AB 2974 — Assembly Committee on Jobs, Economic Development, and the Economy (April 26, 2022)
Summary
This is the Assembly Committee on Jobs, Economic Development, and the Economy analysis of AB 2974, a committee bill, as amended April 19, 2022, for a hearing on April 26, 2022, with Sabrina Cervantes as Chair. The subject is the Small Business Procurement and Contract Act: federal Infrastructure Investment and Jobs Act funding. The summary says AB 2974 establishes a 25% small business participation goal in all contracts financed, in whole or in part, with specified funding in the Federal Infrastructure Investment and Jobs Act (IIJA). It says each state agency awarding new contracts over $500,000 financed with IIJA funds must establish the goal and, beginning April 1, 2023, notify its small business liaison of anticipated contracting opportunities. The registered support and opposition lines both read None on File.
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AB 2974
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Date of Hearing: April 26, 2022
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT, AND THE ECONOMY
Sabrina Cervantes, Chair
AB 2974 (Committee on Jobs, Economic Development, and the Economy) – As Amended April 19, 2022
SUBJECT: Small Business Procurement and Contract Act: federal Infrastructure Investment and Jobs
Act funding
POLICY FRAME: California’s dominance in many economic areas is based, in part, on the significant
role small businesses play in the state’s $3.1 trillion economy. Two separate studies, one by the US
Census Bureau and another by the Kaufman Foundation, found that net job growth was strongest among
businesses with less than 20 employees. Among their many other advantages, small businesses play a
pivotal role within the state’s domestic and international supply chain, meet the niche needs of California
businesses and consumers, and provide many women and people of color with avenues to upward
mobility and economic independence.
Small businesses have, however, been disproportionately impacted by the COVID-19-induced economic
downturn. One estimate is that 19,000 businesses closed during the first year of the pandemic. Among
other challenges is the increased use of methods that systematically or effectively exclude small
businesses from participating in state contracting opportunities. With billions in new federal
infrastructure dollars coming to California, the state has an opportunity to recalibrate its efforts for a more
inclusive economic recovery by ensuring small businesses have a real opportunity to participate in state
contracts funded by federal Infrastructure Investment and Jobs Act (IIJA) moneys.
AB 2974, a committee bill, applies small business inclusion provisions to certain IIJA-funded
infrastructure contracts. Similar goals were applied to the 2006 state infrastructure bonds. Among other
actions, small businesses will receive technical assistance to help them identify subcontracting
opportunities.
The policy committee analysis includes information on the federal IIJA infrastructure package; the 2006
Infrastructure Bonds, which is the model for this bill; the State Small Business Procurement Act, the
impact of COVID-19 on state procurement activities, and the role of small businesses in the California
economy. There is no known opposition to this bill.
SUMMARY: AB 2974 establishes a 25% small business participation goal in all contracts financed, in
whole or in part, with specified funding in the Federal Infrastructure Investment and Jobs Act (IIJA).
Departments may waive this requirement in cases where the federal law precludes small business
participation or if compliance with these requirements would make the state’s application for a
competitive program less competitive than other eligible applicants. Specifically, this bill:
1) Specifies that in order to encourage the participation of small businesses in the construction,
alternation, demolition, repair, or improvement, of the state’s infrastructure, each state agency
awarding new contracts over $500,000 that are financed, in whole or in part, with the IILA funds are
required to do the following:
a) Establish a 25% small business participation goal in all specified contracts.
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b) Beginning April 1, 2023, notify the agency’s small business liaison of any anticipated contracting
opportunities that will be paid, in whole or in part, with IIJA funds during the following 12
months.
c) Requires the agency small business liaison to provide information to California small businesses
regarding training and technical assistance available to assist them in identifying, understanding,
and bidding on contracts for projects funded through the agency with IIJA funding.
2) Specifies that the 25% goal and related activities do not apply to projects funded with IIJA funds if
federal requirements preclude small business procurement participation as required by this bill or, in
the case of competitively awarded funding, if compliance with the requirements of this bill would
make the state’s application less competitive than other eligible applicants. The bill also excludes
contracts that mandate disadvantaged business enterprises, a federal designation used in many federal
transportation contracts.
