Existing law creates within the Governors Office of Business and Economic Development the Office of Small Business Advocate, which is led by the Small Business Advocate, to advocate the causes of small business and to provide small businesses with the information they need to survive in the marketplace. Existing law requires the advocate to, among other duties, collaborate with the Office of Small Business and Disabled Veteran Business Enterprise Services in their activities under the Small Business Procurement and Contract Act, including promoting small business certification.

This bill would also require the advocate to collaborate with local agencies on the development and implementation of local strategies to increase small business participation in local procurement opportunities, as specified. In this connection, the bill would authorize a local agency, as defined, to establish a Small Business Utilization Program (SBUP) to increase small businesses participation in local agency procurement opportunities. The bill would require an SBUP, to facilitate the participation of small businesses in the provision of goods, information technology, and services to the local agency, to establish a small business certification process. As part of this process, the bill would require the SBUP, to the extent feasible, to include all of specified criteria, including, among other things, a minimum goal of 25% procurement participation for small businesses certification.

The bill would authorize a local agency to submit information on its small business procurement participation to the Office of Small Business Advocate, including progress toward meeting utilization goals. The bill would require the Office of Small Business Advocate, subject to funding being available, and upon appropriation by the Legislature for these purposes, to issue its first data call to local agencies on or before November 15, 2026, as specified. The bill would include related legislative findings.

Existing law creates within the Governors Office of Business and Economic Development the Office of Small Business Advocate, which is led by the Small Business Advocate, to advocate the causes of small business and to provide small businesses with the information they need to survive in the marketplace. Existing law requires the advocate to, among other duties, collaborate with the Office of Small Business and Disabled Veteran Business Enterprise Services in their activities under the Small Business Procurement and Contract Act, including promoting small business certification.

This bill would also require the advocate to collaborate with local agencies on the development and implementation of local strategies to increase small business participation in local procurement opportunities, as specified. In this connection, the bill would authorize a local agency, as defined, to establish a Small Business Utilization Program (SBUP) to increase small businesses participation in local agency procurement opportunities. The bill would require an SBUP, to facilitate the participation of small businesses in the provision of goods, information technology, and services to the local agency, to establish a small business certification process. As part of this process, the bill would require the SBUP, to the extent feasible, to include all of specified criteria, including, among other things, a minimum goal of 25% procurement participation for small businesses certification.

The bill would authorize a local agency to submit information on its small business procurement participation to the Office of Small Business Advocate, including progress toward meeting utilization goals. The bill would require the Office of Small Business Advocate, subject to funding being available, and upon appropriation by the Legislature for these purposes, to issue its first data call to local agencies on or before November 15, 2026, as specified. The bill would include related legislative findings.

Existing law states that it is in the public interest to aid, counsel, assist, and protect, insofar as is possible, the interests of small business concerns in order to preserve free competitive enterprise and maintain a healthy state economy.

This bill would express the intent of the Legislature to enact legislation to increase small business utilization by public entities.

SENATE COMMITTEE ON

Senator Anna Caballero, Chair

2023 - 2024 Regular Session

AB 2262 (Reyes) - Small business

Bill Summary:

SB 2262 would (1) require the Office of the Small Business Advocate (OSBA) within the Governor’s Office of Business and Economic Development (GO-Biz) to collaborate with local agencies on strategies to increase small business participation in local procurement opportunities, and (2) authorize a local agency to establish a Small Business Utilization Program to increase small businesses’ participation in local agency procurement opportunities.

Fiscal Impact:

GO-Biz indicates that, at a minimum, it would incur annual General Fund costs of $501,000 to implement the provisions of the bill.

Background:

The State has had various economic development departments through the decades. Prior to 2003, the majority of the State’s economic development programs were housed within the Technology, Trade, and Commerce Agency. The 2003 04 Budget Act abolished both the Agency and state funding for many of its programs designed to encourage economic development.

GO Biz was established statutorily in 2011 to be the lead entity for economic strategy and the marketing of California on issues relating to business development, private sector investment, and economic growth. GO-Biz staff provide a wide range of advisory and coordinating roles across the administration related to economic development. Several units of GO Biz serve as points of contact for businesses considering relocating to or expanding in California. For example, CalOSBA provides resources for small businesses and financial assistance for small business advisory centers. Other units assist international investors, help businesses obtain information about business permits, administer the California Competes Tax Credit Program, and administer the Cannabis Local Equity Grant Program. Additionally, the California Film Commission, Travel and Tourism Commission, and the Infrastructure and Economic Development Bank have been assigned for oversight purposes to GO Biz.

OSBA provides various technical assistance programs to encourage public agencies to contract with small businesses, including:

• The Small Business Technical Assistance Program (SB TAP). SB TAP receives $23 million annually to support a statewide network of over 90 technical assistance programs to assist companies in preparing for procurement activities; and
• The State Small Business Credit Initiative (SSBCI) Technical Assistance Program. In 2023-24, OSBA received $25.3 million to expand technical assistance and other activities to help create a pipeline of small businesses that are financing-ready.

Current law generally requires state agencies and local governments to award public contracts to the lowest responsible bidder. State law also allows local agencies to require that contracts be awarded to the lowest responsible bidder who meets goals for contract participation by minority and women business enterprises. If a bidder does not meet the local agencies' goals, the agency must evaluate the bidder's good faith efforts to meet those goals.

In 1999, Governor Davis vetoed that bill, saying it violated Proposition 209, but appointed a 28-member Governor's Task Force on Diversity and Outreach to examine ways of conducting constitutionally permissible outreach programs. The Task Force's August 2000 report offered a list of legislative, budgetary, and administrative options. According to the Task Force, “most of the businesses adversely impacted by Proposition 209 were minority businesses and women-owned businesses. The vast majority of these businesses are, in fact, small businesses.”

