Prime Contractor’s Certification on DVBE Subcontractors and Payment Withhold - 1203.1
Policy
This policy applies to all contracts as defined herein, regardless of acquisition type and method when a prime contractor commits to subcontracting with a DVBE subcontractor.
Prime Contractor's Certification - DVBE Subcontracting Report
Pursuant to Military and Veterans Code (MVC), Section 999.5(d), upon completion of an awarded contract for which a commitment to achieve a disabled veteran business enterprise (DVBE) goal was made, the state department must require the prime contractor that entered into a contract with one or more DVBE subcontractors to certify on the Prime Contractor's Certification - DVBE Subcontracting Report (STD 817) form the actual percentage and amount of DVBE participation that was achieved and that all payments under the contract have been made to DVBE subcontractors.
Withhold and Payment Provisions
Pursuant to MVC, Section 999.7, state departments are required to withhold $10,000 from the final payment or the full payment if less than $10,000 until the prime contractor complies with the certification requirements of MVC, Section 999.5(d). The withholding applies to all contracts regardless of acquisition type and method when a prime contractor commits to subcontracting with a DVBE subcontractor.
Notwithstanding any other law, state departments shall not withhold more than the required withhold amount on the final payment of any DVBE contract for the purposes of ensuring compliance with the certification requirements of MVC, Section 999.5.
When developing solicitations and contracts that will allow contractors to subcontract with DVBEs, state departments should consider a statement of work and payment provisions that allow for more frequent deliverables and payments during the contract term. This consideration may aid the prime contractor to make payments to DVBE subcontractors thereby allowing the prime contractor to certify payments made to DVBE subcontractors at the conclusion of the contract.
For Leveraged Procurement Agreements (LPAs), DGS may prescribe alternative mechanisms for enforcing the certification requirement, and therefore, state departments must follow instructions provided in the User Instructions for each individual LPA.
Notice to Cure and Permanent Deductions
When a prime contractor fails to comply with the certification requirement in this section and a payment withhold is applied to a contract, the department shall allow the prime contractor to cure the deficiency after written notice. Notwithstanding any other law, if after at least 15 calendar days, but no more than 30 calendar days, from the date of the written notice the prime contractor refuses to comply with the certification requirements, the department shall permanently deduct $10,000 from the final payment, or the full payment if less than $10,000.
Review Procedures and Record Retention
Pursuant to MVC, Section 999.55, state departments must establish appropriate review procedures for records related to the certification to ensure the accuracy and completeness of the award amounts and paid amounts reported.
State departments must maintain all records of the information provided by the prime contractor pursuant to MVC Section 999.5 and retain them for six years after collection.
State departments must report false information provided by a prime contractor on the Prime Contractor’s Certification – DVBE Subcontracting Report (STD 817) to the OSDS at: sb.dvbecompliance@dgs.ca.gov. A person or entity that knowingly provides false information shall be subject to a civil penalty for each violation in the minimum amount of two thousand five hundred dollars ($2,500) and the maximum amount of twenty-five thousand dollars ($25,000).
Partial Payment Dispute and Prompt Payment Considerations
In general, a contractor does not have a right to the withheld amount and may not assert a Prompt Payment Act claim for failure to comply with the certification requirements. Additionally, if the prime contractor never submits the certification and the amount is permanently deducted, a contractor will have no claim under the Prompt Payment Act.
Partial payment of a final invoice requires a dispute notification for the amount withheld. See the State Administrative Manual (SAM) Chapter 8700, Section 8795, for guidance.
State departments should consult with their legal and accounting offices on harmonizing compliance with this policy and the prompt payment and disputes provisions of contracts.
Definitions, Roles, and Responsibilities
“Contract” is defined by MVC, Section 999(b)(4) as including “any agreement or joint agreement to provide professional bond services to the State of California or an awarding department. “Contract” also includes any agreement or joint development agreement to provide labor, services, materials, supplies, or equipment in the performance of a contract, franchise, concession, or lease granted, let, or awarded for, and on behalf of, the state.”