3) Authorizes the heads of state agencies to determine whether a contract meets the exclusion
requirements. On an annual basis, state agencies report these determinations to DGS to be included
within an existing annual report on state small business contracting activities.
4) Specifies the following IJJA subtitles, titles, and divisions being subject to the 25% goal and related
activities:
a) Division A, the Surface Transportation Reauthorization Act of 2021 (23 U.S.C. Sec. 101 et seq.).
b) Division B, the Surface Transportation Investment Act of 2021 (49 U.S.C. Sec. 101 et seq.).
c) Division E, the Drinking Water and Wastewater Infrastructure Act of 2021 (33 U.S.C. Sec. 1251
et seq.).
d) Division F, Broadband (47 U.S.C. Sec. 1701 et seq.).
e) Title IX of Division G, the Build America, Buy America Act (41 U.S.C. 8301 et seq.) – related to
the purchase and use of US materials in the completion of projects.
EXISTING STATE LAW:
1) Designates DGS as the lead agency for implementation of the state Small Business Procurement and
Contract Act and administrator of the Office of the Small Business and DVBE Services, which
includes certifying and implementing targeted preference programs for certified small businesses,
microbusinesses, and DVBEs.
2) Requires state agencies to set a small business participation goal consistent with guidance set by the
DGS Office of Small Business and DVBE Procurement.
3) Requires departments to have a 25% small business procurement participation goal for each of the
following infrastructure-related bond acts of 2006:
a) The Highway Safety, Traffic Reduction, Air Quality, and Port Security Bond Act of 2006, as
specified.
b) The Housing and Emergency Shelter Trust Fund Act of 2006, as specified.
c) The Kindergarten-University Public Education Facilities Bond Act of 2006, as specified.
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d) The Disaster Preparedness and Flood Prevention Bond Act of 2006, as specified.
e) The Safe Drinking Water, Water Quality and Supply, Flood Control, River and Coastal Protection
Bond Act of 2006, as specified.
4) Authorizes a 5% procurement preference for certified small business bidders or nonsmall business
bidders that provide for small business and microbusiness participation in the contract.
5) Defines a “small business” as an independently owned and operated business that is not dominant in
its field of operation; in addition, the principal office of which is located in California, the officers of
which are domiciled in California and which, together with affiliates, has 100 or fewer employees,
with an average annual gross receipt of $10 million or less over the previous three years.
a) For a small business in the manufacturing sector, the limitation on an annual gross receipt is $15
million.
b) For a small business bidding on a public works contract, as defined, the maximum number of jobs
is 200 or fewer employees, and the limitation on the average annual gross receipt is $36 million.
c) A “microbusiness” is a small business with an average annual gross receipt limitation of $5
million or a manufacturer with 25 or fewer employees.
6) Authorizes a streamlined small business procurement option (Small Business/DVBE Option) for state
contracts over $50,000 and under $250,000. Under this process, the contract is not put out for public
bid; instead the contracting agency can award the contract to a certified small business after obtaining
two price quotes from two certified small businesses. Similar provisions may be used for contracting
with a DVBE and obtaining two price quotes from DVBEs.
7) Defines a “DVBE” as a business certified as a sole proprietorship, corporation, or partnership with its
home office in the US, which is not a branch or subsidiary of a foreign corporation, foreign firm, or
other foreign-based business. In addition, a DVBE meets all of the following:
a) The disabled veteran is a veteran of the military, naval, or air service of the US, including, but not
limited to, the Philippine Commonwealth Army, Regular Scouts, “Old Scouts,” Special Philippine
Scouts, “New Scouts,” and those who have at least a 10% service-connected disability and are
domiciled in the state.
b) The management and control of the daily business operations are by one or more disabled
veterans. The disabled veterans who exercise management and control are not required to be the
same disabled veterans as the owners of the business.
c) The DVBE’s ownership of the business meets the following criteria:
i) If the DVBE is a sole proprietorship, it is at least 51% owned by one or more disabled
veterans.
ii) If the DVBE is a publicly owned business, at least 51% of its stock is unconditionally owned
by one or more disabled veterans.
iii) If the DVBE is a subsidiary, it is wholly owned by a parent corporation, but only if one or
more disabled veterans unconditionally own at least 51% of the voting stock of the parent
corporation.
