Existing law establishes bid preferences and participation goals in public contracting for certain types of bidders. The Small Business Procurement and Contract Act establishes a minimum goal of 25% procurement participation for small businesses, including microbusinesses, in the provision of goods, information technology, and services to the state, and in the construction of state facilities. The Small Business Procurement and Contract Act requires that state agencies awarding contracts for goods, information technology, services, and construction give 5% bid preferences, as specified, to small business and microbusiness bidders. The California Disabled Veteran Business Enterprise Program requires state departments that award contracts to establish 3% participation goals for certain types of contracts for certified disabled veteran business enterprises, as defined.

This bill would require an awarding department, defined to include a state agency or department, to provide a bid preference of 10% a prescribed percentage, as specified, in the award of contracts to contractors that set equity metrics, as prescribed. metrics. The bill would prohibit awarding a preference to a noncompliant bidder and would also prohibit the preference from being used to achieve any applicable minimum requirements. The bill would require the Department of General Services to adopt rules and regulations for the purpose of implementing these provisions.

Existing law, on or after January 1, 2026, authorizes a state agency to use, enter into, or require contractors to enter into, a project labor agreement that applies to a project or set of projects with aggregate construction costs in excess of $35,000,000 only if the agreement also includes provisions to address community benefits, as described.

This bill would make nonsubstantive changes to those provisions.

Date of Hearing: August 5, 2026

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Buffy Wicks, Chair

SBPCA Bill Id:SB 247

Author:(Smallwood-Cuevas) – As Amended Ver:April 21, 2025

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

SUMMARY:

This bill requires a state agency, department, governmental entity, or other officer or entity authorized to award contracts on behalf of the state to provide bid preference to contractors that meet specified equity metrics, defined as hiring certain percentages of persons residing in a distressed area or a disadvantaged community. The bill applies only to contracts in excess of $35,000,000 using funds from the federal Infrastructure Investment and Jobs Act (IIJA), the Inflation Reduction Act of 2022 (IRA) or the CHIPS and Science Act of 2022.

Specifically, the bill prescribes a tiered set of bid preference ranges, from one percent to 10% preference, depending on the percentage labor hours performed by eligible persons, from five-to-nine percent up to 90% or more of total labor hours. Lastly, the bill requires DGS to promulgate regulations regarding compliance and reporting requirements.

FISCAL EFFECT:

One-time costs of $928,000 in the first year of implementation, $898,000 in the second year, and $724,000 annually ongoing (General Fund) for DGS to develop a new unit within the State Procurement Oversight Services branch to develop required regulations and policies and oversee implementation statewide.

According to DGS, the bill may also result in state agencies paying more for goods and services if the winning bid utilizes an eligible preference, possibly in the millions to tens of millions of dollars, as equity metrics preferences can range as high as 10% of the $35 million minimum project cost provided for under this bill.

COMMENTS:

1. Purpose. According to the author:

California is home to one of the most diverse populations in the world – communities that are now at risk of losing both job opportunities and economic stability. This bill helps protect and uplift these communities by offering [up to] a 10% bid preference for public infrastructure projects that meet disadvantaged worker equity metrics. This sends a message: diversity, equity, and inclusion are not just priorities, they are essential to the success of California’s workforce and economy.

1. Background. Current law includes multiple contract procurement programs aimed at incentivizing state contracting with small businesses, disabled veteran owned businesses, businesses performing work in distressed areas and employing individuals at higher risk of unemployment, and for projects servicing disadvantaged communities identified by CalEPA. Depending on the specific program, a percentage-based preference is applied to the total bid cost for eligible businesses. Under the typical process, absent such preferences, agencies are required to award a contract to the lowest responsible bidder. This bill establishes a bid preference for projects over $35 million for businesses meeting specified equity metrics as a measure of the percentage of their workforce that are persons residing in a distressed area or a disadvantaged community, with businesses demonstrating a 5-to-9% percent eligible labor hours percentage receiving a one percent bid preference at the lowest tier and businesses demonstrating a 90% or more eligible labor hours percentage receiving 10% bid preference at the highest tier.
2. Support and Opposition. This bill has multiple organizations on file in support and opposition, with Equality California writing in support of the bill that “SB 247 helps ensure that public investments create pathways to good-paying jobs for communities that have historically been excluded from economic opportunity.” However, the Associated General Contractors (AGC) write the following:

Bid preferences do not create new value; they simply shift awards away from the lowest-cost bidder. As a result, the state pays more for the same project, agencies lose the ability to select the most cost-effective contractor, and construction budgets stretch further, reducing the number of projects that can be delivered. In a year when California faces significant fiscal constraints, SB 247 would increase project costs without improving safety, quality, or performance.

Analysis Prepared by: Aaron Heredia / APPR. / (916) 319-2081

Date of Hearing: June 23, 2026

ASSEMBLY COMMITTEE ON ECONOMIC DEVELOPMENT, GROWTH, AND HOUSEHOLD IMPACT

José Luis Solache, Jr., Chair

SBPCA Bill Id:SB 247

Author:(Smallwood-Cuevas) – As Amended Ver:April 21, 2025

SENATE VOTE: 30-10

SUBJECT: State agency contracts: bid preference: equity metrics

SUMMARY: This bill requires state awarding departments to provide a bid preference to contractors that establish and meet prescribed equity metrics. It prohibits noncompliant bidders from receiving the preference and prevents the preference from being used to satisfy minimum contract requirements. The bill also directs the Department of General Services to adopt regulations necessary to implement and administer these provisions.

Specifically, this bill:

1. Establishes the California Good Jobs Act and requires state agencies awarding certain large state contracts funded through the federal Infrastructure Investment and Jobs Act (IIJA), Inflation Reduction Act (IRA), or CHIPS and Science Act to provide bid preferences to contractors that commit to hiring workers residing in disadvantaged communities or distressed areas.
2. Creates a graduated bid preference ranging from 1% to 10%, depending on the percentage of contract labor hours performed by eligible workers. It also directs the Department of General Services (DGS) to adopt regulations and enforcement mechanisms to implement the program.
3. Requires an awarding department, defined to include a state agency or department, to provide a bid preference of 10% a prescribed percentage, as specified, in the award of contracts to contractors that set equity metrics, as prescribed. metrics.
4. Prohibits awarding a preference to a noncompliant bidder and would also prohibit the preference from being used to achieve any applicable minimum requirements.
5. Requires the Department of General Services to adopt rules and regulations for the purpose of implementing these provisions.

EXISTING LAW:

1. Existing law establishes multiple procurement preference and participation programs intended to promote economic opportunity through state contracting. These include:
2. The Small Business Procurement and Contract Act, which establishes a goal that at least 25% of state procurement dollars be awarded to small businesses and provides a 5% bid preference for certified small businesses.
3. The Disabled Veteran Business Enterprise (DVBE) Program, which establishes a statewide participation goal of 3% for certified DVBEs in state contracts.
4. The Target Area Contract Preference Act (TACPA), which provides bid preferences for California-based businesses that perform work in distressed areas and hire individuals facing a high risk of unemployment. TACPA currently provides a 5% worksite preference and an additional workforce preference of up to 4%.
5. Existing law also requires CalEPA to identify disadvantaged communities based on geographic, socioeconomic, environmental, and public health criteria for purposes of targeted state investments.

