The Disabled Veteran Business Enterprise (DVBE) program directs California governmental entities, such as state agencies and departments, to procure goods and services from firms that the Department of General Services (General Services) has certified as meeting the DVBE eligibility criteria required by law (DVBE firms). The DVBE program requires that state governmental entities that award contracts for goods and services (awarding departments) strive to expend not less than 3 percent of the cumulative value of all their contracts on DVBE firms (3 percent goal). In its most recent annual report on state contracting activity, General Services reported that, overall, the State achieved the 3 percent goal each year during fiscal years 2014–15 through 2016–17.
However, the legislative intent of the DVBE program is to honor California’s disabled veterans by having them benefit financially from doing business with the State. A report we issued in 2014 titled Disabled Veteran Business Enterprise Program: Meaningful Performance Standards and Better Guidance by the California Departments of General Services and Veterans Affairs Would Strengthen the Program (Report 2013‑115) pointed out several shortcomings of the program. Our current review found that many of the issues we reported in 2014 still persist.
The DVBE program continues to benefit only a small percentage of DVBE firms. Just 133 (or 8 percent) of the 1,671 certified DVBE firms received contracts directly from awarding departments during fiscal year 2017–18.1 Further, 30 of those 133 DVBE firms captured most of the revenue associated with these contracts. Awarding departments stated that they often struggle to find a DVBE firm that can provide the services or products they need, and they attribute this difficulty to a lack of qualified DVBE firms and the complexities involved in using General Services’ procurement system to identify such DVBE firms.
The California Department of Veterans Affairs (CalVet) and General Services have not measured the success of their outreach efforts in encouraging more firms owned by disabled veterans to participate in the DVBE program. In addition, until recently neither department had considered the types of products and services that awarding departments struggle to procure from DVBE firms to help inform the two departments' outreach activities. Without considering information from awarding departments about their contracting needs and struggles, CalVet and General Services are missing opportunities to make the DVBE program more successful by increasing the number of DVBE firms that offer those products or services. Further, CalVet lacks the necessary staffing and immediate access to data to fully meet its statutory responsibility to assist underachieving awarding departments in meeting the 3 percent goal. However, given General Services’ expertise and access to resources, we believe it is better equipped than CalVet to fulfill this responsibility.
The six awarding departments we reviewed could not fully support the DVBE participation data they reported for fiscal year 2017–18. Most significantly, five of these six departments overstated some DVBE participation amounts. As a result, departments’ claimed DVBE participation levels could be significantly inflated and could lead users of this information to draw incorrect conclusions about these departments’ success in meeting the 3 percent goal. Additionally, General Services does not have reliable contracting and procurement data to measure the DVBE program’s success. General Services plans to use the Financial Information System for California (FI$Cal) to generate DVBE activity reports beginning with fiscal year 2018–19, which may reduce the likelihood of input error and may alleviate some DVBE reporting issues.
Summary of Recommendations
To ensure that awarding departments that fail to meet the 3 percent goal receive the assistance necessary to achieve the goal, the Legislature should amend state law to transfer the responsibility for monitoring and assisting underachieving departments from CalVet to General Services.
CalVet and General Services as Oversight Entities
To ensure that a greater number of DVBE firms benefit from the DVBE program, General Services should work with awarding departments to understand why only a few DVBE firms receive a large number of contract awards. Using its findings, General Services should take the necessary steps to remedy this situation.
To ensure that awarding departments can effectively identify DVBE firms that provide needed products and services, General Services should work with awarding departments to make its procurement system easier to use for identifying such DVBE firms.
To ensure that their outreach efforts are effective and result in a greater number of DVBE firms available to provide the necessary goods and services awarding departments are seeking, CalVet and General Services should assess the effectiveness of their past outreach efforts and work with awarding departments to target specific types of disabled veteran‑owned businesses.
Until it begins generating DVBE activity reports using FI$Cal, General Services should require awarding departments to perform a secondary review of their DVBE activity reports to make sure that the data are supported by documentation.
To ensure that DVBE participation data are reported accurately and consistently, Caltrans, Corrections, DMV, General Services, and Public Health should implement or strengthen a secondary review process to ensure that contracts are accurately recorded in their data systems.
Caltrans, CalVet, Corrections, DMV, and Public Health agreed with the recommendations we made to them and indicated that they will take steps necessary to implement all recommendations. Although General Services generally agreed with our recommendations, it overstated the effectiveness of some of its existing processes.
1 These percentages do not include DVBE firms that are subcontractors and that provide products or services on behalf of primary contractors. Specifically, as we report later, although General Services believes many such firms exist, it lacks the data necessary to quantify the number of DVBE firms that are subcontractors and that financially benefit from doing business with the State. Go back to text