Veteran Participation Goals in Contracting

The California Military and Veterans Code, in Division 4, Chapter 6, Article 6, provides for disabled veterans participation goals for professional bond services and state contracts. Section 999 called this article the “California Disabled Veteran Business Enterprise Program.”

The California Disabled Veteran Business Enterprise Program was established to address the special needs of disabled veterans seeking rehabilitation and training through entrepreneurship and to recognize the sacrifices of Californians disabled during military service. There is also a statement of legislative intent that every state procurement authority honor California’s disabled veterans by taking all practical actions necessary to meet or exceed the disabled veteran business enterprise participation goal of a minimum of 3% of total contract value.

In addition, the following terms are defined: “administering agency,” “awarding agency,” “awarding department,” “bonds,” “contract,” “contractor,” “disabled veteran business enterprise contractor, subcontractor, or supplier,” “commercially useful function,” “disabled veteran,” “disabled veteran business enterprise,” “foreign corporation,” “foreign firm,” “foreign-based business,” “goal,” “management and control,” and “professional bond service.”

Section 999.1 requires each awarding department to have annual statewide participation goals of not less than 3% for disabled veteran business enterprises for contracts entered into by the awarding department during the year for professional bond services. This section does not apply if a contract for professional bond services of an underwriter is to be obtained by competitive bid. However, each awarding department is required to establish goals for contracts to be obtained by competitive bid for professional bond services.

Section 999.2 states that contracts awarded by any state agency, department, officer, or other state governmental entity, including school districts when they are expending state funds for construction, professional services, materials, supplies, equipment, alteration, repair, or improvement have statewide participation goals of not less than 3% for disabled veteran business enterprises. These goals apply to the overall dollar amount expended each year by the awarding department.

In addition, the following terms are defined: “broker,” “agent,” “equipment,” and “equipment broker.”  State funds expended for equipment rented from equipment brokers pursuant to contracts awarded under this section are not be credited toward the 3% goal. A disabled veteran business enterprise, and each owner thereof, is required to submit, at the time of certification, complete copies of the enterprise’s federal income tax returns for the three previous tax years.

A disabled veteran business enterprise that fails to maintain the certification requirements set forth in this article must immediately notify the awarding department and the administering agency of that failure by filing a notice of failure that states with particularity each requirement the disabled veteran business enterprise has failed to maintain.

Section 999.3 provides that, if a contract for professional bond services of an underwriter is to be obtained by competitive bid, the awarding department must, at a minimum, take all three of the specified actions.

Section 999.5 specifies that 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 is required to consult with the California Disabled Veteran Business Enterprise Program Advocate, appointed by the Secretary of the Department of Veterans Affairs, on all matters relating to the California Disabled Veteran Business Enterprise Program.

In addition, the Department of Veterans Affairs is required to do the specified items, including establishing a method of monitoring adherence to the goals specified. An awarding department cannot give credit toward the department’s 3% goal state funds expended on a contract with a disabled veteran business enterprise that is not certified at the time of the award or does not meet and maintain the certification requirements.

A person or entity that knowingly provides false information is subject to a civil penalty for each violation in the minimum amount of $2,500 and the maximum amount of $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 is enforceable as a civil judgment.

Section 999.55 requires an awarding department to maintain all records of the information provided by the prime contractor and establish appropriate review procedures for those records to ensure the accuracy and completeness of the award amounts and paid amounts reported.

Section 999.6 requires the awarding department to utilize existing resources such as the Office of Small Business and Disabled Veteran Business Enterprise Services, the Department of Veterans Affairs, the federal Department of Veterans Affairs, and the Small Business Administration.

Section 999.7 requires the awarding department to withhold on a contract $10,000 from the final payment, or the full final payment if it is less than $10,000 until a prime contractor complies with the certification requirements. A prime contractor that fails to comply with the certification requirement is, after notice, allowed to cure the defect.

Section 999.8 prohibits the validity or enforceability of any bonds, or any contract or any notes, or other obligations issued by the awarding department to provide for the payment of any contract subject to this article from being affected in any way by the failure of an awarding department to meet the goals established under this article.

Section 999.9 makes it unlawful for a person to engage in ten specified activities. A person who violates any of these provisions is guilty of a misdemeanor punishable by imprisonment in the county jail not exceeding six months or by a fine not exceeding $1,000, or by both, as well as a civil penalty. And, a defendant who violates any of the provisions must 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 and the Department of General Services.

Moreover, the Department of General Services is required to suspend any person who violates this statute 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 is required to 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.

In addition, for alleged violations, a contract can be terminated by the Department of General Services and a civil action may be brought by any city attorney, county attorney or county counsel, district attorney, or the Attorney General in the name of the people of the State of California and the penalty imposed is enforceable as a civil judgment.

Section 999.10 requires an awarding department taking bids in connection with the award of a contract to provide, in the general conditions under which bids will be received, that a person making a bid or offer to perform a contract shall, in the bid or offer, set forth all of the specified information.

In addition, the Subletting and Subcontracting Fair Practices Act applies to the information required relating to subcontractors certified as disabled veteran business enterprises. The terms “subcontractor” and “prime contractor” are defined. The term “contract” does not include specified contracts.

Section 999.11 requires the Secretary of the Department of Veterans Affairs to appoint the California Disabled Veteran Business Enterprise Program Advocate. The California Disabled Veteran Business Enterprise Program Advocate reports directly to the secretary and must do the half a dozen specified activities.

Section 999.12 requires each awarding department to appoint an agency Disabled Veteran Business Enterprise Program Advocate. The agency Disabled Veteran Business Enterprise Program Advocate is required to perform six specified activities.