FISCAL EFFECT: None.

COMMENTS: California is expected to receive approximately $42 billion through IIJA funding, including approximately $38.8 billion for transportation projects. The IRA has provided billions of dollars nationally for clean energy investments, while the CHIPS Act supports domestic semiconductor manufacturing and technology development. This bill builds upon existing procurement preference programs. TACPA currently provides bid preferences for businesses operating in distressed areas and additional preferences for hiring workers at high risk of unemployment. This bill differs by focusing on worker residence rather than business location and by establishing a larger preference structure of up to 10%. This bill applies only to projects financed through three major federal initiatives enacted between 2021 and 2022:

• Infrastructure Investment and Jobs Act (IIJA)
• Inflation Reduction Act (IRA)
• CHIPS and Science Act

This bill requires awarding departments to provide bid preferences for certain contracts exceeding $35 million that utilize funding from the IIJA, IRA, or CHIPS and Science Act. The bill defines an "eligible person" as an individual residing in either:

• A disadvantaged community identified pursuant to existing CalEPA criteria; or
• A distressed area, defined as a census tract in the highest quartile statewide for poverty and unemployment.

The bill establishes the following bid preference schedule:

The bill prohibits noncompliant bidders from receiving the preference and requires DGS regulations to include compliance and reporting requirements. The preference may not be used to satisfy other statutory participation requirements.

Author Statement: According to the author, “This bill helps protect and uplift these communities by offering a 10% bid preference for public infrastructure projects that meet disadvantaged worker equity metrics. This sends a clear message: diversity, equity, and inclusion are not just priorities, they are essential to the success of California’s workforce and economy.”

REGISTERED SUPPORT / OPPOSITION:

Support

Opposition

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

Date of Hearing:

ASSEMBLY COMMITTEE ON ECONOMIC DEVELOPMENT, GROWTH, AND HOUSEHOLD IMPACT

José Luis Solache, Jr., Chair

SBPCA Bill Id:SB 247

Author:(Smallwood-Cuevas) – As Amended Ver:April 21, 2025

SENATE VOTE: 30-10

SUBJECT: State agency contracts: bid preference: equity metrics

SUMMARY: This bill requires state awarding departments to provide a bid preference to contractors that establish and meet prescribed equity metrics. It prohibits noncompliant bidders from receiving the preference and prevents the preference from being used to satisfy minimum contract requirements. The bill also directs the Department of General Services to adopt regulations necessary to implement and administer these provisions.

Specifically, this bill:

1. Establishes the California Good Jobs Act and requires state agencies awarding certain large state contracts funded through the federal Infrastructure Investment and Jobs Act (IIJA), Inflation Reduction Act (IRA), or CHIPS and Science Act to provide bid preferences to contractors that commit to hiring workers residing in disadvantaged communities or distressed areas.
2. Creates a graduated bid preference ranging from 1% to 10%, depending on the percentage of contract labor hours performed by eligible workers. It also directs the Department of General Services (DGS) to adopt regulations and enforcement mechanisms to implement the program.
3. Requires an awarding department, defined to include a state agency or department, to provide a bid preference of 10% a prescribed percentage, as specified, in the award of contracts to contractors that set equity metrics, as prescribed. metrics.
4. Prohibits awarding a preference to a noncompliant bidder and would also prohibit the preference from being used to achieve any applicable minimum requirements.
5. Requires the Department of General Services to adopt rules and regulations for the purpose of implementing these provisions.

EXISTING LAW:

1. Existing law establishes multiple procurement preference and participation programs intended to promote economic opportunity through state contracting. These include:
2. The Small Business Procurement and Contract Act, which establishes a goal that at least 25% of state procurement dollars be awarded to small businesses and provides a 5% bid preference for certified small businesses.
3. The Disabled Veteran Business Enterprise (DVBE) Program, which establishes a statewide participation goal of 3% for certified DVBEs in state contracts.
4. The Target Area Contract Preference Act (TACPA), which provides bid preferences for California-based businesses that perform work in distressed areas and hire individuals facing a high risk of unemployment. TACPA currently provides a 5% worksite preference and an additional workforce preference of up to 4%.
5. Existing law also requires CalEPA to identify disadvantaged communities based on geographic, socioeconomic, environmental, and public health criteria for purposes of targeted state investments.

FISCAL EFFECT: None.

COMMENTS: California is expected to receive approximately $42 billion through IIJA funding, including approximately $38.8 billion for transportation projects. The IRA has provided billions of dollars nationally for clean energy investments, while the CHIPS Act supports domestic semiconductor manufacturing and technology development. This bill builds upon existing procurement preference programs. TACPA currently provides bid preferences for businesses operating in distressed areas and additional preferences for hiring workers at high risk of unemployment. This bill differs by focusing on worker residence rather than business location and by establishing a larger preference structure of up to 10%. This bill applies only to projects financed through three major federal initiatives enacted between 2021 and 2022:

• Infrastructure Investment and Jobs Act (IIJA)
• Inflation Reduction Act (IRA)
• CHIPS and Science Act

This bill requires awarding departments to provide bid preferences for certain contracts exceeding $35 million that utilize funding from the IIJA, IRA, or CHIPS and Science Act. The bill defines an "eligible person" as an individual residing in either:

• A disadvantaged community identified pursuant to existing CalEPA criteria; or
• A distressed area, defined as a census tract in the highest quartile statewide for poverty and unemployment.

The bill establishes the following bid preference schedule:

The bill prohibits noncompliant bidders from receiving the preference and requires DGS regulations to include compliance and reporting requirements. The preference may not be used to satisfy other statutory participation requirements.

Author Statement: According to the author, “This bill helps protect and uplift these communities by offering a 10% bid preference for public infrastructure projects that meet disadvantaged worker equity metrics. This sends a clear message: diversity, equity, and inclusion are not just priorities, they are essential to the success of California’s workforce and economy.”

REGISTERED SUPPORT / OPPOSITION:

Support

Initiate Justice
Western Electrical Contractors Association

Opposition

California Association of Sheet Metal & Air Conditioning Contractors National Association
California Chapters of the National Electrical Contractors Association
California Legislative Conference of Plumbing, Heating & Piping Industry
Construction Employers' Association
Southern California Contractors Association
United Contractors (UCON)
Wall and Ceiling Alliance
Western Wall and Ceiling Contractors Association (WWCCA)

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

 THIRD READING 

Bill No: SB 247

Author: Smallwood-Cuevas (D)

Amended: 4/21/25

Vote: 21

SENATE GOVERNMENTAL ORG. COMMITTEE: 10-4, 4/22/25

AYES: Padilla, Archuleta, Ashby, Blakespear, Cervantes, Richardson, Rubio, Smallwood-Cuevas, Wahab, Weber Pierson

NOES: Valladares, Dahle, Jones, Ochoa Bogh

NO VOTE RECORDED: Hurtado

SENATE APPROPRIATIONS COMMITTEE: 5-2, 1/22/26

AYES: Caballero, Cabaldon, Grayson, Richardson, Wahab

NOES: Seyarto, Dahle

SUBJECT: State agency contracts: bid preference: equity metrics

SOURCE: Author

DIGEST: This bill requires state agencies, in awarding contracts in excess of $35 million using funds from the federal Infrastructure Investment and Jobs Act (IIJA), the Inflation Reduction Act of 2022 (IRA), or the Creating Helpful Incentives to Produce Semiconductors for America Act (CHIPS) and Science Act of 2022, to provide a bid preference up to 10%, depending on the number of total contract labor hours performed by individuals residing in a “distressed area” or “disadvantaged community.”

