Section 1896.17 - Denied, Discontinued or Revoked Certification and the Imposition of Sanctions(a) A business' request for small business certification (application) will be denied on any of the following grounds: (1) A business does not meet the eligibility requirements for certification, submits insufficient documentation to demonstrate eligibility, or does not respond to requests from OSDS for additional information by the date and time specified.(2) The application and supporting documents, including any additional information subsequently provided by the business for correction, amendments and/or clarification, do not meet the eligibility requirements.(3) When the application for certification is submitted by a business or one or more principals of a business (new or existing) that is formed, financed by, or affiliated with a business suspended from contracting with the state of California, or whose certifications have been revoked, in accordance with Government Code section 14842 or 14842.5 or Military and Veterans Code section 999.9.(4) Applicants without an active status with the California Secretary of State or Contractors State License Board, when legally required to do so.(b) OSDS may discontinue the certification of a small business for any of the following reasons, including but not limited to:(1) Failure by a small business to provide requested information that supports its continued eligibility as a certified small business, by the date and time specified by the OSDS;(2) Failure to reinstate to active status with the Secretary of State, Contractors State License Board, or other such authorities during the period of certification;(3) The average annual gross receipts and/or employee limits imposed by section 1896.12, subdivisions (a) and (b) have been exceeded during the period of certification;(4) The officers, owners, and/or partners, managers or members of the small business fail to satisfy the California domicile requirement described in Government Code section 14837, subdivision (d)(1);(5) If a small business or small business for the purpose of public works is determined by OSDS to no longer meet the eligibility requirements of this subchapter.(c) Restoration After Discontinuance: (1) Certified status shall be restored for the remaining period of certification when satisfactory action on the part of the certified entity corrects identified insufficiencies.(d) If a business holds both the small business certification and the DVBE certification, both certifications shall be revoked for a period of not less than five (5) years if the business violates Government Code section 14842, subdivision (a). For additional or subsequent violations, the revocation shall be extended for a period of up to ten (10) years. Revocation applies to principals of business and any subsequent business formed by one or more of those principals, as set forth by Government Code section 14842, subdivision (e).(e) A business that has obtained certification based on either furnishing incorrect and/or incomplete information or withholding information, which they knew or should have known would affect their certification eligibility, and, as a result, was awarded a contract to which it would not otherwise have been entitled, shall, in accordance with Government Code section 14842: (1) Pay to the state any difference between the contract amount awarded to the business and the contract amount had the business been properly awarded; and(2) Pay to the awarding state agency and the Department an amount equal to the costs incurred for investigating the certification that led to the finding that the contract had been improperly awarded; and(3) The business shall be assessed an additional penalty in the amount of not more than ten percent (10%) of the amount of the contract.(f) The Department shall suspend any person who violates subdivision (a) of Government Code section 14842 from transacting any business with the state in the capacity of a contractor or a subcontractor for a period of not less than three (3) years and not more than ten (10) years. State agencies may reject the bid of a supplier offering goods, information technology, or services manufactured or provided by a subcontractor if the supplier or subcontractor has been declared ineligible to transact any business with the state pursuant to Government Code section 14842, even though the bidder is a business in good standing otherwise.(g) Government Code section 14842.5, subdivision (a) makes it unlawful for any person to: (1) Knowingly and with intent to defraud, fraudulently obtain, retain, attempt to obtain or retain, or aid another in fraudulently obtaining or retaining or attempting to obtain or retain: (A) Small business or microbusiness certification;(B) Public moneys, contracts, or funds expended under a contract, that are awarded by any state agency, department, officer, or other state governmental agency, to which the person is not entitled under the Act;(2) Knowingly and with intent to defraud, fraudulently represent: (A) Certified small business or microbusiness participation in order to obtain or retain a bid preference or a state contract;(B) That a commercially useful function is being performed by a certified small business or microbusiness in order to obtain or retain a bid preference or a state contract;(3) Willfully and knowingly: (A) Make a false statement with the intent to defraud, whether by affidavit, report, or other representation, to a state official or employee for the purpose of influencing the small business or microbusiness certification or denial of certification;(B) Obstruct, impede, or attempt to obstruct or impede, any state official or employee who is investigating the qualifications of a business entity that has requested small business or microbusiness certification;(C) Make or subscribe to any statement, declaration, or other document that is fraudulent or false as to any material matter, whether or not that falsity or fraud is committed with the knowledge or consent of the person authorized or required to present the declaration, statement, or document; or(D) Aid or assist in, or procure, counsel, or advise, the preparation or presentation of a declaration, statement, or other document that is fraudulent or false as to any material matter, regardless of whether that falsity or fraud is committed with the knowledge or consent of the person authorized or required to present the declaration, statement, or document.(4) Establish, or knowingly aid in the establishment of, or exercise control over a firm found to have violated any provisions of subdivisions (e)(1), (e)(2), or (e)(3).(5) Any person in violation of subdivisions (e)(1), (e)(2) or (e)(3) shall pay all investigation costs leading to the finding of the violation: (A) Incurred by the awarding state agency; or(B) Incurred by the Department of General Services;(6) Investigation costs shall include, but are not limited to costs and attorney's fees related to hearings and court appearances.(h) Any suspension, revocation and/or civil penalty issued pursuant to Government Code section 14842 or 14842.5 shall, unless otherwise statutorily specified, apply to the principals of the business, and neither the business nor the principals may re-apply for certification, either as the same business or a new business, for a period of not less than three (3) years, nor more than ten (10) years, from the date of certification revocation.(i) When denying certification, discontinuing small business certification, or imposing any other sanction, including suspension, revocation, monetary penalty, or cost recovery, the OSDS will notify the business in writing. The notice shall include the reasons for the determination together with the statutory or regulatory authority or basis for such action, and provide information regarding the process of restoring the certification or appealing the decision(s).Cal. Code Regs. Tit. 2, § 1896.17
1. New section filed 1-23-2017; operative 1-23-2017 pursuant to Government Code section 11343.4(b)(3) (Register 2017, No. 4).
2. Amendment of subsection (a)(5) and NOTE filed 11-8-2018; operative 1-1-2019 (Register 2018, No. 45).
3. Amendment of section heading, section and NOTE filed 6-29-2023; operative 6-29-2023 pursuant to Government Code section 11343.4(b)(3) (Register 2023, No. 26). Note: Authority cited: Sections 14837, 14839.1 and 14843, Government Code. Reference: Sections 4525, 14836, 14837, 14938, 14840, 14841, 14842 and 14842.5, Government Code; and Section 1101, Public Contract Code.
1. New section filed 1-23-2017; operative 1-23-2017 pursuant to Government Code section 11343.4(b)(3) (Register 2017, No. 4).
2. Amendment of subsection (a)(5) and Note filed 11-8-2018; operative 1/1/2019 (Register 2018, No. 45).
3. Amendment of section heading, section and Note filed 6-29-2023; operative 6/29/2023 pursuant to Government Code section 11343.4(b)(3) (Register 2023, No. 26).