Commercially Useful Function - 1200.1

Authority for Commercially Useful Function

In accordance with Government Code. Section 14837 and M&VC, Section 999, all SB and DVBE contractors, subcontractors and suppliers that bid on or participate in a State contract, regardless of being a verbal or written solicitation and/or paid for using the CAL-Card as a payment method, must perform a Commercially Useful Function (CUF). In addition, the requirement to determine CUF is not affected by the applicability of the 5% SB preference and/or the DVBE participation goal or DVBE incentive. There is no exception to this requirement; consequently, certified SB, MB and DVBEs must perform a CUF. CUF must be determined prior to contract award.

Performing and Demonstrating a Commercially Useful Function

A business performing a CUF is one where the contract administrator determines that the business does all of the following:

• Is responsible for a distinct element of the work of the contract.
• Carries out its obligation by actually performing, managing or supervising the work involved.
• Performs work that is normal for its business, services and functions.
• Is responsible, with respect to products, inventories, materials, and supplies required for the contract, for negotiating price, determining quality and quantity, ordering, installing, if applicable, and making payment.
• Is not further subcontracting a portion of the work that is greater than that expected to be subcontracted by normal industry practices.

A California certified SB and/or DVBE contractor, subcontractor, or supplier will not be considered to perform a CUF if the role of the contractor or supplier is limited to that of an extra participant in a transaction, contract, or project through which funds are passed in order to obtain the appearance of SB, MB, or DVBE participation. After award, the contract administrator must monitor compliance with CUF for the duration of the contract.

Departments must document their evaluation of CUF compliance in the procurement file. The CUF Evaluation and Determination Worksheet or some other equivalent must be used to document CUF compliance. Departments have the option of creating a Departmental Policy or may use the sample policy for additional direction regarding CUF.  Information that departments may want to include can be found in the sample. Further information can be found on the CUF webpage which includes a link to a Frequently Asked Questions (FAQ) document.

CUF Compliance

Failure of a certified SB, MB, or DVBE to demonstrate performance of a CUF, when bidding as a prime contractor, will result in that certified bidder being eliminated from consideration.  When analysis discloses that a certified subcontractor/supplier is not providing a CUF, a contract may still be awarded if the prime contractor is a responsible bidder without the involvement of the firm that has been determined not to provide a CUF and/or the work can be performed by an alternate SB, MB, or DVBE firm where the substitution is determined to have no material effect on the bid.

With respect to possible sanctions or decertification where it is determined that fraud or misrepresentation has occurred, information provided by bidders to demonstrate compliance with the CUF requirement is required under M&VC, Section 999.9 and Government Code, Section 14842.  Awarding departments are reminded of their responsibilities under these sections, particularly with respect to receipt of complaints, investigations, and reporting responsibility to DGS/PD’s Office of Small Business and DVBE Services (OSDS).

Contact DGS/PD/OSDS

To contact DGS/PD/OSDS, refer to DGS/PD/OSDS Small Business and DVBE Services web page.