ANALYSIS:

Existing law:

1. Establishes procedures for state agencies to enter into contracts for goods and services, including generally requiring that certain contracts by a state agency be approved by the Department of General Services (DGS).
2. Requires, generally, public contracts to be awarded by competitive bidding pursuant to procedures set forth, as specified.
3. Establishes the Target Area Contract Preference Act (TACPA), which aims to stimulate economic growth and job creation in economically distressed areas within the state. It does so by offering bid preferences, as specified, to California-based companies that commit to performing a significant portion of their work in these designated areas and, optionally, by hiring individuals with a high risk of unemployment.
4. Requires the California Environmental Protection Agency (CalEPA) to identify disadvantaged communities for investment opportunities (subdivision (a) of Section 39711 of the Health and Safety Code). Those communities shall be identified based on geographic, socioeconomic, public health, and environmental hazard criteria, and may include but not limited to, either of the following:
   1. Areas disproportionately affected by environmental pollution and other hazards that can lead to negative public health effects, exposure, or environmental degradation.
   2. Areas with concentrations of people that are low income, high unemployment, low levels of homeownership, high rent burden, sensitive populations, or low levels of educational attainment.
5. Establishes, through the Small Business Procurement and Contract Act, a minimum goal of 25% procurement participation for small businesses in the provision of goods, information technology, and services to the state, and in the construction of state facilities.
6. Requires DGS and other state agencies that enter into contracts for the provision of goods, information technology, services to the state, and construction of state facilities, to provide for a small business preference, in the award of contracts, in solicitations where an award is to be made to the lowest responsible bidder meeting specifications, with the amount being five percent of the lowest responsible bidder meeting those specifications.

This bill:

1. Requires an awarding department to provide for a bid preference in the award of contracts, as defined, to contractors that set equity metrics, as defined. The bid preference shall operate as follows:
   1. One-percent preference for hiring eligible persons to perform five to nine percent of the total contract hours.
   2. Two-percent preference for hiring eligible persons to perform 10 to 19 percent of the total contract hours.
   3. Three-percent preference for hiring eligible persons to perform 20 to 29 percent of the total contract hours.
   4. Four-percent preference for hiring eligible persons to perform 30 to 39 percent of the total contract hours.
   5. Five-percent preference for hiring eligible persons to perform 40 to 49 percent of the total contract hours.
   6. Six-percent preference for hiring eligible persons to perform 50 to 59 percent of the total contract hours.
   7. Seven-percent preference for hiring eligible persons to perform 60 to 69 percent of the total contract hours.
   8. Eight-percent preference for hiring eligible persons to perform 70 to 79 percent of the total contract hours.
   9. Nine-percent preference for hiring eligible persons to perform 80 to 89 percent of the total contract hours.
   10. 10-percent preference for hiring eligible persons to perform 90 percent of the total contract hours.
2. Defines “disadvantaged community” to mean either of the following:
   1. Areas disproportionally affected by environmental pollution and other hazards that can lead to negative public health effects, exposure, or environmental degradation.
   2. Areas with concentrations of people that are of low income, high unemployment, low income, high unemployment, lows levels of homeownership, high rent burden, sensitive populations, or low levels of educational attainment.
3. Defines “distressed area” to mean a census tract determined by the Department of Finance to be in the top quartile of census tracts for having the highest unemployment and poverty in the state (Subsection (b) of Section 4532 of the Government Code).

Background

Author Statement. According to the author’s office, “California is home to one of the most diverse populations in the world – communities that are now at risk of losing both job opportunities and economic stability. This bill helps protect and uplift these communities by offering [up to] a 10% bid preference for public infrastructure projects that meet disadvantaged worker equity metrics. This sends a message: diversity, equity, and inclusion are not just priorities, they are essential to the success of California’s workforce and economy.”

Infrastructure Investment and Jobs Act. The IIJA was signed into law by President Joe Biden on November 15, 2021. The IIJA allocated $1.2 trillion toward revitalizing the nation’s infrastructure, with $550 billion dedicated to new investment in areas such as transportation, broadband, water systems, and energy infrastructure.

California, with its extensive infrastructure needs, stands to benefit significantly from the IIJA. According to build.ca.gov, the state is set to receive approximately $42 billion – the largest share among all states – through a combination of formula-based and competitive grants. Specifically, California is expected to receive $38.8 billion to Department of Transportation projects.

Through the Justice40 Initiative, the Federal Government had made it a goal that 40% of the overall benefits of certain federal investment, like IIJA, flow to disadvantaged communities that are marginalized, underserved, and overburdened by pollution. Days after being sworn in, the Trump administration’s funding freeze left of all of these federal funding dollars in jeopardy.

The Inflation Reduction Act of 2022. The IRA Act was enacted on August 16, 2022, and is aimed at reducing the federal deficit, lowering prescription drug prices, and investing in domestic energy production while promoting clean energy. The IRA allocates approximately $370 billion toward energy security and climate change initiative. Since its enactment, the IRA has received substantial funding to advance the state’s clean energy and environmental goals. In 2023 alone, California received over $1.6 billion in tax incentives for energy-efficient home improvements, including solar panel installations and heat pump upgrades.

Furthermore, nearly $600 million has been allocated to assist low-and moderate-income households in implementing clean and efficient energy upgrades. The state has also received over $500 million from the U.S. Environmental Protection Agency to support clean energy initiatives aimed at reducing greenhouse gas emissions and other pollutants. More than $168 million has been dedicated to adding 2,600 electric vehicle charging stations in rural and disadvantaged areas, with an additional $64 million for upgrading existing infrastructure.

Similar to funds from the IIJA, the federal funding freeze by the Trump administration has significantly impacted California’s access to these funds. California, along with other states, has filed legal motions to enforce existing court orders and challenge the funding freeze. It remains unclear if and when all of these funds will become available.

The CHIPS and Science Act. The CHIPS and Science Act of 2022 was enacted on August 9, 2022, and aimed at bolstering domestic semiconductor manufacturing and strengthening the nation’s scientific research and technological innovation. The act seeks to address critical supply chain vulnerabilities and seeks to enhance the United States’ competitiveness in key technology sections. California, as a hub of technology and innovation, was set to benefit significantly from the CHIPS and Science Act. Some notable projects in California funded by the act include:

1. Applied Materials has been awarded $100 million to develop advanced packaging technologies.
2. Bosch plans to invest $1.9 billion to transform its Roseville facility into a silicon carbide power semiconductor manufacturing site. The project is expected to crate approximately 1,700 jobs, including roles in construction, manufacturing, and engineering.
3. Akash Systems is set to receive up to $18.2 million to construct a 40,000-square foot cleanroom for advanced semiconductor manufacturing.