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iv) If the DVBE is a joint venture, it is an entity in which at least 51% of the joint venture’s
management, control, and earnings are held by one or more disabled veterans.
FISCAL EFFECT: Unknown
COMMENTS & CONTEXT:
1) California and the Federal Infrastructure Package: The federal Infrastructure Investment and Jobs
Act (IIJA) includes $1.2 trillion in new infrastructure funds. This represents a $550 billion increase in
federal government spending above baseline funding levels. Among other funding, the IIJA includes:
$621 billion on roads, bridges, public transit, rail, ports, waterways, airports, and electric vehicles
to improve air quality, reduce congestion, and limit greenhouse gas emissions;
$400 billion to bolster caregiving for aging and disabled Americans;
$300 billion toward boosting manufacturing, specifically semiconductor, medical, and clean
manufacturing;
$111 billion to rebuild water infrastructure and replace all of the nation's lead pipes and service
lines; and
$100 billion in order to give every American access to affordable, reliable, and high-speed
broadband.
To assist state and local governments, Tribal Governments, and other partners access the new funds,
the federal government has created a Building a Better American guidebook with details on each
program funded through the IIJA.
The Governor’s proposed budget for 2022-23 anticipates $20 billion in federal funding, which he
proposes to use to accelerate the transition to zero-emission vehicles, modernize the state’s
transportation system, spur clean energy innovation, advance the state’s housing goals, reduce wildfire
risk to communities, and support drought resilience and response.
One estimate is that this new federal funding represents $14 billion in additional formula funding to
California over the five-year funding period, as compared to existing formula funding levels.
In presenting the 2022-23 budget, the Governor is asking for “administrative flexibility so matching
fund requirements for unanticipated formula or competitive programs can be provided in a timely
manner to bolster the state’s competitiveness when applying for these programs.” Local agencies may
also need funding flexibility in order to draw down all available federal funding.
The LAO has completed an analysis of the Governor’s budget proposals on supply chain and the $4.1
billion Transportation Infrastructure Package, which provide additional details on his strategy for
integrating state and federal funds to meet important California needs. This includes: $3.4 billion that
was agreed to in concept in the 2021-22 budget package but reverted to the General Fund when
subsequent legislation was not enacted; and $1.5 billion that would be allocated between programs
from last year’s package and a new set of proposed programs.
Given the importance of small businesses to the California economy and the challenges they have and
continue to face during COVID-19, ensuring that state projects funded with IIJA funds include small
businesses is important to an inclusive recovery.
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2) Infrastructure Bonds of 2006: In 2007, the Legislature passed and the Governor signed AB 761,
which required each state agency awarding contracts that are financed with proceeds from the
infrastructure bonds approved by voters in November 2006 to establish a 25% small business
participation goal for state infrastructure construction contracts, and to provide specified assistance to
small businesses bidding on state infrastructure bond-related contracts. Collectively, these bonds are
known as the Infrastructure Bond Acts of 2006, and they include:
Proposition 1B, transportation bonds ($19.9 billion)
Proposition 1C, housing bonds ($2.9 billion)
Proposition 1D, education ($10.4 billion)
Proposition 1E, flood control bonds ($4.1 billion)
Proposition 84, bonds for resources ($5.4 billion).
During 2019-20, over $3 million in bond proceeds from the Infrastructure Bond Acts of 2006 were
expended. Chart 1 includes additional information on the small business (90%) and DVBE (0%),
which were expended.
Chart 1 – 2019-20 Infrastructure Bond Acts of 2006
Bond Contract DVBE SB/MB SB/MB
Departments DVBE %
Dollars Dollars Dollars %
Tahoe Conservancy, California $840 $0.00 0.00% $0 0.00%
Coastal Conservancy, State $3,365,513 $0.00 0.00% $3,054,855 90.77%
Grand Total $3,366,353 $0.00 0.00% $3,054,855 90.75%
Source: DGS, 2019-20 Consolidated Report
In prior years, significantly more funds were awarded. For example, in 2010-11, over $230 million of
bond funds being expended, with the California Natural Resources Agency expending 85% of their
contract dollars going to small businesses and the Department of Emergency Management expending
65%. This data shows that goals work, and as departments encourage primes to seek out small
business subcontracts, more money is circulated within local communities.