In response to the Task Force’s recommendations, the Legislature revised the existing Small Business Procurement and Contract Act (Act) in several ways (AB 1084, Wesson, 2001). Among other things, AB 1084 permits local agencies to depart from the requirement to award contracts to the lowest responsible bidder by providing a five percent preference for small businesses in contracts for construction, goods, or services. Under this preference, bids from small businesses are reduced by the percentage of the preference multiplied by the lowest bid that the local agency receives—effectively lowering the price of a bid for purposes of awarding a contract. This preference can be extended to bidders that use small business contractors, and local governments can require bidders to make, and provide evidence of, good faith efforts to meet a subcontracting participation goal for small business contracts, as well as setting additional guidelines for local preference purposes.

AB 1084 also mandates that state agencies offer a similar small business preference of five percent, establish goals for the participation of small businesses in contracting, and offer a preference to disabled veteran business enterprises (DVBEs). The Act defines “small business” and DVBE, and directs the Department of General Services (DGS) to certify and maintain a list of eligible small businesses and DVBEs. However, local agencies can also promulgate their own definitions of small business. In 2012, the Legislature updated the Act to align local agency procurement programs with the State's certified small business program to ensure small businesses certified by the state under the program would be assured of eligibility to engage in procurement activities with local agencies (AB 1783, Perea, 2012).

For the purposes of the Small Business Procurement and Contract Act, a small business is a company with 100 or fewer employees and fewer than $15 million in average annual gross receipts, among other conditions. The DGS director can increase the gross receipts threshold to account for inflation every two years.

To permit some counties to offer additional preferences, the Legislature enacted AB 2762 (Wendy Carrillo, 2018). AB 2762 created two additional categories of preferences that local governments may offer when procuring contracts: DVBEs and social enterprises. These preferences may be applied to contracts for construction, the procurement of goods, or the delivery of services. Local agencies offering a preference to small businesses, DVBEs, and social enterprises must define eligibility for a preference and must include in that eligibility those businesses that meet specified definitions in law. AB 2762 defined DVBEs to match the state definition and required social enterprises to meet criteria similar to LA County’s program.

AB 2762 also increased, from five percent to seven percent of the lowest responsible bidder, the maximum value of a single preference for small businesses and extended this maximum value to DVBEs and social enterprises. However, local governments cannot provide a single preference that exceeds $100,000 for any bid. If a contractor qualifies for multiple preferences—for example, as both a small business and a DVBE—local agencies can grant multiple preferences for a bid, up to a total preference of 15 percent of the lowest responsible bidder and no more than $200,000.

Only local agencies within 12 counties were eligible to offer the preferences established by AB 2762: Alameda, Contra Costa, Lake, Los Angeles, Marin, Napa, San Francisco, San Joaquin, San Mateo, Santa Clara, Solano, and Sonoma. The DVBE and social enterprise preference authorization sunset on January 1, 2024.

Proposed Law:

This bill would, among other things, do the following:

• Beginning January 1, 2025, require OSBA to collaborate with local agencies on the development and implementation of local strategies to increase small business participation in local procurement opportunities, including facilitating discussions and sharing examples, when known and available, of small business utilization strategies, technical assistance and outreach models, reciprocity agreements, and structures of preferences and other incentives.
• Authorize a local agency to establish a Small Business Utilization Program (SBUP) to increase small businesses’ participation in local agency procurement opportunities.
• Require a SBUP, to the extent feasible, to include all of the following:
  • A small business certification process that considers reciprocity with the state and other local agencies.
  • A minimum goal of 25 percent procurement participation for small businesses, including microbusinesses, in local agency contracts.
  • A small business preference and a nonsmall business preference for bidders that provide for small business and microbusiness subcontractor participation in the award of contracts for goods, information technology, and services.
  • Policies and strategies related to training, technical assistance, and resources available to small businesses to enhance their ability to compete for local agency contracts.
  • Policies and strategies that provide specific considerations to be taken in designing and issuing solicitations to increase small business and microbusiness procurement opportunities while also meeting local agency needs and available.
  • Policies and strategies to assist departments that fail to meet the small business participation goal.
  • Data on local procurement activities and methods that will be used to monitor and report on the participation of small businesses in local agency contracts.
  • A process for a nonsmall business that receives a preference to replace the small business subcontractor identified in the bid for another qualified small business subcontractor after the contract has been awarded.
  • To the extent feasible and consistent with state law, incentives to small businesses in the procurement process, including, but not limited to, set-asides, subcontracting opportunities, and mandatory small business participation in certain local agency contracts for qualified small businesses.
  • Policies and strategies that support the local agency in continuously expanding the pool of small businesses and microbusinesses participating in the local agency contracts.
  • A requirement for the local agency to review the SBUP and update it as needed, but not less than every four years.
• Authorize a local agency to submit information on their small business procurement participation to OSBA.
• Require OSBA, subject to funding being available, and upon appropriation by the Legislature to issue its first data call to local agencies on or before November 15, 2026 that captures information about the total number and dollar amount of contracting activities entered into by the local agency during the prior fiscal year in dollars and percentages compared to the baseline year identified in the SBUP or set by the local agency through another means.

Staff Comments:

GO-Biz notes that it would require a minimum of three positions to fulfill the bill’s workload requirements. Cost drivers would include the requirement to expand the scope of the CalOSBA Director’s responsibilities to “Collaborate with local agencies on the development and implementation of local strategies to increase small business participation in local procurement opportunities, including facilitating discussions and sharing examples, when known and available, of small business utilization strategies, technical assistance and outreach models, reciprocity agreements, and structures of preferences and other incentives.” GO-Biz identifies, at a minimum, hundreds of local jurisdictions and the potential resulting demand for technical assistance is unknown. CalOSBA has a team dedicated to the statewide implementation of AB 2019 (2022), which codified a 25 percent small business goal for state procurement and proposed a number of actions to enhance the ability and commitment of state agencies to include diverse business-owners and DVBEs in state contracting; however, it does not have existing resources to provide these consulting services to local jurisdictions who each have their own way of conducting business and contracting provisions. Consequently, CalOSBA may need to stand up a new team and this would cost hundreds of thousands of dollars.

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SENATE COMMITTEE ON LOCAL GOVERNMENT

Senator María Elena Durazo, Chair

2023 - 2024 Regular

Small business

Enacts the Small Business Utilization Act to encourage local agencies to increase small businesses to participate in local agency procurement.