Again, the Trump Administration’ funding freeze has placed many of these and other projects in jeopardy. As of the writing of this analysis, it remains unclear what projects will continue to be funded, and what the impact on the funding freeze will ultimately be.

Target Area Contract Preference Act. The TACPA program was established in 1983 to stimulate economic growth and employment opportunities in designated distressed areas throughout the State of California. Distressed area is defined to mean a census tract determined by the Department of Finance to be in the top quartile of census tracts for having the highest unemployment and poverty in the state. The Procurement Division, Support Services Unit within DGS oversees the TACPA preference program and evaluates all TACPA applications.

The state agency conducting the competitive solicitations is responsible for including the preference option information and request forms, in any solicitation for a contract in excess of $100,000. However, DGS recommends that the state agencies include the preference option information and request of forms for any solicitation estimate to be over $85,000. To qualify for a TACPA preference, the firm must be located directly in a California eligible distresses area(s), located directly adjoining/adjacent, or contagious to a valid TACPA Census Tract.

Whenever the state prepares a solicitation for a contract for goods, the TACPA provides a five percent preference to California-based companies who demonstrate and certify under penalty of perjury that at least 50% of the labor hours required to manufacture the goods and perform the contract, shall be accomplished at an identified worksite or worksite located in, adjacent, or contiguous to a distresses area.

In evaluating proposals for contracts for services, the TACPA provides a five percent preference on the price submitted by California-based companies who demonstrate and certify under penalty of perjury that not less than 90% of the total labor hours requires to perform the contract shall be accomplished at an identified or worksites located in a distressed area.

Bidders may also apply for an additional work-force preference of one to four percent if the bidder certifies under penalty of perjury to hire persons with high risk of unemployment equal to five to 20% of its work force during the period of contract performance. This additional work-force preference works as follows:

1. One percent preference for hiring eligible persons to perform five to nine percent of the total contract labor hours.
2. Two percent preference for hiring eligible persons to perform 10 to 14 percent of the total contract labor hours.
3. Three percent for hiring eligible persons to perform 15 to 19 percent of the total contract labor hours.
4. Four percent for hiring eligible persons to perform 20 percent or more of the total contract labor hours.

DGS monitors compliance of all contracts awarded based on the approval of the TACPA work site(s) and workforce preference. Bidders that have requested and have been given preference shall submit monthly performance reports demonstrating compliance with worksite(s) and workforce requirements (if requested). Bidders who fail to comply may be assessed a penalty fee or may be ineligible to directly or indirectly transact with the state for a period up to 36 months. The TACPA interactive map can be found at https://tacpa.dgs.ca.gov/.

This bill will require state agencies, in awarding contracts over $35 million using funds from the IIJA, the IRA Act, or the CHIPS and Science Act of 2022, to provide a bid preference, up to 10%, depending on the number of total contract labor hours are performed by individuals residing in “distressed areas” or “disadvantaged communities.”

CalEPA Disadvantaged Communities Definition. Disadvantaged communities in California are specifically targeted for investment of proceeds from the state’s Cap-and-Trade Program. These investments are aimed at improving public health, quality of life and economic opportunity in California’s most burdened communities, and at the same time, reducing pollution that causes climate change.

In 2013, SB 535 (De Leon, Chapter 830, Statutes of 2012) established initial requirements for minimum funding levels to “disadvantaged communities.” The bill also gave CalEPA the responsibility for identifying those communities, stating that CalEPA’s designation of disadvantaged communities must be based on “geographic socioeconomic, public health, and environmental hazard criteria.”

After receiving public input at workshops and in written comments, in May 2022, CalEPA released its updated designated of Disadvantaged Communities for the purposes of SB 535. The designation takes into account the latest and best available data and considers factors related to data unavailability. This designation went into effect on July 1, 2022. An interactive map of these communities can be found at:

https://experience.arcgis.com/experience/1c21c53da8de48f1b946f3402fbae55c/page/SB-535-Disadvantaged-Communities

This bill requires state agencies, in awarding contracts over $35 million using funds from the IIJA, the IRA Act, or the CHIPS and Science Act of 2022, to provide a bid preference, up to 10%, depending on the number of total contract labor hours are performed by individuals residing in “disadvantaged communities” or “distressed areas.”

Related/Prior Legislation

SB 150 (Durazo, Chapter 61, Statutes of 2023) embedded workforce and community benefit requirements in procurement and contracting for infrastructure and manufacturing investments related to IIJA, the IRA, and the CHIPS and Science Act.

SB 2019 (Petrie-Norris, Chapter 730, Statutes of 2022) codified, among other things, a 25% small business goal for state procurement and proposed a number of actions to enhance the ability and commitment of state agencies to include small business, including microbusinesses in state contracting, as specified.

AB 1550 (Gomez, Chapter 369, Statutes of 2016) required a minimum of 25% of Greenhouse Gas Reduction Fund moneys be spent on projects located within and benefiting disadvantaged communities, and an additional minimum of 10% of these moneys be spent on projects that benefit low-income household or are within, and benefit, low-income communities, as specified.

SB 535 (De Leon, Chapter 830, Statutes of 2012) required CalEPA to identify disadvantaged communities for investment opportunities, as specified. The bill required the Department of Finance, when developing a specified three-year investment plan, to allocate 25% of the available moneys in the Greenhouse Gas Reduction Fund to projects that provide benefits to disadvantaged communities, as specified, and to allocate a minimum of 10% of the available moneys in the Greenhouse Gas Reduction Fund to projects located within disadvantaged communities, as specified.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Senate Appropriations Committee, unknown, potentially significant costs to DGS for additional limited term staff to develop regulations outlining bid preferences as prescribed by the bill (General Fund).

Additionally, unknown, potentially significant increased qualifying project costs ranging in the hundreds of thousands to millions of dollars, to the extent that the bid preferences proposed by the bill results in delayed solicitations for these projects or in other increased contract costs (various special funds and federal funds). Actual impact to the cost of qualifying projects may vary and depend on, among other things, the size of the contract and number of bidders.

SUPPORT: (Verified 1/22/25)

None received

OPPOSITION: (Verified 1/22/25)

American Council of Engineering Companies of California

Associated General Contractors of California

CA Asphalt Pavement Association

CA Assoc. of Sheet and Metal & Air Conditioning Contractors National Assoc.