3) Small Business Procurement and Contract Act: California has a 40-year history of utilizing state
contracting to support business development within targeted business populations. The statute sets an
annual 3% DVBE procurement participation goal, and a 2006 executive order sets a 25% small
businesses and microbusinesses participation goal for state agencies, departments, boards, and
commissions.
While encouraging small business participation furthers the state’s interest in having a robust small
business sector, the Small Business Procurement and Contract Act also establishes the policy
foundation for DVBE contract participation. The DVBE procurement program is intended to
recognize the sacrifices of California’s disabled military veterans and address the specific needs of
disabled veterans seeking rehabilitation and training through entrepreneurship.
To assist state agencies in reaching these targeted procurement participation goals, state law
authorizes:
A procurement preference of 5% for bids using a certified small business as a prime or
subcontractor.
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A streamlined alternative procurement process for smaller size contracts (between $5,000 and
$250,000), known as the Small Business/DVBE Option, whereby an awarding department can
contract directly with a certified small business or DVBE after comparing the bid against two
other similar businesses.
A DVBE incentive allows an awarding department to set an incentive percentage between 1% and
5% for a particular transaction.
In the state’s experience, a majority of DVBEs are smaller size firms, with 86% having dual
certifications, including 56.5% of all DVBEs also holding microbusiness certificates, 25.6% having a
small business certification, and 0.6% having a small business public works certification. The
remaining 14% of DVBEs operate with only a single DVBE certification.
DGS has a range of responsibilities relating to the implementation of the Small Business and DVBE
program, including:
Certification of DVBEs (866 new and renewed DVBEs certified in 2019-20, which brings the total
of certified DVBEs in 2019-20 to 1,795);
Certification of small businesses and microbusinesses (8,278 new and renewed certifications
bringing the total number of certified small businesses and microbusinesses in 2019-20 to 17,374);
Outreach to the potential small business and DVBE bidders (142 events, including 114 events to
the veteran community in 2019-20);
Marketing of the DVBE program to state agencies;
Partnering with CalVet on meetings with departments that are not meeting participation goals;
Consulting with the California Procurement Contracting Academy on the DVBE training of state
contracting staff;
Preparation of an annual consolidated report on DVBEs, small businesses, and microbusinesses’
participation within state contracting activities; and
Program oversight to identify abuses by bidders and failures performed by state departments and
agencies.
DGS reports that it is also developing an online survey to increase the voluntary reporting of
Ethnicity, Race, Gender, and Sexual Orientation information by business owners contracting with the
state, in accordance with Public Contract Code Section 10111. According to DGS, this new online
ERGSO survey will be designed to ensure the confidentiality of responses and make it easier for
business owners to complete this voluntary survey.
4) Tracking Small Business and DVBE Procurement: Given the importance of small businesses to
California's economy, these procurement preferences play a key role in distributing state expenditures
throughout the state and among a variety of business types. The charts below (Charts 2 and 3)
display small business and DVBE procurement participation for the most recent four fiscal years for
which data is available.
Chart 2– Small Business and Microbusiness Contracting Activity of
Mandated Reporters (dollars in millions)
Fiscal Year Total Contract Total Small Total Percent Total Number of Contracts
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Dollars Business and
Microbusiness
Contract Dollars
2019-20 $11,988 $2,840 23.7% 97,515
2018-19 $10,531 $2,168 20.58% 96,345
2017-18 $8,361 $2,720 32.50% 110,864
2016-17 $6,329 $1,683 26.60% 117,624
2015-16 $5,855 $2,112 36.08% 116,169
2014-15 $8,117 $2,079 25.61% 482,707
2013-14 $7,101 $2,013 28.35% 90,784
2012-13 $7,616 $1,801 23.66% 105,617
2011-12 $7,399 $1,796 24.28% 165,523
Source: DGS Statewide Consolidated Annual Reports for the contracting periods
Chart 3 – DVBE Five-Year Contracting Activity of Mandated Reporters (dollars in millions)
Total Contract Total DVBE Total DVBE
Fiscal Year Total DVBE Contracts
Dollars Dollars Percent
2019-20 $11,988 $464 3.87% 22,894
2018-19 $10,531 $340 3.23% 23,782
2017-18 $8,314 $387 4.7% 19,174
2016-17 $6,329 $259 4.1% 19,823
2015-16 $5,855 $274 4.6% 18,638
2014-15 $8,105 $314 3.8% 16,192
2013-14 $6,566 $241 3.6% 12,777
2012-13 $7,151 $216 3.0% 14,907
2011-12 $7,173 $340 4.7% 16,246
Source: DGS Statewide Consolidated Annual Reports for the contracting periods
Based on the charts’ data, aside from 2019-20, the state appeared to nearly meet its 25% small
business target and exceeded the 3% DVBE procurement participation goal. These official numbers
are, however, only part of the program assessment. DGS prepares an extensive annual report on state
procurement activities, the California Consolidated Report. In addition to reporting the number of
contracts with small businesses and DVBEs, these reports also provide information on outreach
activities and other information to provide a framework for understanding the state’s targeted
procurement activities.