Background

Small Business Advocate. The Governor’s Office for Business and Economic Development (GO-Biz) is the lead state agency for economic strategy and marketing of California on issues relating to business development, private sector investment, and economic growth. Within GO-Biz is the Office of the Small Business Advocate (OSBA). The Director of the OSBA represents the views and interests of small businesses before other state agencies whose policies and activities may affect small businesses. OSBA must post specified information on the GO-Biz or OSBA’s website, including how to receive assistance in getting certified as a small business and identifying and participating in state procurement opportunities.

OSBA provides various technical assistance programs to encourage public agencies to contract with small businesses, including:

• The Small Business Technical Assistance Program (SB TAP). SB TAP receives $23 million annually to support a statewide network of over 90 technical assistance programs to assist companies in preparing for procurement activities; and
• The State Small Business Credit Initiative (SSBCI) Technical Assistance Program. In 2023-24, OSBA received $25.3 million to expand technical assistance and other activities to help create a pipeline of small businesses that are financing-ready.

Small business procurement. Current laws generally require state agencies and local governments to award public contracts to the lowest responsible bidder. State law also allows local agencies to require that contracts be awarded to the lowest responsible bidder who meets goals for contract participation by minority and women business enterprises. If a bidder does not meet the local agencies' goals, the agency must evaluate the bidder's good faith efforts to meet those goals.

When the voters passed Proposition 209 (1996), they constitutionally banned discrimination or preferential treatment based on race, sex, color, ethnicity, or national origin in public employment, public education, and public contracting. Lawmakers responded with legislation allowing agencies to engage in public sector outreach programs, including recruitment of minority groups and women (SB 44, Polanco, 1999). Governor Davis vetoed that bill, saying it violated Proposition 209, but appointed a 28-member Governor's Task Force on Diversity and Outreach to examine ways of conducting constitutionally permissible outreach programs. The Task Force's August 2000 report offered a list of legislative, budgetary, and administrative options. According to the Task Force, “most of the businesses adversely impacted by Proposition 209 were minority businesses and women-owned businesses. The vast majority of these businesses are, in fact, small businesses.”

Responding to the Task Force’s recommendations, the Legislature revised the existing Small Business Procurement and Contract Act in several ways (AB 1084, Wesson, 2001). Among other things, the Small Business Procurement and Contract Act permits local agencies to depart from the requirement to award contracts to the lowest responsible bidder by providing a 5 percent preference for small businesses in contracts for construction, goods, or services. Under this preference, bids from small businesses are reduced by the percentage of the preference multiplied by the lowest bid that the local agency receives—effectively lowering the price of a bid for purposes of awarding a contract. This preference can be extended to bidders that use small business contractors, and local governments can require bidders to make, and provide evidence of, good faith efforts to meet a subcontracting participation goal for small business contracts, as well as setting additional guidelines for local preference purposes. By focusing the preference on small businesses generally, these laws dodge the constitutional prohibitions in Proposition 209.

The Small Business Procurement and Contract Act also mandates that state agencies offer a similar small business preference of 5 percent, establish goals for the participation of small businesses in contracting, and offer a preference to disabled veteran business enterprises (DVBEs). The Act defines “small business” and DVBE, and directs the Department of General Services (DGS) to certify and maintain a list of eligible small businesses and DVBEs. However, local agencies can also promulgate their own definitions of small business. In 2012, the Legislature updated the Small Business Procurement and Contracting Act to align local agency procurement programs with the state's certified small business program to ensure small businesses certified by the state under the program would be assured of eligibility to engage in procurement activities with local agencies (AB 1783, Perea, 2012).

For the purposes of the Small Business Procurement and Contract Act, a small business is a company with 100 or fewer employees and fewer than $15 million in average annual gross receipts, among other conditions. The DGS director can increase the gross receipts threshold to account for inflation every two years.

AB 2762 (Wendy Carrillo, 2018). To allow some counties to offer additional preferences, the Legislature enacted AB 2762 (Wendy Carrillo, 2018). AB 2762 created two additional categories of preferences that local governments may offer when procuring contracts: DVBEs and social enterprises. These preferences may be applied to contracts for construction, the procurement of goods, or the delivery of services. Local agencies offering a preference to small businesses, DVBEs, and social enterprises must define eligibility for a preference and must include in that eligibility those businesses that meet specified definitions in law. AB 2762 defined DVBEs to match the state definition and required social enterprises to meet criteria similar to LA County’s program.

AB 2762 also increased, from 5 percent to 7 percent of the lowest responsible bidder, the maximum value of a single preference for small businesses and extended this maximum value to DVBEs and social enterprises. However, local governments cannot provide a single preference that exceeds $100,000 for any bid. If a contractor qualifies for multiple preferences—for example, as both a small business and a DVBE—local agencies can grant multiple preferences for a bid, up to a total preference of 15 percent of the lowest responsible bidder and no more than $200,000.

Only local agencies within 12 counties were eligible to offer the preferences established by AB 2762: Alameda, Contra Costa, Lake, Los Angeles, Marin, Napa, San Francisco, San Joaquin, San Mateo, Santa Clara, Solano, and Sonoma. The DVBE and social enterprise preference authorization sunset on January 1, 2024.

The author wants to encourage local governments to adopt practices that align with recent OSBA technical assistance programs with the goal of increasing small business procurement opportunities with local governments.

Proposed Law

Assembly Bill 2262 enacts the Small Business Utilization Act, which allows a local agency to establish a Small Business Utilization Program (SBUP) to increase small businesses’ participation in local agency procurement opportunities.