CA Legislative Conference of the Plumbing, Heating and Piping Industry

California & Nevada Civil Engineers and Land Surveyors Association

Construction Employers Association

Finishing Contractors Association of Southern California

National Electrical Contractors Association

Northern California Allied Trades

Southern California Contractors Association

Southern California Glass Management Association

United Contractors

Wall and Ceiling Alliance

Western Line Construction Chapter

Western Painting & Coating Contractors Association

Western Wall & Ceiling Contractors Association

ARGUMENTS IN OPPOSITION: According to various construction organizations, “as you know, contractors and subcontractors covered by collective bargaining agreements are obligated to hire workers dispatched from union hiring halls, and there are limited circumstances under which they can reject those workers. Your measure provides that to receive a 10% bid preference, contractors must adopt ‘equity metrics’ that include ‘having a required percentage of the workforce for the contract living in areas below the poverty line, in communities disproportionately affected by environmental pollution, or in regions with high unemployment and low-income concentrations.’ In practice, this means that for signatory contractors and subcontractors to receive the 10% benefit, their labor partners must agree to only dispatch workers from certain communities for state-funded projects. Absent agreement, signatory employers cannot adopt ‘equity

measures.’ Additionally, as a matter of clarity, we assume that by ‘contractors’ you meant to include “subcontractors” as they employ the bulk of the workers on building projects in particular, though the bill does not say this.”

Prepared by: Felipe Lopez/ G.O. / (916) 651-1530

1/23/26 15:39:09

**** END ****

SENATE COMMITTEE ON

Senator Anna Caballero, Chair

2025 - 2026 Regular Session

SB 247 (Smallwood-Cuevas) - State agency contracts: bid preference: equity metrics

Bill Summary:

SB 247 requires state agencies awarding certain contracts to provide for a bid preference of up to ten percent to contractors that set equity metrics in their hiring practices, as specified.

Fiscal Impact:

• Unknown, potentially significant costs to the Department of General Services (DGS) for additional limited term staff to develop regulations outlining bid preferences as prescribed by the bill (General Fund).
• Unknown, potentially significant increased qualifying project costs ranging in the hundreds of thousands to millions of dollars, to the extent that the bid preferences proposed by the bill results in delayed solicitations for these projects or in other increased contract costs (various special funds and federal funds). Actual impact to the cost of qualifying projects may vary and depend on, among other things, the size of the contract and number of bidders.

Background:

This bill explicitly applies to contracts in excess of $35 million using funds from three specific federal acts: the Infrastructure Investment and Jobs Act (IIJA), the Inflation Reduction Act of 2022 (IRA), and the CHIPS and Science Act of 2022 (CHIPS and Science Act).

Infrastructure Investment and Jobs Act. The IIJA was signed into law by President Joe Biden on November 15, 2021. The IIJA allocated $1.2 trillion toward revitalizing the nation’s infrastructure, with $550 billion dedicated to new investment in areas such as transportation, broadband, water systems, and energy infrastructure.

California, with its extensive infrastructure needs, stands to benefit significantly from the IIJA. According to build.ca.gov, the state is set to receive approximately $42 billion – the largest share among all states – through a combination of formula-based and competitive grants. Specifically, California is expected to receive $38.8 billion to Department of Transportation projects. Through the Justice40 Initiative, the Federal Government had made it a goal that 40% of the overall benefits of certain federal investment, like IIJA, flow to disadvantaged communities that are marginalized, underserved, and overburdened by pollution.

Days after being sworn in, the Trump administration’s funding freeze left of all of these federal funding dollars in jeopardy.

Inflation Reduction Act of 2022. The IRA was enacted on August 16, 2022, and is aimed at reducing the federal deficit, lowering prescription drug prices, and investing in domestic energy production while promoting clean energy. The IRA allocates approximately $370 billion toward energy security and climate change initiative. Since its enactment, the IRA has received substantial funding to advance the state’s clean energy and environmental goals. In 2023 alone, California received over $1.6 billion in tax incentives for energy-efficient home improvements, including solar panel installations and heat pump upgrades.

Furthermore, nearly $600 million has been allocated to assist low-and moderate income households in implementing clean and efficient energy upgrades. The state has also received over $500 million from the U.S. Environmental Protection Agency to support clean energy initiatives aimed at reducing greenhouse gas emissions and other pollutants. More than $168 million has been dedicated to adding 2,600 electric vehicle charging stations in rural and disadvantaged areas, with an additional $64 million for upgrading existing infrastructure.

Similar to funds from the IIJA, the federal funding freeze by the Trump administration has significantly impacted California’s access to these funds. California, along with other states, has filed legal motions to enforce existing court orders and challenge the funding freeze. It remains unclear if and when all of these funds will become available.

CHIPS and Science Act of 2022. The CHIPS and Science Act was enacted on August 9, 2022, and aimed at bolstering domestic semiconductor manufacturing and strengthening the nation’s scientific research and technological innovation. The act seeks to address critical supply chain vulnerabilities and seeks to enhance the United States’ competitiveness in key technology sections. California, as a hub of technology and innovation, was set to benefit significantly from the CHIPS and Science Act. Some notable projects in California funded by the act include:

1) Applied Materials has been awarded $100 million to develop advanced packaging technologies.

2) Bosch plans to invest $1.9 billion to transform its Roseville facility into a silicon carbide power semiconductor manufacturing site. The project is expected to crate approximately 1,700 jobs, including roles in construction, manufacturing, and engineering.

3) Akash Systems is set to receive up to $18.2 million to construct a 40,000-square foot cleanroom for advanced semiconductor manufacturing.

Again, the Trump Administration’ funding freeze has placed many of these and other projects in jeopardy. As of the writing of this analysis, it remains unclear what projects will continue to be funded, and what the impact on the funding freeze will ultimately be.

Proposed Law:

• Requires an awarding department to provide for a bid preference for contracts with aggregate construction costs of $35 million or more using IIJA, IRA, or CHIPS and Science Act funds to contractors that set equity metrics. Provides the bid preference operate as follows:
  • A 1-percent preference for hiring eligible persons to perform 5 to 9 percent, inclusive, of the total contract labor hours.
  • A 2-percent preference for hiring eligible persons to perform 10 to 19 percent, inclusive, of the total contract labor hours.
  • A 3-percent preference for hiring eligible persons to perform 20 to 29 percent, inclusive, of the total contract labor hours.
  • A 4-percent preference for hiring eligible persons to perform 30 to 39 percent, inclusive, of the total contract labor hours.
  • A 5-percent preference for hiring eligible persons to perform 40 to 49 percent, inclusive, of the total contract labor hours.
  • A 6-percent preference for hiring eligible persons to perform 50 to 59 percent, inclusive, of the total contract labor hours.
  • A 7-percent preference for hiring eligible persons to perform 60 to 69 percent, inclusive, of the total contract labor hours.
  • An 8-percent preference for hiring eligible persons to perform 70 to 79 percent, inclusive, of the total contract labor hours.
  • A 9-percent preference for hiring eligible persons to perform 80 to 89 percent, inclusive, of the total contract labor hours.
  • A 10-percent preference for hiring eligible persons to perform 90 percent of the total contract labor hours.
• Prohibits the above bid preferences from being awarded to a noncompliant bidder or be used to achieve any applicable minimum requirements.
• Requires DGS to adopt rules and regulations for administering the outlined bid preferences.
  • Requires these rules and regulations to include enforcement methods to ensure compliance with agreed-upon equity metrics, including requiring contractors to track and report progress to the awarding department.
• Defines:
  • “Equity metrics” as hiring a required percentage of eligible person.
  • “Eligible person” as a person who resides in either a distressed area or a disadvantaged community.
  • “Distressed area” as a census tract determined by the Department of Finance to be in the top quartile of census tracts for having the highest unemployment and poverty in the state.
  • “Disadvantaged community” as areas disproportionately affected by environmental pollution and other hazards that can lead to negative public health effects, exposure, or environmental degradation, or areas with concentrations of people that are of low income, high unemployment, low levels of homeownership, high rent burden, sensitive populations, or low levels of educational attainment.