Although DGS works diligently to gather and aggregate this information, the California Consolidated
Report also highlights potential data irregularities, including the inconsistent reporting by state
agencies and the failure of some state agencies to even make a report. For example, in 2012-13, only
79% of the mandatory reporting entities reported their contracting activity to DGS.
The data also provides only a partial look at contracting activities, as it reflects the amount contracted
for and not the amounts actually received by a small business or DVBE. A state audit of the DVBE
program, released in 2019, suggests that very few state agencies have implemented practices to
monitor and report DVBE procurement participation violations for follow-up by DGS. The
Legislature passed three measures to address the deficiencies identified in the audit, described in
Comment 10. However, the impact of those changes will not be known until procurement data for
2021-22 are released.
5) COVID-19 Procurement Opportunities: On March 4, 2020, Governor Newsom issued an
emergency proclamation due to the COVID-19 pandemic, which suspended statutory requirements for
competitive bidding, advertising, and other state purchasing requirements for the procurement of
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goods and services needed to address the effects of the pandemic. With the state government
operating under a state of emergency, state agencies are authorized to use contracting protocols that
allow for little or no small business and DVBE participation. Many small business groups have
expressed concern to the Assembly Jobs Committee over the lack of access to new procurement
opportunities since April of 2020.
Small business participation in state procurement was below 25% in 2018-19 and 2019-20. One of
the reasons for these lower participation levels by small businesses is the increased use of emergency
contracting authority. DGS releases an annual California Consolidated Report, which tracts small
business, micro business, and DVBE procurement participation. In the 2018-19 report, DGS states
that the “primary reason departments gave for not meeting the Small Business or DVBE participation
goals was the large number of emergency contracts related to the 2018 wildfires, such as the Camp
Fire.”
For the 2019-20 report, DGS prepared Chart 4, which compares small business and DVBE
participation with and without emergency contracting activity.
Chart 4 - Participation with and without Emergency Purchases (dollars in millions)
Total
SB/Micro SB/Micro DVBE
Departments Contract DVBE Dollars
Dollars Percent Percent
Dollars
Total State Award $11,988 $2,840 23.70% $464 3.87%
Without Emergencies $7,339 $2,661 36.27% $407.3 5.54%
Only Emergencies $4,650 $179 3.85% $56.7 1.22%
Source: 2019-20 California Consolidated Report
To combat this trend, DGS reports that its Office of Small Business and DVBE Services has taken a
number of steps to address the impact of large emergency/disaster-related contracts on small
businesses and DVBEs. A few highlights from their 2018-19 and 2019-20 California Consolidated
Report are provided below:
New Register of Certified Firms for Emergency-related Contracts: Working with departments
that make large disaster-related contracts, DGS identified approximately 32 activity/supplies
categories for which small businesses and DVBEs will be able to register. Categories include but
are not limited to debris removal, energy generators, equipment rentals, rescue supplies, medical
supplies, respiratory products, sanitation, food, and fuel. The Emergency Registry went live in
October 2021.
Leveraged Procurement Agreements for Emergency Purchases: DGS finalized and expanded
the Master Service Agreement (MSA) and California Multiple Award Schedule contracting
opportunities for emergency procurement. This included the debris removal MSA related to
recovery efforts from the fires. DGS will also continue to provide SB/DVBE participation
language to be used in emergency MSAs and provide targeted outreach to certified businesses to
connect them with emergency contracting opportunities.