The SBUP must, to the extent feasible, include:

• A small business certification process. In developing the process and certification criteria, the local agency shall consider reciprocity with the state and other local agencies. Nothing in this chapter prohibits a local agency from also adopting a local small business certification;
• A minimum goal of 25 percent procurement participation for small businesses, including microbusinesses, in local agency contracts;
• A small business preference and a nonsmall business preference for bidders that provide for small business and microbusiness subcontractor participation in the award of contracts for goods, information technology, and services. These small businesses are required to serve a commercially useful function in the completion of the contract;
• Policies and strategies related to training, technical assistance, and resources available to small businesses to enhance their ability to compete for local agency contracts;
• Policies and strategies that provide specific considerations to be taken in designing and issuing solicitations to increase small business and microbusiness procurement opportunities while also meeting local agency needs and available funding, including:
  • Determining when it is appropriate and how to unbundle larger contracts to allow smaller ones;
  • Reducing the minimum years of experience a business must have to submit a fully compliant bid;
  • Reducing the level of inventory normally required; and
  • Streamlining the bidding process.
• Policies and strategies to assist departments that fail to meet the small business participation goal;
• Baseline data on local procurement activities and methods that will be used to monitor and report on the participation of small businesses in local agency contracts;
• A process for a nonsmall business that receives a preference pursuant to this chapter to verify:
  • The small business subcontractors identified in the bid package have been notified that the prime has been awarded the contract;
  • The small business subcontractors identified in the bid package have been paid in full;
  • The amount paid, in the aggregate, to small business subcontractors meets or exceeds the amount committed to in the bid and as modified by the local agency contract; and
  • The small business subcontractors serve a commercially useful function.
• A process for a nonsmall business that receives a preference to replace the small business subcontractor identified in the bid for another qualified small business subcontractor after the contract has been awarded, including a requirement for approval by the local agency and the notification and payment of costs already incurred by the small business subcontractors named in the bid;
• To the extent feasible and consistent with state law, incentives to small businesses in the procurement process, including, but not limited to, set-asides, subcontracting opportunities, and mandatory small business participation in certain local agency contracts for qualified small businesses;
• Policies and strategies that support the local agency in continuously expanding the pool of small businesses and microbusinesses participating in the local agency contracts; and
• A requirement for the local agency to review the Small Business Utilization Plan and update it as needed, but not less than every four years.

A local agency may submit information on their small business procurement participation to OSBA, including progress toward meeting utilization goals. Subject to funding being available, OSBA must issue its first request for data from local agencies on or before November 15, 2026, to at least cover contracting activities during the prior fiscal year.

Information from the data call must include the total number and dollar amount of contracting activities entered into by the local agency during the prior fiscal year in dollars and percentages compared to the baseline year identified in the SBUP or set by the local agency through another means. The report may also summarize any substantive changes made to the SBUP, if one has been adopted, during the reporting year.

AB 2262 requires OSBA to collaborate with local agencies on the development and implementation of local strategies to increase small business participation in local procurement opportunities, including facilitating discussions and sharing examples, when known and available, of small business utilization strategies, technical assistance and outreach models, reciprocity agreements, and structures of preferences and other incentives.

Comments

1. Purpose of the bill. According to the author, “Small businesses have demonstrated a unique ability to fill niche business needs, fill gaps in supply chains, bring innovative products and ideas into the marketplace, and help American products enter global markets. While small businesses serve as an essential foundation of the California economy, their economic contributions could be more significant and strengthen local economies if they had access to city and county government procurement opportunities.”

2. Sure, but will it work? Existing law already allows local agencies to give small businesses a preference when they award contracts. Local agencies also had the authority to award an additional preference for DVBEs and social enterprises, but that authority sunset on January 1, 2024. Despite the existing small business contracting preference for local agencies, AB 2262 seeks to further opportunities for small businesses to receive contracts for local agencies. Specifically, it allows local agencies to establish a Small Business Utilization Program (SBUP), and then outlines a comprehensive set of information an SBUP must include. However, AB 2262 does not require local agencies to establish an SBUP, does not provide them additional powers to grant preferences to small business, and does not offer local agencies a significant incentive to adopt an SBUP. It is unclear how AB 2262 would actually encourage local agencies to award more contracts to small businesses.

3. Incoming! The Senate Business, Professions, and Economic Development Committee approved AB 2262 at its June 17^th hearing on a vote of 12-0. The Senate Local Government Committee is hearing AB 2262 as the committee of second reference.

Assembly Actions

Assembly Jobs, Economic Development, and the Economy Committee: 7-0
Assembly Appropriations Committee: 11-0
Assembly Floor: 73-0

Support and Opposition

(6/28/24)

Support: California African American Chamber of Commerce
California Asian Pacific Chamber of Commerce
California Hispanic Chambers of Commerce
Los Angeles Area Chamber of Commerce

Opposition: None submitted.

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SENATE COMMITTEE ON

BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT

Senator Angelique Ashby, Chair

2023 - 2024 Regular

Bill No: AB 2262 Hearing Date: June 17, 2024

Subject: Small business

SUMMARY:

Requires the Office of the Small Business Advocate (OSBA) within the Governor’s Office of Business and Economic Development (GO-Biz) to collaborate with local agencies on strategies to increase small business participation in local procurement opportunities and authorizes a local agency to establish a Small Business Utilization Program to increase small businesses’ participation in local agency procurement opportunities.

NOTE: This measure is double-referred to the Senate Committee on Local Government, second.

Existing law

1. Establishes GO-Biz within the Governor’s Office for the purpose of serving as the lead state agency for economic strategy and marketing of California on issues relating to business development, private sector investment, and economic growth, and authorizes GO-Biz to establish an interactive internet website. (Government Code (GOV) §§ 12096-12098.5)
2. Establishes OSBA within the GO-Biz and outlines the duties and functions of the Director of OSBA including representing the views and interests of small businesses before other state agencies whose policies and activities may affect small businesses. (GOV §§ 12098-12098.9)
3. Requires OSBA to post specified information on the GO-Biz or OSBA’s internet website, including how to receive assistance in certifying as a small business and identifying and participating in state procurement opportunities. (GOV §§ 8333.1)

This bill:

1. Beginning January 1, 2025, requires OSBA to collaborate with local agencies on the development and implementation of local strategies to increase small business participation in local procurement opportunities, including facilitating discussions and sharing examples, when known and available, of small business utilization strategies, technical assistance and outreach models, reciprocity agreements, and structures of preferences and other incentives.
2. Makes various findings and declarations about the crucial role small businesses play in the state economy and contribute significantly to job creation and economic growth.
3. Authorizes a local agency to establish a Small Business Utilization Program (SBUP) to increase small businesses’ participation in local agency procurement opportunities.
4. Requires a SBUP, to the extent feasible, to include all of the following:
5. A small business certification process that considers reciprocity with the state and other local agencies.
6. A minimum goal of 25 percent procurement participation for small businesses, including microbusinesses, in local agency contracts.
7. A small business preference and a nonsmall business preference for bidders that provide for small business and microbusiness subcontractor participation in the award of contracts for goods, information technology, and services.
8. Policies and strategies related to training, technical assistance, and resources available to small businesses to enhance their ability to compete for local agency contracts.
9. Policies and strategies that provide specific considerations to be taken in designing and issuing solicitations to increase small business and microbusiness procurement opportunities while also meeting local agency needs and available
10. Policies and strategies to assist departments that fail to meet the small business participation goal.
11. Data on local procurement activities and methods that will be used to monitor and report on the participation of small businesses in local agency contracts.
12. A process for a nonsmall business that receives a preference to replace the small business subcontractor identified in the bid for another qualified small business subcontractor after the contract has been awarded.
13. To the extent feasible and consistent with state law, incentives to small businesses in the procurement process, including, but not limited to, set-asides, subcontracting opportunities, and mandatory small business participation in certain local agency contracts for qualified small businesses.
14. Policies and strategies that support the local agency in continuously expanding the pool of small businesses and microbusinesses participating in the local agency contracts.
15. A requirement for the local agency to review the SBUP and update it as needed, but not less than every four years.
16. Authorizes a local agency to submit information on their small business procurement participation to OSBA.
17. Requires OSBA, subject to funding being available, and upon appropriation by the Legislature to issue its first data call to local agencies on or before November 15, 2026 that captures information about the total number and dollar amount of contracting activities entered into by the local agency during the prior fiscal year in dollars and percentages compared to the baseline year identified in the SBUP or set by the local agency through another means.

FISCAL EFFECT:

This bill is keyed fiscal by Legislative Counsel. According to the Assembly Committee on Appropriations, the bill will result in unknown General Fund costs to GO-Biz to provide technical assistance to cities and counties and to issue a data call. GO-Biz indicates costs could be minor and absorbable to the extent cities and counties do not request technical assistance but could result in the need for additional personnel to the extent cities and counties request large amounts of technical assistance.

COMMENTS:

1. Purpose. This bill is sponsored by the California Asian Pacific Chamber of Commerce, California Hispanic Chamber of Commerce and California African-American Chamber of Commerce. According to the Author, “The problem this bill is trying to solve is the issue of limited access for small businesses to government procurement opportunities at the city and county levels. This lack of access hinders the ability of small enterprises to fully contribute to the local economy and inhibits their potential for growth. Without the opportunity to participate in government contracts, small businesses are deprived of a significant source of revenue and expansion. This not only affects the economic prosperity of small businesses but also diminishes their capacity to reinvest in the community, sponsor local events, and support other small enterprises, thus impeding overall community development. Addressing this issue is crucial for fostering an inclusive and vibrant economic environment that benefits both small businesses and local communities.”
2. Background.

GO-Biz. In February 2010, the Little Hoover Commission undertook a review of the state's economic and workforce development programs. In its final report, Making up for Lost Ground: Creating a Governor's Office of Economic Development, it analyzed the status and effectiveness of current programs since the 2003 demise of the Technology, Trade and Commerce Agency (TTCA) and recommended the creation of a new governmental entity to fill the void left by the dismantled agency.

The report called for a single entity that would promote greater economic development, foster job creation, serve as a policy advisor and deliver specific services (i.e., permitting, tax, regulatory, and other information) directly to the California business community. In April 2010, Governor Schwarzenegger issued Executive Order S-05-10 as a means to operationalize the report recommendations including the creation of the Governor's Office of Economic Development (GOED).

In October 2011, the Governor signed AB 29 (John A. Pérez, Chapter 475, Statutes of 2011), which effectively codified GOED and changed its name to GO-Biz. Since its inception, the office has served thousands of businesses, 95 percent of which are small businesses. The most frequent types of assistance include help with permit streamlining, starting a business, relocation and expansion of businesses, and regulatory challenges.

In March 2012, Governor Brown initiated a reorganization process to realign the state's administrative structure. Key changes include dismantling of the Business, Transportation and Housing Agency and the shifting of a number of key programs to GO-Biz including the Small Business Loan Guarantee Program, the California Travel and Tourism Commission, the California Film Commission, the Film California First Program, and the Infrastructure and Economic Development Bank (IBank). Currently, GO-Biz administers the following programs and units:

• Made In California program for the purpose of encouraging consumer product awareness and to foster the purchases of products manufactured in California.
• The California Inclusive Innovation Hub Program (iHub2) to incubate and/or accelerate technology and science-based firms, with a focus on underserved regions and communities.
• The California Competes Tax Credit Program under which “businesses who want to come to California or stay and grow in California” can receive an income tax credit.
• The California Business Investment Services Unit, which provides no-fee, tailored site selection services to employers and others who may be considering California for relocation or expansion.
• The California Business Portal, which provides information to California businesses about common questions, permitting, financial options, and more.
• The California Community Reinvestment Grants Program, which was included in Proposition 64, authorized GO-Biz to award grants to local health departments and certain nonprofit organizations to support communities disproportionately affected by the War on Drugs.
• Office of the Small Business Advocate which provides information and assistance to small businesses.
• The Zero Emission Vehicles (ZEV) Infrastructure Unit which works to accelerate the deployment of ZEV infrastructure.
• The International Affairs and Business Development Unit, which serves as California’s primary point of contact for expanding international trade and investment relations. This unit focuses on foreign direct investment (services for foreign investors, foreign investment technical assistance, and the EB-5 Investor Visa Program), international trade promotion (STEP program, trade missions, export assistance, and the California-China Trade Office), and international agreements.