-- END --

SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION

Senator Steve Padilla

Chair

2025 - 2026 Regular

Bill No: 247 Hearing Date: 4/22/2025

SUBJECT: State agency contracts: bid preference: equity metrics

DIGEST: This bill requires state agencies, in awarding contracts in excess of $35 million using funds from the federal Infrastructure Investment and Jobs Act (IIJA), the Inflation Reduction Act of 2022 (IRA), or the CHIPS and Science Act of 2022, to provide a bid preference up to 10%, depending on the number of total contract labor hours performed by individuals residing in a “distressed area” or “disadvantaged community.”

ANALYSIS:

Existing law:

1. Establishes procedures for state agencies to enter into contracts for goods and services, including generally requiring that certain contracts by a state agency be approved by the Department of General Services (DGS).
2. Generally requires public contracts to be awarded by competitive bidding pursuant to procedures set forth, as specified.
3. Establishes the Target Area Contract Preference Act (TACPA), which aims to stimulate economic growth and job creation in economically distressed areas within the state. It does so by offering bid preferences, as specified, to California-based companies that commit to performing a significant portion of their work in these designated areas and, optionally, by hiring individuals with a high risk of unemployment.
4. Requires the California Environmental Protection Agency (CalEPA) to identify disadvantaged communities for investment opportunities (subdivision (a) of Section 39711 of the Health and Safety Code). Those communities shall be identified based on geographic, socioeconomic, public health, and environmental hazard criteria, and may include but not limited to, either of the following:
   1. Areas disproportionately affected by environmental pollution and other hazards that can lead to negative public health effects, exposure, or environmental degradation.
   2. Areas with concentrations of people that are low income, high unemployment, low levels of homeownership, high rent burden, sensitive populations, or low levels of educational attainment.
5. Requires a minimum of 25% of Greenhouse Gas Reduction Fund moneys be spent on projects located within and benefiting disadvantaged communities, and an additional minimum of 10% of these moneys be spent on projects that benefit low-income household or are within, and benefit, low-income communities, as specified.
6. Requires DGS, and the heads of other state agencies that enter into contracts for the acquisition of goods, services, and information technology and for the construction of state facilities to establish goals for the participation of small businesses and microbusinesses in these contracts, to provide for a small business preference in the award of these contracts, to give special consideration and special assistance to small businesses, and, whenever possible, to make awards to small businesses, as specified.
7. Establishes, through the Small Business Procurement and Contract Act, a minimum goal of 25% procurement participation for small businesses in the provision of goods, information technology, and services to the state, and in the construction of state facilities.
8. Defines a “small business” to mean an independently owned and operated business that is not dominant in its field of operation, the principal office of which is located in California, the officers of which are domiciled in California, and which, together with its affiliates, has 100 or fewer employees, and average annual gross receipts of $10,000,000 or less over the previous three years, or is a manufacturer with 100 or fewer employees and less than $15,000,000 average annual gross receipts, as specified.
9. Requires DGS and other state agencies that enter into contracts for the provision of goods, information technology, services to the state, and construction of state facilities, to provide for a small business preference, in the award of contracts, in solicitations where an award is to be made to the lowest responsible bidder meeting specifications, with the amount being five percent of the lowest responsible bidder meeting those specifications.
10. Requires, through the California Disabled Veteran Business Enterprise (DVBE) Program, awarding departments to establish a three-percent participation goal for certain types of contracts for certified DVBEs, as defined.
11. Requires DGS, during the process of certifying and determining the eligibility of a small business or a DVBE, to require the applicant or certified firm to submit a written declaration, under penalty of perjury, that the information submitted to the department pursuant to specified law is true and correct.

This bill:

1. Requires an awarding department to provide for a bid preference in the award of contracts, as defined, to contractors that set equity metrics, as defined. The bid preference shall operate as follows:
   1. One-percent preference for hiring eligible persons to perform five to nine percent of the total contract hours.
   2. Two-percent preference for hiring eligible persons to perform 10 to 19 percent of the total contract hours.
   3. Three-percent preference for hiring eligible persons to perform 20 to 29 percent of the total contract hours.
   4. Four-percent preference for hiring eligible persons to perform 30 to 39 percent of the total contract hours.
   5. Five-percent preference for hiring eligible persons to perform 40 to 49 percent of the total contract hours.
   6. Six-percent preference for hiring eligible persons to perform 50 to 59 percent of the total contract hours.
   7. Seven-percent preference for hiring eligible persons to perform 60 to 69 percent of the total contract hours.
   8. Eight-percent preference for hiring eligible persons to perform 70 to 79 percent of the total contract hours.
   9. Nine-percent preference for hiring eligible persons to perform 80 to 89 percent of the total contract hours.
   10. 10-percent preference for hiring eligible persons to perform 90 percent of the total contract hours.
2. Defines “contract” to include any contract for a project aggregate construction costs in excess of $35 million using funds from the federal Infrastructure Investment and Jobs Act, the Inflation Reduction Act of 2022, or the CHIPS and Science Act of 2022.
3. Defines “equity metrics” to mean hiring a required percentage of eligible persons.
4. Defines “eligible person” to mean a person who resides in either a “distressed area” or a “disadvantaged community.”
5. Defines “disadvantaged community” to mean either of the following:
   1. Areas disproportionally affected by environmental pollution and other hazards that can lead to negative public health effects, exposure, or environmental degradation.
   2. Areas with concentrations of people that are of low income, high unemployment, low income, high unemployment, lows levels of homeownership, high rent burden, sensitive populations, or low levels of educational attainment.
6. Defines “distressed area” to mean a census tract determined by the Department of Finance to be in the top quartile of census tracts for having the highest unemployment and poverty in the state (Subsection (b) of Section 4532 of the Government Code).
7. Provides that the bid preferences contained in this bill shall not be awarded to a noncompliant bidder and shall not be used to achieve any applicable minimum requirements.
8. Requires DGS to adopt rules and regulations for the purposes of implementing this article. The rules and regulations adopted by DGS shall include enforcement methods to ensure compliance with agreed-upon equity metrics, including requiring contractors to track and report progress to the awarding department.

Background

Author Statement. According to the author’s office, “California is home to one of the most diverse populations in the world – communities that are now at risk of losing both job opportunities and economic stability. This bill helps protect and uplift these communities by offering [up to] a 10% bid preference for public infrastructure projects that meet disadvantaged worker equity metrics. This sends a message: diversity, equity, and inclusion are not just priorities, they are essential to the success of California’s workforce and economy.”

