the contract
involved were made, except payments to the department shall be
deposited in the Service Revolving Fund. 
   (c) The department shall revoke the small business or
microbusiness certification of any person that violates subdivision
(a) for a period of not less than five years, and shall, in addition
to the penalties provided for in subdivision (b), be suspended from
bidding on, or participating as a contractor, a subcontractor, or a
supplier in, any state contract or project for a period of not less
than three years nor more than 10 years  and shall result in
the revocation of the business' seller's permit  . However,
for an additional or subsequent violation, the period of
certification revocation or suspension shall be extended for a period
of up to three years. The certification revocation shall apply to
the principals of the business and any subsequent businesses formed
by one or more of  those principals. Any business or person
who fails to satisfy  any of  the penalties imposed pursuant
to  subdivisions (b) and (c)   paragraphs (1)
and (2) of subdivision (b)  shall be prohibited from further
contracting with the state until the penalties are satisfied.
   (d) 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.
   (e) (1) 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  shall be terminated   may
be terminated at the discretion of the awarding state agency  ,
and the Controller  shall withhold any payments to that
contractor except for outstanding invoices.   shall set
off penalties and costs due to the state against any payments due to
that contractor. 
   (2) For purposes of this  subdivision  
section  :
   (A) "Awarding  department"   state agency"
 means any state agency, department, governmental entity, or
other officer or entity empowered by law to enter into contracts on
behalf of the State of California.
   (B) "Contractor" means any person or persons, firm, partnership,
corporation, or combination thereof who submits a bid and enters into
a contract with a representative of a state agency, department,
governmental entity, or other officer empowered by law to enter into
contracts on behalf of the State of California.
  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 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' certification
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  and shall result in the
revocation of the business' seller's permit  . 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.  
   (2) 
    (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 
subdivision (b)   subdivisions (b) and (c)  from
further contracting with the state until  the penalties
  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  shall   may  be
terminated  at the discretion of the awarding department  ,
and the Controller  shall withhold any payments to that
contractor except for outstanding invoices.   shall set
off penalties and costs due to the state against any payments due to
that contractor. 
   (e) The awarding department shall report all alleged violations of
this section to the Department of General Services.  The
  After any review and investiga   tion it
deems necessary, the  Department of General Services shall
subsequently report all  alleged violations  
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 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.