OSBA. Since its inception, GO-Biz has served thousands of businesses, 95 percent of which are small businesses. The most frequent types of assistance include help with permit streamlining, starting a business, relocation and expansion of businesses, and regulatory challenges. In addition to economic development programs, GO-Biz is responsible for specialized assistance to small businesses through the OSBA. OSBA directly serves the small business community through hosting summits, forums, and interagency meetings; maintaining resources for technical assistance, financing, and state procurement; holding webinars, and other outreach methods. OSBA oversees the Capital Infusion Program, which enables the California Small Business Development Center (SBDC) Networks to expand their one-to-one, no-cost, confidential consulting to small business owners.  From its inception in 2014 to 2016, the Capital Infusion Program resulted in roughly $379 million in documented capital infusion and served over 20,000 small business owners across the state.  In 2015, GO-Biz launched a new California Business Portal; the site includes a Business Navigator feature, which provides custom information regarding permits, licenses, and incentives that relate specifically to the user’s business. OSBA also provides emergency preparedness resources on its website and was involved in facilitating disaster relief financing efforts for small businesses during the 2017 Northern and Southern California fires. During the COVID-19 pandemic, OSBA has been crucial in hosting events for small businesses to learn how to adapt, particularly by moving into the online space through trainings with names ranging from Google to Facebook.

GO-Biz launched a California Business Portal under the OSBA in 2015, which includes a Business Navigator feature, which provides custom information regarding permits, licenses, and incentives that relate specifically to the user’s business; a Business Service Desk, which provides answers to commonly asked questions and allows businesses to submit questions; a financial assistance resources to help businesses research loan programs and other financing options; and a library of Quick Start Guides to provide businesses with information on how to start, grow, and expand specific types of businesses in California. Generally speaking, the portal is a service offered by GO-Biz that provides resources on how to start a business, relocating or expanding a business, international trade and investment, incentives and financing, emergency preparedness and recovery, closing a business, and email subscriptions.

GO-Biz also administers the Permit Assistance Unit which was established based on the agency’s statutory authority to provide assistance to businesses in obtaining state and local permits and support small businesses in complying with regulatory requirements and was codified in statute by AB 2605 (Nazarian, Chapter 78, Statutes of 2605). The Permit Assistance Unit provides new business owners with assistance in identifying the permits needed to start a new business and facilities meetings between businesses and regulatory agencies. The Permit Assistance Unit is also responsible for maintaining the CalGOLD program which provides assistance in finding local, state, and federal permit information based on business type and location in California as well as the contact information for relevant regulatory agencies. The online tool provides online resources, application forms, and contact information for the various agencies that administer and issue these permits. For permits and registrations administered by the State of California, CalGold also includes a Forms and Fee Finder with direct links to applications and fee information.

Just last year, the Author’s AB 258 (Chapter 423, Statutes of 2023) created the “Small Business Information Act” that requires OSBA to establish an internet web portal that includes information along with various specified links. Specifically, the portal includes information on how to identify and access services provided through the statewide network of small business technical assistance centers, including, but not limited to, small business development centers, women business centers, veteran business outreach centers, procurement technical assistance centers, and the Manufacturing Extension Partnership also include a list with links to current awardees of the California Small Business Development Technical Assistance Act of 2022. The bill also requires OSBA to ensure that the portal is accessible and provides helpful information to a diverse set of small businesses, including women-, minority-, and veteran-owned businesses in disadvantaged or low-income communities.

1. Arguments in Support. Supporters state that “Every year, cities and counties contract for millions of dollars in goods, services, and information technology. While civic leaders and residents recognize that public money spent closer to “home” would have the most significant multiplier effect on their community, local companies need help to compete effectively for those contracts. Busy

local government staff often have competing priorities for their time, and developing comprehensive Small Business Utilization Programs can take time.

The AB 2262 model establishes an optional Small Business Utilization Program for local governments and sets standards for a comprehensive plan that addresses a range of common small business procurement challenges. Further, the bill explicitly authorizes the California Small Business Advocate to collaborate with local agencies to develop and implement their local strategies to increase small business procurement participation.”

SUPPORT AND OPPOSITION:

Support:

Cal Asian Chamber of Commerce
California African American Chamber of Commerce
California Asian Pacific Chamber of Commerce
California Hispanic Chambers of Commerce
Los Angeles Area Chamber of Commerce

Opposition:

None received

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 2262

Author:(Reyes and Stephanie Nguyen)

As Amended Ver:May 16, 2024

Majority vote

SUMMARY

Empowers cities and counties to establish Small Business Utilization Program, initiate small business certification, and set a 25% certification target. Additionally, it requires the Office of Small Business Advocate to collect data on local small business procurement and utilization plans by November 15, 2026, pending funding.

Major Provisions

1. Requires collaboration between the advocate and local agencies to boost small business participation in local procurement.
2. Establishes the Small Business Utilization Program (SBUP), aiming to promote small business inclusion in government contracts.
3. Defines key terms and declares the public benefit of the program.
4. Allows local agencies to create their own Small Business Utilization Programs.
5. Sets guidelines for SBUP implementation, including certification, procurement goals, preferences, and training strategies.
6. Mandates regular review and updates of SBUPs by local agencies.
7. Requires reporting of small business procurement participation to the Office of Small Business Advocate.
8. Sets the effective date of the chapter as January 1, 2025.

COMMENTS

AB 2262 tackles hurdles local companies encounter in securing contracts with cities and counties despite significant public spending. It introduces an optional Small Business Utilization Program for local governments, setting standards for comprehensive plans to address procurement challenges while promoting collaboration between the California Small Business Advocate and local agencies to enhance small business procurement participation.

According to the Author

AB 2262 would encourage cities and counties to adopt Small Business Utilization Plans to leverage local contracting activities to support small businesses and promote local economic growth. Small businesses offer personalized products and services tailored to the needs of their community, fostering a sense of belonging and trust among residents. While small businesses serve as an essential foundation of the California economy, their economic contributions could be more significant and strengthen local economies if they had access to city and county government procurement opportunities. Supporting small businesses not only strengthens the local economy but also creates a ripple effect, as they are more likely to reinvest in the community, sponsor local events, and support other small businesses. Small Business Utilization Plans in local communities are crucial for fostering economic resilience, innovation, and community cohesion. AB 2262 will empower small businesses, invigorate local economies, and cultivate thriving communities for generations to come.