Infrastructure Investment and Jobs Act. The IIJA was signed into law by President Joe Biden on November 15, 2021. The IIJA allocated $1.2 trillion toward revitalizing the nation’s infrastructure, with $550 billion dedicated to new investment in areas such as transportation, broadband, water systems, and energy infrastructure.

California, with its extensive infrastructure needs, stands to benefit significantly from the IIJA. According to build.ca.gov, the state is set to receive approximately $42 billion – the largest share among all states – through a combination of formula-based and competitive grants. Specifically, California is expected to receive $38.8 billion to Department of Transportation projects.

Through the Justice40 Initiative, the Federal Government had made it a goal that 40% of the overall benefits of certain federal investment, like IIJA, flow to disadvantaged communities that are marginalized, underserved, and overburdened by pollution.

Days after being sworn in, the Trump administration’s funding freeze left of all of these federal funding dollars in jeopardy.

The Inflation Reduction Act of 2022. The IRA Act was enacted on August 16, 2022, and is aimed at reducing the federal deficit, lowering prescription drug prices, and investing in domestic energy production while promoting clean energy. The IRA allocates approximately $370 billion toward energy security and climate change initiative. Since its enactment, the IRA has received substantial funding to advance the state’s clean energy and environmental goals. In 2023 alone, California received over $1.6 billion in tax incentives for energy-efficient home improvements, including solar panel installations and heat pump upgrades.

Furthermore, nearly $600 million has been allocated to assist low-and moderate income households in implementing clean and efficient energy upgrades. The state has also received over $500 million from the U.S. Environmental Protection Agency to support clean energy initiatives aimed at reducing greenhouse gas emissions and other pollutants. More than $168 million has been dedicated to adding 2,600 electric vehicle charging stations in rural and disadvantaged areas, with an additional $64 million for upgrading existing infrastructure.

Similar to funds from the IIJA, the federal funding freeze by the Trump administration has significantly impacted California’s access to these funds. California, along with other states, has filed legal motions to enforce existing court orders and challenge the funding freeze. It remains unclear if and when all of these funds will become available.

The CHIPS and Science Act. The CHIPS and Science Act of 2022 was enacted on August 9, 2022, and aimed at bolstering domestic semiconductor manufacturing and strengthening the nation’s scientific research and technological innovation. The act seeks to address critical supply chain vulnerabilities and seeks to enhance the United States’ competitiveness in key technology sections. California, as a hub of technology and innovation, was set to benefit significantly from the CHIPS and Science Act. Some notable projects in California funded by the act include:

1. Applied Materials has been awarded $100 million to develop advanced packaging technologies.
2. Bosch plans to invest $1.9 billion to transform its Roseville facility into a silicon carbide power semiconductor manufacturing site. The project is expected to crate approximately 1,700 jobs, including roles in construction, manufacturing, and engineering.
3. Akash Systems is set to receive up to $18.2 million to construct a 40,000-square foot cleanroom for advanced semiconductor manufacturing.

Again, the Trump Administration’ funding freeze has placed many of these and other projects in jeopardy. As of the writing of this analysis, it remains unclear what projects will continue to be funded, and what the impact on the funding freeze will ultimately be.

State Procurement Processes Designed to Diversify California Businesses. Existing law provides for several programs designed to boost the participation of underrepresented business in state government contracting, including small businesses and those owned by women, minorities and disabled veterans. In order to effectively deploy these programs, the state has vested DGS, the Governor’s Office of Business and Economic Development GOBIiz, and the Department of Veterans Affairs (CalVet) with the responsibility for coordinating with other state agencies to boost contracting opportunities for underrepresented businesses. Below is a description of some of those programs.

Small Business Eligibility Requirements. In order for a small business to be eligible for certification, the small business must be independently owned and operated; not dominant in its field of operation; and, its principal office must be located in California. In addition, the business must be either a business with 100 or fewer employees and average annual gross receipts of $15 million or less over the last three tax years; a manufacturer, as defined, with 100 or fewer employees; or, a microbusiness. A small business will automatically be designated as microbusiness, if gross annual receipts are less than $3.5 million; or the small business is a manufacturer with 25 or fewer employees.

Upon meeting eligibility requirements, certified small businesses and microbusinesses are entitled, to among other things, a five percent bid preference. The goal of the preference is to help small and micro businesses to be more competitive in the bid process, thereby enhancing state contract awards directly or indirectly to these types of businesses. The preference is only used for computation purposes to determine the winning bidder, the contract is awarded at the actual bid amount.

In addition, certified small businesses are eligible for the State’s Business Participation Program, which sets a goal for the use of small businesses in at least 25% of the state’s overall annual contract dollars.

DVBE Program. The DVBE Program directs state governmental entities, such as state agencies and departments, to procure goods and services from DVBEs that DGS has certified as meeting the eligibility requirements of a DVBE. The legislative intent of the program is to target DVBEs and for those DVBEs to benefit financially from doing business with California. In order for a business to be certified as a DVBE, the business must be at least 51% owned by one or more disabled veterans, have its daily operations managed by one or more disabled veterans, and have its home office located in the United States.

The DVBE Program requires state governmental entities that award contracts for goods or services, known as awarding departments, to meet or exceed the statewide participation goal of three percent. Awarding departments may meet the three percent goal either by contracting directly with a certified DVBEs as prime contractors or by requiring a prime contractor to use DVBEs as subcontractors for a portion of the work.

State departments that fail to meet the annual three percent goal can, in theory, have their delegated contracting authority removed, however DGS has never removed that authority based solely on a department’s failure to meet the percent goal.

Disadvantaged Business Enterprises. The DBE Program, under the Department of Transportation (CalTrans) is designed to remedy ongoing discrimination and the continuing effects of past discrimination in federally-assisted highway, transit, airport, and highway safety financial assistance transportation contracting markets nationwide. The primary remedial goal and objective of the DBE program is to level the playing field by providing small business owned and controlled by socially and economically disadvantaged individuals a fair opportunity to compete for federally funded transportation contracts.

The California Department of Transportation and nine other government agencies in California participate in the DBE certification program. The federal government uses the DBE program to ensure that federally assisted contracts for highway, transit and aviation projects are made available for small business concerns owned and controlled by socially and economically disadvantaged individuals. In general, DBEs are larger than state certified Small Businesses, but smaller than state certified Small Business-Public Works. The DBE employment and revenue standards are based on business’ industry sector and are set through regulation by the federal Small Business Administration.

While certified by Caltrans and local agencies, the DBE program is a national program and there is no requirement that the business is head-quartered in California. Caltrans provides a fairly robust set of resources, including a searchable database for vendors looking for DBE subcontractors, as well as free training. DBEs are also included in the Caltrans SB 1 Small Business Outreach Plan and Implementation Report, which is applied to the state’s $54 billion transportation infrastructure investment plan.

Target Area Contract Preference Act. The TACPA program was established in 1983 to stimulate economic growth and employment opportunities in designated distressed areas throughout the State of California. Distressed area is defined to mean a census tract determined by the Department of Finance to be in the top quartile of census tracts for having the highest unemployment and poverty in the state. The Procurement Division, Support Services Unit within DGS oversees the TACPA preference program and evaluates all TACPA applications.

