Report 2011-120 Recommendation 37 Responses

Report 2011-120: California Department of Transportation: Its Poor Management of State Route 710 Extension Project Properties Costs the State Millions of Dollars Annually, Yet State Law Limits the Potential Income From Selling the Properties (Release Date: August 2012)

Recommendation #37 To: General Services, Department of

To ensure that the construction unit complies with the State's procurement laws and policies, General Services should continue its efforts to implement regulations that govern the small business certification process related to defining and enforcing violations of commercially useful function requirements.

Annual Follow-Up Agency Response From June 2017

The Department of General Services (DGS) has completed its revision of the Small Business (SB) regulations, including commercially useful function provisions. On February 8, 2017, Bulletin #: P-08-17 was issued announcing the adoption of the Small Business regulations.

The DGS, Procurement Division (PD), Office of Small Business & Disabled Veteran Business Enterprise Services (OSDS) has revised California Code of Regulations (CCR), Title 2, Division 2, Chapter 3, Subchapter 8, Office of Small Business Procurement and Contracts, Sections 1896 - 1896.22, also known as the Small Business (SB) regulations. The regulations incorporated legislation chaptered between 2005 through 2015, deleted obsolete terms, and reconciled, where applicable, the SB regulations with the Disabled Veteran Business Enterprise regulations. The proposed regulations became effective on January 23, 2017.

The newly amended Small Business regulations are available at this address:

http://www.dgs.ca.gov/pd/Programs/OSDS/NoticeofRulemaking.aspx

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

Annual Follow-Up Agency Response From October 2016

DGS is in the final stages of completing its revision of the small business (SB) regulations, including commercially useful function provisions. Specifically, in August 2016, DGS' Office of Small Business and DVBE Services (OSDS) submitted the SB rulemaking file to the Office of Administrative Law (OAL) for its approval. Subsequently, OAL sent a list of identified issues that require DGS' attention, none of which impact the proposed revisions to the commercially useful function language. Recently, OSDS withdrew the package and is actively working with OAL staff in making the required revisions.

In November 2016, OSDS expects to complete the revision process and resubmit the package to OAL. This timeline should allow OAL's final approval to be obtained on a schedule that allows the SB regulations to be issued with an effective date of January 1, 2017.

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

Annual Follow-Up Agency Response From September 2015

During the 2014/15 fiscal year, DGS made a concerted effort to issue a comprehensive revision of the small business (SB) regulations, including commercially useful function provisions. As part of these efforts, DGS' Office of Small Business and DVBE Services (OSDS) took the following actions: (1) in December 2014, issued a Notice of Proposed Rulemaking to SB Regulations announcement; (2) in February 2015, provided an inspection period of the modified regulations; (3) in March 2015, held a public hearing to receive comments; and, (4) in June 2015, provided another inspection period of the modified regulations.

In July and August, in consultation with DGS legal staff, OSDS began the process of finalizing the SB regulations. The process identified sections of the proposed regulations that needed to be further researched and discussed prior to submittal of the rulemaking file to the Office of Administrative Law (OAL). As a result, DGS will not be able to meet the statutory deadline, December 28, 2015, for submittal of the file to OAL.

OSDS will restart the SB regulatory process in early 2016 and estimates that the rulemaking file will be submitted to OAL in September 2016. Subsequently, depending on OAL's response, DGS anticipates the regulations to be effective in December 2016.

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

Annual Follow-Up Agency Response From October 2014

As noted in our previous status reports, the DGS planned to embark on a comprehensive revision of the small business (SB) regulations, including commercially useful function (CUF) provisions, upon the issuance of new disabled veteran business enterprises (DVBE) regulations. The DVBE regulations were issued in April 2013.

At the time of our August 2013 status report, DGS' Office of Small Business and DVBE Services (OSDS) had begun working on the SB regulation revision process and roughly estimated that the Notice of Proposed Rulemaking would be submitted to the Office of Administrative Law (OAL) in December 2013. However, subsequent to that update, OSDS workload associated with implementing FI$Cal, the state's new integrated financial management system, has taken priority delaying the SB regulation development process.

Currently, OSDS estimates that the proposed SB regulation notice will be submitted to OAL in December 2014. The new regulations will include CUF provisions which are consistent with those contained in the DVBE regulations.

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

Annual Follow-Up Agency Response From November 2013

Please refer to our one-year response.

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

1-Year Agency Response

As noted in our previous status reports, the DGS planned to embark on a comprehensive revision of the small business (SB) regulations, including commercially useful function (CUF) provisions, upon the issuance of new disabled veteran business enterprises (DVBE) regulations. Subsequent to our six-month status report, the Office of Administrative Law (OAL) approved the new regulations and they were issued. The new DVBE regulations further expand and clarify CUF requirements.

In April 2013, DGS' Office of Small Business and DVBE Services began work on the SB regulation revision process. Although in the very early stages of the process, it is currently estimated that the Notice of Proposed Rulemaking will be submitted to OAL in December 2013. The new regulations will include CUF provisions which are consistent with those contained in the DVBE regulations.

California State Auditor's Assessment of 1-Year Status: Partially Implemented

6-Month Agency Response

General Services stated that the Office of Administrative Law (OAL) is currently reviewing its revised regulations proposal.

California State Auditor's Assessment of 6-Month Status: Partially Implemented

General Services did not provide an estimate of the OAL's final approval of the regulations.

60-Day Agency Response

General Services expects the Office of Administrative Law (OAL) will approve the final regulations by January 31, 2013. (See 2013-406, p. 177)

California State Auditor's Assessment of 60-Day Status: Partially Implemented

All Recommendations in 2011-120

Agency responses received after June 2013 are posted verbatim.