Targeted Outreach for Emergency Purchases: DGS is encouraging and, in some cases requiring,
departments to reach out to DGS when conducting emergency procurements. DGS has committed
to assisting awarding departments with identifying certified small businesses and DVBEs to meet
their needs. Examples of targeted SB/DVBE outreach for emergency purchases include:
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o Distributing emergency specific communication to certified firms
o Assisting certified businesses with strengthening their certification profile keywords and
UNSPSC and taking advantage of the search functionality of the Financial Information System
for California (FI$Cal).
o Offering certification workshops and individual assistance to interested businesses and will
continue to do so moving forward.
o Collecting business information from SB/DVBEs who reported they could provide COVID-
related goods and services and distributed their information to all state advocates and Cal OES.
DGS believes that these changes will show improvements in the 2021-22 contract activities.
6) Small Business Public Works: In 2019, DGS implemented a new small business certification
category - Small Business Certification for the Purpose of Public Works [SB 605, Chapter 673,
Statute of 2017]. This new certification includes small businesses in the public works arena with
three-year annual average gross receipts not exceeding $36 million and fewer than 200 employees.
At the end of 2018-19 (six months after the bill took effect), 422 firms had applied for and received
the small business-public works certification. Of those 422, 292 were exclusively SB-PWs, while 130
others added this certification to other certifications they used in applying for state contracts. In
addition to a new certification category, SB 605 also increased and codified the certification eligibility
threshold for firms based on their three-year average of gross annual receipts. The microbusiness
designation was increased to $5 million, and $15 million was set for the small business certification
cap. Chart 5 displays data on the number of California-certified small businesses and DVBEs in all
certification categories for 2019-20.
Percent of
Chart 5 - Small Business, Micro Firms, and DVBE by Percent
Firm Count Small
Certification Type of DVBEs
Businesses
DVBE (only) 247 -- 13.76%
Small Business 1,998 11.50%
Dual Certifies Small Business and DVBE 82 0.47% 4.57%
Dual Certified Small Business and Small Business-Public Works 164 0.94% --
Small Business Micro 12,014 69.15% --
Dual Certified Small Business Micro and Small Business–Public
1,311 7.55% --
Works
Dual Certified Small Business Micro and DVBE 1,283 7.38% 71.48%
Small Business–Public Works 339 1.95% --
Dual Certified Small Business–Public Works and DVBE 21 0.12% 8.36%
Triple Certified Small Business, DVBE, and Small Business–Public
12 0.07% 0.07%
Works
Triple Certified Small Business (Micro), Small Business–Public
150 0.86% 1.17%
Works and DVBE
Total Small Business, Micro Businesses, and Public Works 17,374 100% --
Total DVBEs 1,795 -- 100%
Source: 2019-20 California Consolidated Report
The new category of small business certification reflects the Legislature’s understanding that
participating in public works projects can require slightly more robust small businesses. This category
did not exist when the bulk of the 2006 bonds proceeds were being deployed.
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7) The Role of Small Businesses within the California Economy: California’s dominance in many
economic areas is based, in part, on the significant role small businesses play in the state’s $3.1
trillion economy. Two separate studies, one by the US Census Bureau and another by the Kaufman
Foundation, found that net job growth was strongest among businesses with less than 20 employees.
Among other advantages, small businesses are crucial in the state’s international competitiveness, and
they are an important means for dispersing the economic positive impacts of trade within the
California economy.
In 2018 (most recent full set of data), of the 4.4 million firms in California, there were 3.4 million
nonemployer firms as compared to 954,632 employer firms.
Total revenues for nonemployer sole proprietorships across all industry sectors were $189 billion
in receipts in 2017.
Businesses with less than five employees are classified as microenterprises. In 2017, there were
473,641 microenterprises which had one or more employees.
Microenterprises, including both nonemployer and up-to-5-employee businesses, comprise the
single largest segment of the California business community, representing 89.0% (3.9 million) of
all businesses in the state.
Microenterprises have many unique features and provide important benefits to local communities,
according to a recent study from the Microenterprise Fund for Innovation, Effectiveness, Learning,
and Dissemination (FIELD) at the Aspen Institute. These benefits include:
Providing products and services tailored to meet local and neighborhood needs.
