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TITLE 2.
DEPARTMENT OF GENERAL SERVICES
_________________
NOTICE OF PROPOSED RULEMAKING
The Department of General Services (DGS) proposes to adopt modifications to the regulations described below after considering all comments, objections, and recommendations regarding the proposed action.
PROPOSED REGULATORY ACTION
The DGS proposes to modify the California Code of Regulations, title 2, sections 1896.4 and 1896.12. These sections concern the definitions and eligibility for certification of small businesses and microbusinesses.
The proposed amendments increase the average annual gross receipts limit of $10 million to $12 million for eligibility for certification as a small business in California State contracting. It also increases the average annual gross receipts limit of $2.5 million to $2.75 million for eligibility for certification as a microbusiness in California State contracting. Additionally the proposed regulation amendment removes reference to Title 13 Code of Federal Regulations that is no longer a valid reference.
PUBLIC HEARING
DGS has not scheduled a public hearing on this proposed action. However, the DGS will hold a hearing if it receives a written request for a public hearing form any interested person, or his or her authorized representative, no later than 15 days before the close of the written comment period.
WRITTEN COMMENT PERIOD
Any interested person, or his or her authorized representative, may submit written comments relevant to the proposed regulatory action to the DGS. The written comment period closes at 5:00 p.m. on July 24, 2006. The DGS will consider only comments received at the DGS office by that time. Submit comments to:
Office of Small Business and Disabled Veteran Business Enterprise Services, Attention: Melodie Cato
Procurement Division, DGS
707 3rd Street, 1st floor, Room 400
Sacramento, CA, 95605
E-mail to melodie.cato@dgs.ca.gov.
AUTHORITY AND REFERENCES
Authority: §14837(d)(3) and 14843, Government Code
Reference: §14837 (d)(1) and (2), Government Code; §1896.4(q), 1896.12, Division 2 of Title 2 of the California Code of Regulations
INFORMATIVE DIGEST
Government Code section 14837, subdivisions (d)(1), (2), and (3) read as follows:
- "'Small business' means 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 that, together with affiliates, has 100 or fewer employees, and an average annual gross receipts of ten million dollars ($10,000,000) or less over the previous three years, or is a manufacturer, as defined in subdivision (c), with 100 or fewer employees.
- 'Microbusiness' is a small business that, together with affiliates, has average annual gross receipts of two million five hundred thousand dollars ($2,500,000) or less over the previous three years, or is a manufacturer, as defined in subdivision (c), with 25 or fewer employees.
- The director shall conduct a biennial review of the average annual gross receipt levels specified in this subdivision and may adjust that level to reflect changes in the California Consumer Price Index for all items."
In November 2005, DGS conducted an analysis of the effect of the California Consumer Price Index for "all urban consumers." The California Consumer Price Index for "all urban consumers" can be accessed on the Internet at url. The Legislature first adopted a small business limit of $10 million in the Statutes of 1998, Chapter 821. The Legislature defined microbusiness with a $2.5 million limit in the Statutes of 2001, Chapter 882. In accordance with Government Code section 14837, subdivision (b) (3), the DGS shall conduct a biennial review of the average annual gross receipt limits and may adjust that limit to reflect changes in the Consumer Price Index. The objective of this proposed regulation amendment is to adjust the small business and microbusiness limits to reflect changes in the California Consumer Price Index.
Additionally the proposed regulation amendment removes reference to Title 13 Code of Federal Regulations that is no longer a valid reference.
POLICY STATEMENT OVERVIEW
The purpose of the proposed regulations is to increase the average annual gross receipts limit of small business and microbusiness for certification eligibility to adjust for inflation in accordance with the Consumer Price Index.
DISCLOSURES REGARDING THE PROPOSED ACTION
The DGS has made the following initial determinations:
- Mandate on local agencies and school districts: None.
- Cost or savings to any State agency: None
- Cost to any local agency or school district which must be reimbursed in accordance with Government Code §17561: None.
- Other non-discretionary cost or savings imposed upon local agencies: None.
- Cost or savings in federal funding to the State: None.