The state agency conducting the competitive solicitations is responsible for including the preference option information and request forms, in any solicitation for a contract in excess of $100,000. However, DGS recommends that the state agencies include the preference option information and request of forms for any solicitation estimate to be over $85,000. To qualify for a TACPA preference, the firm must be located directly in a California eligible distresses area(s), located directly adjoining/adjacent, or contagious to a valid TACPA Census Tract.

Whenever the state prepares a solicitation for a contract for goods, the TACPA provides a five percent preference to California-based companies who demonstrate and certify under penalty of perjury that at least 50% of the labor hours required to manufacture the goods and perform the contract, shall be accomplished at an identified worksite or worksite located in, adjacent, or contiguous to a distresses area.

In evaluating proposals for contracts for services, the TACPA provides a five percent preference on the price submitted by California-based companies who demonstrate and certify under penalty of perjury that not less than 90% of the total labor hours requires to perform the contract shall be accomplished at an identified or worksites located in a distressed area.

Bidders may also apply for an additional work-force preference of one to four percent if the bidder certifies under penalty of perjury to hire persons with high risk of unemployment equal to five to 20% of its work force during the period of contract performance. This additional work-force preference works as follows:

1. One percent preference for hiring eligible persons to perform five to nine percent of the total contract labor hours.
2. Two percent preference for hiring eligible persons to perform 10 to 14 percent of the total contract labor hours.
3. Three percent for hiring eligible persons to perform 15 to 19 percent of the total contract labor hours.
4. Four percent for hiring eligible persons to perform 20 percent or more of the total contract labor hours.

DGS monitors compliance of all contracts awarded based on the approval of the TACPA work site(s) and workforce preference. Bidders that have requested and have been given preference shall submit monthly performance reports demonstrating compliance with worksite(s) and workforce requirements (if requested). Bidders who fail to comply may be assessed a penalty fee or may be ineligible to directly or indirectly transact with the state for a period up to 36 months. The TACPA interactive map can be found at https://tacpa.dgs.ca.gov/.

This bill will require state agencies, in awarding contracts over $35 million using funds from the IIJA, the IRA Act, or the CHIPS and Science Act of 2022, to provide a bid preference, up to 10%, depending on the number of total contract labor hours are performed by individuals residing in “distressed areas” or “disadvantaged communities.”

CalEPA Disadvantaged Communities Definition. Disadvantaged communities in California are specifically targeted for investment of proceeds from the state’s Cap-and-Trade Program. These investments are aimed at improving public health, quality of life and economic opportunity in California’s most burdened communities, and at the same time, reducing pollution that causes climate change.

In 2013, SB 535 (De Leon, Chapter 830, Statutes of 2012) established initial requirements for minimum funding levels to “disadvantaged communities.” The bill also gave CalEPA the responsibility for identifying those communities, stating that CalEPA’s designation of disadvantaged communities must be based on “geographic socioeconomic, public health, and environmental hazard criteria.”

After receiving public input at workshops and in written comments, in May 2022, CalEPA released its updated designated of Disadvantaged Communities for the purposes of SB 535. The designation takes into account the latest and best available data and considers factors related to data unavailability. This designation went into effect on July 1, 2022. An interactive map of these communities can be found at:

https://experience.arcgis.com/experience/1c21c53da8de48f1b946f3402fbae55c/page/SB-535-Disadvantaged-Communities

This bill requires state agencies, in awarding contracts over $35 million using funds from the IIJA, the IRA Act, or the CHIPS and Science Act of 2022, to provide a bid preference, up to 10%, depending on the number of total contract labor hours are performed by individuals residing in “disadvantaged communities” or “distressed areas.”

Prior/Related Legislation

SB 713 (Valladares, 2025) requires CalTrans to ensure that at least an unspecified percent of state funded construction contracts and construction-related procurements involve contractors who have received an Employee Stock Ownership Plan contractor certificate, as specified. (Pending in the Senate Business, Professions, & Economic Development Committee)

SB 150 (Durazo, Chapter 61, Statutes of 2023) embeds workforce and community benefit requirements in procurement and contracting for infrastructure and manufacturing investments related to IIJA, the IRA, and the CHIPS and Science Act.

SB 2019 (Petrie-Norris, Chapter 730, Statutes of 2022) codified, among other things, a 25% small business goal for state procurement and proposed a number of actions to enhance the ability and commitment of state agencies to include small business, including microbusinesses in state contracting, as specified.

AB 1080 (Gonzalez Fletcher, 2018) would have required a state agency awarding specified contracts to provide a five percent bid preference to that portion of the total bid performed by a bidder or subcontractor if its employees, during the time that they were employed, were covered by credible, health care coverage, as defined, during the 12-month period immediately preceding submission of the bid. (Vetoed by Governor Brown)

AB 1550 (Gomez, Chapter 369, Statutes of 2016) requires a minimum of 25% of Greenhouse Gas Reduction Fund moneys be spent on projects located within and benefiting disadvantaged communities , and an additional minimum of 10% of these moneys be spent on projects that benefit low-income household or are within, and benefit, low-income communities, as specified.

SB 535 (De Leon, Chapter 830, Statutes of 2012) required CalEPA to identify disadvantaged communities for investment opportunities, as specified. The bill required the Department of Finance, when developing a specified three-year investment plan, to allocate 25% of the available moneys in the Greenhouse Gas Reduction Fund to projects that provide benefits to disadvantaged communities, as specified, and to allocate a minimum of 10% of the available moneys in the Greenhouse Gas Reduction Fund to projects located within disadvantaged communities, as specified.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT:

None received

OPPOSITION:

CA Assoc. of Sheet and Metal & Air Conditioning Contractors National Assoc.

Construction Employers Association

Finishing Contractors Association of Southern California

National Electrical Contractors Association

Northern California Allied Trades

Southern California Contractors Association

Southern California Glass Management Association

United Contractors

Wall and Ceiling Alliance

Western Line Construction Chapter

Western Painting & Coating Contractors Association

Western Wall & Ceiling Contractors Association

ARGUMENTS IN OPPOSITION: According to various construction organizations, “as you know, contractors and subcontractors covered by collective bargaining agreements are obligated to hire workers dispatched from union hiring halls, and there are limited circumstances under which they can reject those workers. Your measure provides that to receive a 10% bid preference, contractors must adopt ‘equity metrics’ that include ‘having a required percentage of the workforce for the contract living in areas below the poverty line, in communities disproportionately affected by environmental pollution, or in regions with high unemployment and low-income concentrations.’ In practice, this means that for signatory contractors and subcontractors to receive the 10% benefit, their labor partners must agree to only dispatch workers from certain communities for state-funded projects. Absent agreement, signatory employers cannot adopt ‘equity measures.’ Additionally, as a matter of clarity, we assume that by ‘contractors’ you meant to include “subcontractors” as they employ the bulk of the workers on building projects in particular, though the bill does not say this.”