Arguments in Support

Per the bill sponsors, The California Asian Pacific Chamber of Commerce, California Hispanic Chamber of Commerce, and the African- American Chamber of Commerce, they state the following, "Every year, cities and counties contract for millions of dollars in goods, services, and information technology. While civic leaders and residents recognize that public money spent closer to "home" would have the most significant multiplier effect on their community, local companies need help to compete effectively for those contracts. Busy local government staff often have competing priorities for their time, and developing comprehensive Small Business Utilization Programs can take time. The AB 2262 model establishes an optional Small Business Utilization Program for local governments and sets standards for a comprehensive plan that addresses a range of common small business procurement challenges. Further, the bill explicitly authorizes the California Small Business Advocate to collaborate with local agencies to develop and implement their local strategies to increase small business procurement participation

Arguments in Opposition

None on file.

FISCAL COMMENTS

According to the Assembly Appropriations Committee, unknown General Fund costs to GO-Biz to provide technical assistance to cities and counties and to issue a data call. GO-Biz indicates costs could be minor and absorbable to the extent cities and counties do not request technical assistance but could result in the need for additional personnel to the extent cities and counties request large amounts of technical assistance.

VOTES

ASM JOBS, ECONOMIC DEVELOPMENT, AND THE ECONOMY: 7-0-0

YES: Villapudua, Hoover, Stephanie Nguyen, Petrie-Norris, Ramos, Soria, Wallis

ASM APPROPRIATIONS: 11-0-4

YES: Wicks, Arambula, Bryan, Calderon, Wendy Carrillo, Mike Fong, Grayson, Haney, Hart, Pellerin, Villapudua

ABS, ABST OR NV: Sanchez, Dixon, Jim Patterson, Ta

UPDATED

VERSION: May 16, 2024

CONSULTANT: Ashley Bennett / J., E.D., & E. / (916) 319-2090 FN: 0003382

Date of Hearing: May 1, 2024

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Buffy Wicks, Chair

ABPCA Bill Id:AB 2262

Author:(Reyes) – As Amended Ver:March 19, 2024

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill encourages cities and counties to adopt strategies to provide more opportunities to local small businesses for local agency contracting opportunities. The bill also requires the Office of Small Business Advocate at the Governor’s Office of Business and Economic Development (GO-Biz) to collaborate with cities and counties on the development and implementation of these strategies.

Specifically, this bill authorizes a city or county to establish a Small Business Utilization Program to increase small businesses’ participation in local agency procurement opportunities and allows the agency to launch a small business certification program and set a 25% small business certification goal, among other initiatives.

The bill requires, subject to appropriation, the Office of Small Business Advocate to issue a data call to cities and counties to collect information about local small business procurement and Small Business Utilization Plans by November 15, 2026.

FISCAL EFFECT:

Unknown General Fund costs to GO-Biz to provide technical assistance to cities and counties and to issue a data call. GO-Biz indicates costs could be minor and absorbable to the extent cities and counties do not request technical assistance but could result in the need for additional personnel to the extent cities and counties request large amounts of technical assistance.

COMMENTS:

1. Purpose. According to the sponsors of this bill, The California Asian Pacific Chamber of Commerce, California Hispanic Chamber of Commerce, and the African- American Chamber of Commerce:

Every year, cities and counties contract for millions of dollars in goods, services, and information technology. While civic leaders and residents recognize that public money spent closer to “home” would have the most significant multiplier effect on their community, local companies need help to compete effectively for those contracts. Busy local government staff often have competing priorities for their time, and developing comprehensive Small Business Utilization Programs can take time. The AB 2262 model establishes an optional Small Business Utilization Program for local governments and sets standards for a comprehensive plan that addresses a range of common small business procurement challenges. Further, the bill explicitly authorizes the California Small Business Advocate to collaborate with local agencies to develop and implement their local strategies to increase small business procurement participation.

1. Background. Several of the strategies described in this bill to increase small business utilization for local agency procurement are used at the state level to increase small business utilization state agency procurement, such as a goal of 25% for procurement participation for small businesses in local agency contracts.

Analysis Prepared by: Natasha Collins / APPR. / (916) 319-2081

Date of Hearing: 04/16/2024

ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT, AND THE ECONOMY

Carlos Villapudua, Chair

ABPCA Bill Id:AB 2262 (

Author:Reyes) – As Amended Ver:March 19, 2024

SUBJECT: Small business and Small Business Utilization Program Act

SUMMARY: This bill encourages cities and counties to adopt Small Business Utilization Plans to leverage local contracting activities to support small businesses and local economic growth.

This bill addresses the issue of limited access for small businesses to government procurement opportunities at the city and county levels. It would require the collaboration of advocates with local agencies to develop strategies for increasing small business participation in procurement and permitting local agencies to report their small business procurement participation to the Office of Small Business Advocate, with the advocate issuing data calls to agencies, subject to funding availability.

Specifically, this bill:

1. Requires the advocate to collaborate with local agencies on the development and implementation of local strategies to increase small business participation in local procurement opportunities, as specified.
2. Including facilitating discussions and sharing examples, when known and available, of small business utilization strategies, technical assistance and outreach models, reciprocity agreements, and structures of preferences and other incentives.

Establishes the Small Business Utilization Program finding and declaring all of the following:

• 1. Small businesses play a crucial role in the state economy and contribute significantly to job creation and economic growth.
  2. Establishing a Small Business Utilization Program will promote the inclusion and participation of small businesses in government contracts, fostering economic development.
  3. Serves a public purpose and is of benefit to the state to promote and facilitate the fullest possible participation by all citizens.
  4. Serves the public interest to ensure fair and equal opportunities for small businesses to compete for and perform local contracts.