- Significant Statewide adverse economic impact directly affecting business including the ability of California businesses to compete with businesses in other states: None.
- Cost impact on private person or directly affected businesses: The agency is not aware of any cost impacts that a representative private person or business would necessarily incur in reasonable compliance with the proposed action.
- Creation or elimination of jobs within California: None
- Creation of new business or eliminate existing businesses within California: None
- Expansion of businesses currently doing business within California: Minimal. The increase may allow additional firms to qualify for the benefits of the Small Business Procurement and Contract Act (Government Code §14835 et seq.) It would further prevent some firms from being disqualified as a small business or microbusiness if they exceed the current dollar limits.
- Significant effect on housing costs: None.
BUSINESS REPORTING REQUIREMENT
The proposed regulations do not have any reporting requirement for businesses.
PLAIN ENGLISH DETERMINATION AND OVERVIEW
Small Business Determination
The proposed regulations affect small business. The specific effect of these amended regulations is expected to be minimal. The DGS certifies small and microbusinesses so that they can receive five percent preferences on low price State bids and receive prompt payment benefits. DGS estimates it denies certification to between 12 and 24 firms annually that seek certification, but are ineligible without an increase to the average annual gross receipts limit. It is unknown how many firms do not apply for certification due to awareness that their annual gross receipts exceed the current dollar limitations.
Plain English Policy Overview
The objective of the proposed regulations is to increase the limit of average annual gross receipts from $2.5 million to $2.75 million for microbusinesses and from $10 million to $12 million for small businesses.
CONSIDERATION OF ALTERNATIVES
In accordance with Government Code section 11346.5, subdivision (a)(13), the DGS must determine that no reasonable alternative it considered or that has otherwise been identified and brought to the attention of the DGS would be more effective in carrying out the purpose for which the action is proposed or would be as effective and less burdensome to affected private persons than the proposed action.
The DGS invites interested persons to present statements or arguments with respect to alternatives to the proposed regulations at the scheduled hearing or during the written comment period.
CONTACT PERSON
Inquiries concerning the proposed regulatory action may be directed to:
Melodie Cato, Regulations Contact
Office of Small Business and Disabled Veteran Business Enterprise Services (OSDS), Procurement Division
Department of General Services
707 3rd Street, 1st floor, Room 400
West Sacramento, CA 95605
(916) 375-4935
E-mail: Melodie.Cato@dgs.ca.gov
Backup person for these inquiries is:
Mariel Dennis, Chief
OSDS, Procurement Division
Department of General Services
707 3rd Street, 1st floor, Room 400
West Sacramento, CA 95605
(916) 375-4945
E-mail: Mariel.Dennis@dgs.ca.gov
AVAILABILITY OF STATEMENT OF REASONS AND TEXT OF PROPOSED REGULATIONS
The DGS will have the entire rulemaking file available for inspection and copying throughout the rulemaking process at its office at the above address. As of the date this notice is published in the Notice Register, the rulemaking file consists of this notice, the proposed text of the regulations, the initial statement of reasons, the escalation analysis, and the Procurement Division's Procedure for Price Analysis (1997). Copies may be obtained by contacting Melodie Cato at the address, phone number, or email listed above. Copies of this notice, the proposed text of the regulations, the initial statement of reasons, and the escalation analysis may be also viewed and downloaded from the DGS Web site at url.
AVAILABILITY OF CHANGED OR MODIFIED TEXT
After holding the hearing and considering all timely and relevant comments received, the DGS may adopt the proposed regulations substantially as described in this notice. If the DGS makes modifications, which are sufficiently related to the originally proposed text, it will make the modified text with the changes clearly indicated available to the public for at least 15 days before the DGS adopts the regulations as revised. Please send requests for copies of any modified regulations to the attention of Melodie Cato at the address indicated above. The DGS will accept written comments on the modified regulations for 15 days after the date on which they are made available.
AVAILABILITY OF THE FINAL STATEMENT OF REASONS
Upon its completion, copies of the Final Statement of Reasons may be obtained by contacting Ms. Cato at the address, phone number, or email listed previously in this Notice.
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