Stimulating an inflow of revenues to and within local communities.
Serving as catalysts for neighborhood reengagement.
Revitalizing neighborhoods that may otherwise have vacant storefronts.
Providing role models and support for future entrepreneurs.
Excluding sole proprietorships, businesses with less than 20 employees comprise over 88.6% of all
businesses and employ approximately 17.4% of all workers. Businesses with less than 100 employees
represent 97.3% of all businesses and employ 34.5% of the workforce.
Chart 6 displays 2018 data (the most recent full set of data) on California employer businesses,
including payrolls, employment, and a number of firms, which may be comprised of one or
more establishments.
Chart 6 - 2018 Business Profile by Size (excludes nonemployer firms)
Area Employment Number of Percent of Employees Percent of Jobs Annual
Description Size Firms Firms Payroll ($1,000)
United States Total 6,075,937 130,881,471 $7,097,310,272
California Total 779,825 12.8% 15,223,664 11.6% $1,020,958,926
U.S. Firms U.S. Jobs
United States 0-4 3,757,163 61.8% of 5,967,955 4.5% of $287,379,518
U.S. Firms U.S. Jobs
California 0-4 485,387 62.2% of 746,240 4.9% of $46,663,550
CA Firms CA Jobs
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United States <20 5,411,180 89.0% of 21,337,272 16.3% of $898,874,051
U.S. Firms U.S. Jobs
California <20 692,139 88.7% of 2,650,204 17.4% of $130,748,308
CA Firms CA Jobs
United States 0-99 5,962,057 98.1% of 42,918,809 32.7% of $1,859,572,577
U.S. Firms U.S. Jobs
California 0-99 759,654 97.4% of 5,214,752 34.2% of $261,490,973
CA Firms CA Jobs
United States <500 6,055,421 99.6% of 61,244,031 46.7% of $2,819,089,905
U.S Firms U.S. Jobs
California <500 773,386 99.1% of 7,339,390 48.2% of $395,286,015
CA Firms CA Jobs
United States 500+ 20,516 0.33% of 69,637,440 53.2% of $4,278,220,367
U.S. Firms U.S. Jobs
California 500+ 6,439 0.82% of 7,884,274 51.7% of $625,672,911
CA Firms CA Jobs
Source: https://www.census.gov/data/tables/2018/econ/nonemployer-statistics/2018...
These nonemployer and small employer firms create jobs, generate taxes, support important industry
sectors, and revitalize communities. While their small size allows them to be more flexible in meeting
niche foreign and domestic market needs, it also results in certain market challenges. These
challenges include having difficulty meeting the procedural requirements of the state’s complex
regulatory structure and the traditional credit and collateral requirements of mainstream financial
institutions. Specialized technical assistance, access to credit enhancements, and targeting of state
procurement activities help many small businesses overcome or at least minimize these difficulties.
8) Related Legislation: Below is a list of bills from the current and prior sessions.
a) AB 31 (Price) Public Contracts: Small Business Procurement and Contract Act: This bill
increases the maximum contract threshold amount for awards to small businesses (SME),
including microbusinesses, and DVBEs under the state’s streamlined procurement process, from
$100,000 to $250,000, as specified. This bill requires contractors to report the contract amount
allocated to SMEs and DVBEs with which they made contract commitments. Status: Signed by
the Governor, Chapter 212, Statutes of 2009.
b) AB 309 (Price) Public Contracts: Small Business Participation: This bill would have required
the establishment of a 25% small business participation goal for all state entities and directed DGS
to monitor each agency’s progress in meeting this goal. The bill would have required that the
Office of the Small Business Advocate received the same progress report information as state
entities and directed DGS and the Office of the Small Business Advocate to work collaboratively
to assist state entities in meeting their goals. This goal is currently provided for in Executive
Order (EO) D-37-01 and EO S-02-06. Status: Held on the Suspense File of the Assembly
Committee on Appropriations, 2010.
c) AB 550 (Brown) State Procurement Procedures for Small Businesses: This bill would have
required the establishment of a 25% small business participation goal for all state entities and
directed DGS to monitor each agency’s progress in meeting this goal. The bill would have
required that the Office of the Small Business Advocate receive the same progress report
information as state entities and directed DGS and the Office of the Small Business Advocate to
work collaboratively to assist state entities in meeting their goal. This goal is currently provided
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for in Executive Order (EO) D-37-01 and EO S-02-06. Status: Held on the Suspense File of the
Assembly Committee on Appropriations, 2013.
d) AB 657 (Cunningham) State Government Small Business Liaisons: This bill requires certain
state agencies to prominently display the name and contact information of the small business
liaison on the agencies’ websites and to notify the Governor’s Office of Business and Economic
Development and the Department of General Services of liaison position vacancies, as specified.