Defines for the purpose of this chapter, the following terms:

1. “Commercially useful function” means
   • 1. A contractor is deemed to perform a commercially useful function if the contractor, including a subcontractor, does all of the following:
     2. Is responsible for the execution of a distinct element of the work of the contract.
     3. Carries out its obligation by actually performing, managing, or supervising the work involved.
     4. Performs work that is normal for its business services and functions.
     5. 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.
     6. Is not further subcontracting a portion of the work that is greater than that expected to be subcontracted by normal industry practices.
2. A contractor or subcontractor shall not be considered to perform a commercially useful function if the contractor’s or subcontractor’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 a small business, a disabled veteran business, or a social enterprise.
   1. “Contract” or “procurement” means the procurement of goods, information technology, or delivery of services.
   2. “Local agency” means a city, county, or city and county, including charter cities and charter counties.
3. A local agency may establish a Small Business Utilization Program (SBUP) to increase small businesses’ participation in local agency procurement opportunities.
4. In order to facilitate the participation of small businesses, including microbusinesses, in the provision of goods, information technology, and services to the local agency, the SBUP shall, to the extent feasible, include all of the following:
   • 1. A small business certification process, including certification criteria, that shall, at minimum, include each small business certification In developing the process and certification criteria, the local agency shall consider reciprocity with the state and other local agencies. Nothing in this chapter prohibits a local agency from also adopting a local small business certification.
     2. A minimum goal of 25 percent procurement participation for small businesses, including microbusinesses, in local agency contracts.
     3. A small business preference and a nonsmall business preference for bidders that provide for small business and microbusiness subcontractor participation in the award of contracts for goods, information technology, and services. These small businesses are required to serve a commercially useful function in the completion of the contract.
     4. Policies and strategies related to training, technical assistance, and resources available to small businesses to enhance their ability to compete for local agency contracts.
     5. Policies and strategies that provide specific considerations to be taken in designing and issuing solicitations to increase small business and microbusiness procurement opportunities while also meeting local agency needs and available funding, including, but not limited to:
   1. To the extent feasible and consistent with state law, incentives to small businesses in the procurement process, including, but not limited to, set-asides, subcontracting opportunities, and mandatory small business participation in certain local agency contracts for qualified small businesses.
   2. Policies and strategies that support the local agency in continuously expanding the pool of small businesses and microbusinesses participating in the local agency contracts.
   3. A requirement for the local agency to review the Small Business Utilization Plan and update it as needed, but not less than every four years.

Reporting Requirements:

• 1. A local agency may submit information on their small business procurement participation to the Office of Small Business Advocate, including progress toward meeting utilization goals.
  2. Subject to funding being available, and upon appropriation by the Legislature for purposes of this chapter, the Office of Small Business Advocate shall issue its first data call to local agencies on or before November 15, 2026. The data call shall cover contracting activities during the prior fiscal year.
  3.  Information from the data call shall include the total number and dollar amount of contracting activities entered into by the local agency during the prior fiscal year in dollars and percentages compared to the baseline year identified in the Small Business Utilization Plan or set by the local agency through another means. The report may also summarize any substantive changes made to the Small Business Utilization Plan, if one has been adopted, during the reporting year.

Effective Date: This chapter shall become effective on January 1, 2025.

EXISTING LAW:

1. Existing law creates within the Governor’s Office of Business and Economic Development the Office of Small Business Advocate, which is led by the Small Business Advocate, to advocate the causes of small business and to provide small businesses with the information they need to survive in the marketplace.
2. Existing law requires the advocate to, among other duties, collaborate with the Office of Small Business and Disabled Veteran Business Enterprise Services in their activities under the Small Business Procurement and Contract Act, including promoting small business certification.

FISCAL EFFECT: Unknown

COMMENTS:

California boasts an impressive over 4 million small businesses, representing 99.8 percent of all businesses in the state and employing 7.2 million people or 47.6 percent of the private workforce—with approximately 1.9 million being minority-owned. Minority-owned businesses constitute approximately 46% of all businesses in the state and contribute $192.8 billion in economic output, which is more than the annual Gross Domestic Product of 18 US States, generating $28.7 million in tax revenue, and supporting 2.56 million jobs. Beyond the economic and fiscal contributions, small businesses have a vital role in local capacity building, community engagement, empowering marginalized communities, supporting cultural diversity, creating a more inclusive environment and therefore contributing to a more diverse and inclusive economy. Research shows entrepreneurship creates intergenerational wealth-building opportunities that is particularly strong for minority and women owned businesses.

According to the author, “Small businesses have demonstrated a unique ability to fill niche business needs, fill gaps in supply chains, bring innovative products and ideas into the marketplace, and help American products enter global markets. While small businesses serve as an essential foundation of the California economy, their economic contributions could be more significant and strengthen local economies if they had access to city and county government procurement opportunities.”

Author Statement: “AB 2262 would encourage cities and counties to adopt Small Business Utilization Plans to leverage local contracting activities to support small businesses and promote local economic growth. Small businesses offer personalized products and services tailored to the needs of their community, fostering a sense of belonging and trust among residents. While small businesses serve as an essential foundation of the California economy, their economic contributions could be more significant and strengthen local economies if they had access to city and county government procurement opportunities. Supporting small businesses not only strengthens the local economy but also creates a ripple effect, as they are more likely to reinvest in the community, sponsor local events, and support other small businesses. Small Business Utilization Plans in local communities are crucial for fostering economic resilience, innovation, and community cohesion. AB 2262 will empower small businesses, invigorate local economies, and cultivate thriving communities for generations to come.”

Arguments in Support:

Per the bill sponsors, The California Asian Pacific Chamber of Commerce, California Hispanic Chamber of Commerce, and the African- American Chamber of Commerce, they state the following, “Every year, cities and counties contract for millions of dollars in goods, services, and information technology. While civic leaders and residents recognize that public money spent closer to “home” would have the most significant multiplier effect on their community, local companies need help to compete effectively for those contracts. Busy local government staff often have competing priorities for their time, and developing comprehensive Small Business Utilization Programs can take time. The AB 2262 model establishes an optional Small Business Utilization Program for local governments and sets standards for a comprehensive plan that addresses a range of common small business procurement challenges. Further, the bill explicitly authorizes the California Small Business Advocate to collaborate with local agencies to develop and implement their local strategies to increase small business procurement participation.”

Arguments in Opposition: None on file

REGISTERED SUPPORT / OPPOSITION:

Support

Cal Asian Chamber of Commerce
Los Angeles Area Chamber of Commerce

Opposition

None on file

Analysis Prepared by: Carla Castilla / J., E.D., & E. / (916) 319-2090