DVBE and Small Business Program Violations and Sanctions

California law permits the State to impose various sanctions on contractors, and in some cases, specific individuals (principals in the business), including prohibiting contractors from doing business with the State for specified periods of time under certain circumstances.  Sanctions will result particularly in cases where small business (SB) and/or Disabled Veteran Business Enterprise (DVBE) certification was fraudulently obtained and/or misused in a State bid or contracting situation.  They can also result from finding that a firm does not perform a "commercially useful function" or "CUF", as defined.  SB and DVBE regulations further support the State's legal authority to enforce sanctions. 

DVBE Sanctions and Penalties

Fraudulent intent and activity as defined under Military and Veterans Code (MVC) , Sections 999.9(a)(1-5) and Public Contract Code (PCC), Section 10115.10(a)(1-5) are considered DVBE Program violations and are subject to serious sanctions and penalties.  Under MVC, Section 999.9(b-c) and California Code of Regulations (CCR), Title 2, Section 1896 et seq, violators:

• May be found guilty of a misdemeanor and can be fined and/or receive jail time.
• Can be suspended from bidding on, or participating as either a contractor, subcontractor, or supplier in any State contract or project for a period of not less than three years.
• Can also have their DVBE certification revoked for a period of not less than three years.
• Can also have their certification revocation and/or suspension extended for a period of not less than five years if additional or subsequent violations occur.  The certification revocation and/or suspension shall apply to the principals of the business and any subsequent businesses formed or financed by, or affiliated with those principals.
• Will be further prohibited from contracting with the State until all imposed penalties, costs, and attorney fees are satisfied.

Small Business Sanctions and Penalties

Fraudulent intent and activity as defined under Government Code (GC), Sections 14842 and 14842.5(a)(1-6) are considered Small Business Certification Program violations and are subject to serious sanctions and penalties.  Under GC, Sections 14842(a)(1-3) through 14842(e) and 14842.5(b-d), violators may be subject to the following penalties:

• Pay the State for improperly awarded contracts; pay the difference between the contract amount and what the State's cost would have been if the contract had been properly awarded.
• Be assessed a penalty not to exceed 10% of the contract amount.
• Shall be ineligible to directly as a prime contractor or indirectly as a subcontractor transact any business with the State for six to 36 months.
• The firm's small business certification will be revoked for not less than one year.
• Can receive a civil penalty up to $5000.
• Can be suspended from bidding on, or participating as either a contractor, subcontractor, or supplier in any State contract or project.
• Can have their small business certification suspended.
• Can have their certification revocation and/or suspension extended for a period of up to three years if additional or subsequent violations occur.  The certification revocation and/or suspension shall apply to the principals of the business and any subsequent businesses formed by or financed by, or affiliated with those principals.
• Will be further prohibited from contracting with the State until all imposed penalties, costs, and attorney fees are satisfied.

Certified Nonprofit Veteran Service Agencies (NVSA)

Certified Nonprofit Veteran Service Agencies (NVSA) who become ineligible for certification will also be displayed on the list of suspended/debarred suppliers.  (NVSA requirements webpage under construction.)

Reporting Suspected DVBE or Small Business Program Violations

Prior to reporting an alleged violation to the DGS, Procurement Division, Office of Small Business and DVBE Services (OSDS), Compliance Unit, awarding departments will investigate the alleged violation and prepare a written report of their findings.  The written report will include a recommendation for action to be taken commensurate with the awarding department's findings and will be submitted to the OSDS within 60 working days of the notification to the awarding department of the alleged violation.  The report is a public record.

In preparation for a suspension action based on fraudulently obtaining State monies (a contract), the OSDS will work with the awarding department.  The awarding department may terminate the contract for default when the suspension is imposed and a contract has been determined to have been obtained fraudulently.

Suspended and Debarred Contractors Listing

The law requires that contractors and persons who have been determined to be in violation that resulted in suspension be identified on a list made available to State buyers and the public. 

"Suspended" means a firm (contractor, subcontractor, supplier, subsidiary, or affiliate) has been deemed as violating State small business and DVBE certification laws in conjunction with State contracting laws.  The suspended firm(s) and its principal(s) are prohibited from entering into a State project or contract until all imposed penalties, costs, and attorney fees are satisfied.

"Debarred" means a firm (contractor, subcontractor, supplier, subsidiary, or affiliate) is prohibited from entering into a State project or contract and from further bidding to the State as a contractor, subcontractor or supplier.  The debarred firm has previously been found to be in violation under GC 14842.5(a) and has a subsequent violation under the same section within a three-year period.

• Awarding departments will check the suspension list to ensure a contractor or subcontractor is not under suspension or debarred from State contracting.
• No awarding department will enter into any contract with any business and/or person identified in the listing during the business' and/or person's suspension period.
• No awarding department will award a contract to any contractor utilizing the services of a suspended subcontractor during the suspended subcontractor's suspension or debarment period.

List of Suspended Firms

Need help? Contact Us: by phone at (916) 375-4940 or by fax at (916) 375-4950.