Status: Signed by the Governor, Chapter 81, Statutes of 2017.
e) AB 761 (Coto) Infrastructure Bonds of 2006: This bill requires each state agency awarding
contracts that are financed with proceeds from the infrastructure bonds approved by voters in
November 2006 to establish a 25% small business participation goal for state infrastructure
construction contracts, and to provide specified assistance to small businesses bidding on state
infrastructure bond-related contracts. Status: Signed by the Governor, Chapter 611, Statutes of
2007.
f) AB 915 (Chiu and Holden) Small Business Goal and DBE Participation: This bill codifies a
25% small business goal for state procurement and proposes a number of actions to enhance the
ability and commitment of state agencies to include small businesses, disadvantaged business
enterprises (DBEs), and disabled veteran business enterprises (DVBEs) in state contracting.
Status: Held in the Senate Committee on Appropriations, 2021.
g) AB 1365 (Quirk-Silva and Reyes) Small Business Procurement Goal: This bill would have
expressed the Legislature’s intent that all California government agencies should have a 25% goal
for small business participation in state procurement and contracting activities. Status: Held on
the Suspense File of the Assembly Committee on Appropriations, 2018.
h) AB 1554 (Reyes and Quirk-Silva) Reporting of Small Business and DVBE Procurement
Participation: As passed by this committee, the bill would have required a state department to
annually report small business and DVBE participation based on prime and subprime contracts
beginning with the 2018-19 contract period. Status: Amended and used for a different policy
purpose. Signed by the Governor, Chapter 380, Statutes of 2018.
i) AB 1635 (Quirk-Silva) Public Contracts and Small Business Participation: This bill would have
required specified state agencies to establish and achieve a 25% small business participation goal
within their annual state contracting and permitting activities. The bill would have also required
DGS and the state Small Business Advocate to take reasonable steps to assist state agencies in
meeting this goal. The Assembly Committee on Jobs, Economic Development, and the Economy
was the sponsor of this bill. Status: Died in the Assembly Committee on Appropriations, 2017.
j) AB 1734 (Jones-Sawyer) Public Contracts: Small Business Participation: Disabled Veterans:
This bill would have required each state agency to establish and achieve a 25% small business
participation goal and increased the annual procurement participation goal for disabled veteran
business enterprises from 3% to 5% of the value of state contracts. In addition, the bill required
greater reporting and accountability of DVBE program information. Status: Held on the Suspense
File in the Assembly Committee on Appropriations, 2014.
k) AB 2905 (Assembly Jobs Committee) Small Business Procurement Goal: This bill would have
expressed the Legislature’s intent that all California government agencies should have a 25% goal
for small business participation in state procurement and contracting activities. To assist in
furthering the state goal, the bill would have required each state department to disclose its small
business participation goal when making its annual procurement report. Status: Held on the
Suspense File of the Assembly Committee on Appropriations, 2016.
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l) SB 67 (Price) Small Business Participation in Public Contracts: This bill would have authorized
DGS to direct all state entities to establish an annual goal of achieving no less than 25% small
business participation in state procurement contracts, as specified. This goal is currently provided
for in Executive Order (EO) D-37-01 and EO S-02-06. Status: Held on the Suspense File of the
Assembly Committee on Appropriations, 2011.
m) SB 941 (Florez) DVBE Contracting Advocates: This bill requires the Department of Veterans
Affairs and awarding departments to appoint DVBE advocates to assist in meeting DVBE
procurement participation goals. Status: Signed by the Governor, Chapter 666, Statutes of 2002.
REGISTERED SUPPORT / OPPOSITION:
Support
None on File
Opposition
None on File
Analysis Prepared by: Toni Symonds / J., E.D., & E. / (916) 319-2090
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