Consistent with the State Contracting Manual, this policy further clarifies a “contract” to include any acquisition type (information technology (IT) goods and services, non-IT goods, non-IT services, etc.) using any acquisition method (e.g., formal competitive, informal competitive, etc.) regardless of the contract form used to make the purchase (e.g., STD 213, STD 65, FI$Cal Purchase Order).
“Awarding department” is defined by MVC, Section 999(b)(2) to mean “a state agency, department, governmental entity, or other officer or entity empowered by law to issue bonds or enter into contracts on behalf of the state.”
This policy clarifies that an awarding department includes entities that purchase on behalf of other state departments such as the Procurement Division’s (PD) One Time Acquisition (OTA) Unit as it relates to awarding of contracts.
“Contract manager” is defined for the purposes of this section to mean state departments receiving the goods and services that are responsible for contract management which includes, but is not limited to, approving payments for goods and services received as well as withholding payments in accordance with MVC, Section 999.7 and this policy/procedure.
The procedures noted below identify the roles and responsibilities of the awarding department and contract manager.
Procedure
For contracts awarded where a prime contractor has committed to achieve a DVBE participation goal, state departments are required to establish procedures that implement the policy and procedures noted herein. The procedures must include, at a minimum, the following elements:
| What | Who | When | |
| 1 |
Include the applicable DVBE Program Requirements in the solicitation (verbal or written) whenever the solicitation includes the DVBE participation requirements. Departments may use the sample DVBE Program Requirements documents found here:
|
Awarding Department |
Solicitation development before execution. |
| 2 | The awarded contract must include contract language and specific payment provisions to describe the requirements including the Prime Contractor’s Certification-DVBE Subcontracting Report STD 817. | Awarding Department |
Upon contract award. |
| 3 | The completed STD 817 is required to be submitted to the contract manager. | Prime Contractor |
Upon completion of the contract, no later than final invoice. |
| 4 |
Withhold $10,000, or full payment if less than $10,000, from a prime contractor’s final payment pending receipt of a complete and accurate STD 817. Do not withhold more than $10,000 for the purposes of ensuring compliance with the STD 817 certification requirement. |
Contract Manager |
Pending receipt of an accurate and complete STD 817.
|
| 5 |
Receive and review STD 817 for completeness and accuracy. |
Contract Manager | Upon receipt but no later than 5 business days. |
| 6 | Authorize payment of the withhold upon review and determination that the STD 817 received is accurate and complete. | Contract Manager | Immediately. |
| 7 |
If the STD 817 is received but is found by the department to be incomplete or inaccurate, or if the STD 817 is not received by the final invoice, the department must send the prime contractor a cure notice allowing at least 15 calendar days, but not more than 30 calendar days to meet the certification requirements. The notice must inform the prime contractor of the consequence of a permanent deduction if the prime refuses to comply. |
Contract Manager |
Within 15 calendar days of either: Receipt of an incomplete STD 817 Or Final invoice wherein the STD 817 is not received. |
| 8 |
Permanently deduct the withheld amount when the prime contractor refuses to comply with the STD 817 requirement after given an opportunity to cure. |
Contract Manager |
No later than the 31st day from the cure notice. |
| 9 | The state department receiving the goods or services must retain in the procurement file all records related to the Prime Contractor’s Certification – DVBE Contract Report (STD 817) submittal. | Contract Manager | Minimum of six years from the receipt of the records. |
The Prime Contractor’s Certification – DVBE Subcontractor Report (STD 817) replaces the Prime Contractor DVBE Subcontracting Form (DGS PD 810P). Find the new Prime Contractor’s Certification – DVBE Subcontractor Report form (STD 817).
Legal Reference
Military and Veterans Code (MVC), Sections 999.5(d), 999.55, and 999.7
Public Contract Code (PCC), Section 10230
California Code of Regulations (CCR), Section 1896.78(e)
Related Policy, Procedures & Resources
Broadcast Bulletin P-17-14
Attachments
Prime Contractor’s Certification – DVBE Subcontracting Report (STD 817)
State Department’s Contractor DVBE Subcontracting Consolidation Report (DGS PD 810D)
Revisions
No Revisions for this item.