STATE CONTRACTING MANUAL
CURRENT AS OF APRIL 2022
Gavin Newsom, Governor
Amy Tong, Secretary
Government Operations Agency
Ana M. Lasso, Director
Department of General Services
Volume 1
Non-IT Services
Published by the Department of General Services,
Office of Legal Services (916) 376-5080
www.dgs.ca.gov/ols
Notice
This publication is designed to provide accurate and current information about the law and State policies. Readers
should consult the relevant codes, rules, and cases when relying on cited material.
Copyright 1996 (rev. 2022)
California Department of General Services
State Contracting Manual – Volume I
ABBREVIATIONS AND ACRONYMS
(Rev 6/17)
A & E Architectural and Engineering
ADA Americans with Disabilities Act
AG Attorney General
BL Budget Letter
CC California Civil Code
CCR California Code of Regulations
CalHR California Department of Human Resources
CSCR California State Contracts Register
CCC Contractor Certification Clauses
DFEH Department of Fair Employment and Housing
DOF Department of Finance
DGS Department of General Services
DGS/OLS Department of General Services, Office of Legal Services
DGS/ORIM Department of General Services, Office of Risk Management
DGS/OSDS Department of General Services, Office of SB & DVBE Services
DGS/OSP Department of General Services, Office of State Publishing
DGS/PD Department of General Services, Procurement Division
DGS/RESD Department of General Services, Real Estate Services Division
DVBE Disabled Veteran Business Enterprise
FI$Cal Financial Information System for California
GC California Government Code
GIA General Interagency Agreement Terms and Conditions
GTC General Terms and Conditions
IFB Invitation for Bids
IRS Internal Revenue Service
IT Information Technology
IP Intellectual Property
LC California Labor Code
LPA Leveraged Procurement Agreement
MM Management Memo
MOU Memorandum of Understanding
MSA Master Services Agreement
NCB Non-Competitively Bid Contract Justification
NLRB National Labor Relations Board
PCC California Public Contract Code
RFP Request for Proposals
RFQ Request for Qualifications
SAM State Administrative Manual
SCAN State Contracting Advisory Network
SCM State Contracting Manual
SCO State Controller’s Office
SCPRS State Contract and Procurement Registration System
SPB State Personnel Board
TACPA Target Area Contract Preference Act
UIC California Unemployment Insurance Code
UNSPSC United Nations Standard Products and Services Code
USC United States Code
UTC University Terms and Conditions for UC and CSU Agreements
State Contracting Manual – Volume I i
TABLE OF CONTENTS
(Rev. 04/22)
CHAPTER 1 – INTRODUCTION SECTION
Introduction 1.00
Table of Contents 1.01
Availability of the Manual 1.02
Guides To Usage of the Manual 1.03
Agency Responsibilities 1.04
Classification of Contracts 1.05
Circumvention of Responsibilities Prohibited 1.06
Standard Contracting Forms 1.07
CHAPTER 2 – THE BASIC CONTRACTING PROCESS
SECTION
Introduction
2.00
Table
of Contents 2.01
Definition
of a Contract 2.02
Preliminary
Considerations 2.03
Overview
of the Contracting Process 2.04
Elements
of a Valid Contract 2.05
Authority
to Sign a Contract 2.06
Standard Language
2.07
A
DGS/OLS Review Checklist Appendix
CHAPTER 3 – ADDITIONAL REQUIREMENTS
SECTION
Introduction 3.00
Table of Contents 3.01
Consultant Services Contracts 3.02
Interagency Agreements 3.03
Leveraged Procurement/Master Agreements for Services and Consulting
Services
3.04
Contracts With Local Government 3.05
State Contracting Manual – Volume I ii
Contracts With Other Governmental Entities & Public Universities 3.06
Legal Services Contracts 3.07
Expert Witness Contracts 3.08
Amendments 3.09
Emergency Contracts 3.10
Federally Funded Contracts 3.11
Hazardous Activities Contracts 3.12
Joint Powers Authorities 3.13
Wage and Benefit Requirements for Specific Types of Personal Services
(GC § 19134)
3.14
Contracts With Nonprofit Organizations 3.15
Revenue Agreements and Concession Contracts 3.16
Subvention and Local Assistance Contracts 3.17
UC, CSU, and Authorized CSU Auxiliary Organizations 3.18
IT and Telecommunications Contracts (See SCM volume 2) 3.19
Convention and Conference Facilities Contracts 3.20
Printing Services Contracts 3.21
Contracting for Students 3.22
Memberships 3.23
Fiscal Intermediaries 3.24
Commercial Office Moving Services 3.25
Elevator Maintenance Contracts 3.26
Contracting With Expatriate Corporations 3.27
Loss Leader 3.28
Darfur Contracting Act 3.29
Iran Contracting Act 3.30
The Congo – Securities Exchange Act 3.31
Tax Delinquencies, Contract Ban 3.32
Civil Rights Certifications (PCC § 2010) 3.33
Mandatory Organic Waste Recycling 3.34
State Contracting Manual – Volume I iii
CHAPTER 4
– STANDARD CONTRACT FORMAT AND DGS
CONTRACT APPROVAL
SECTION
Introduction 4.00
Table of Contents 4.01
Responsibility for Contract Approval 4.02
Contracts Requiring DGS/OLS Approval 4.03
Contracts Not Requiring DGS/OLS Approval 4.04
Exemption Letters 4.05
Certain State and Federally Funded Grants Exempt from Approval by
DGS/OLS
4.06
Approval of Emergency Contracts 4.07
Standard Contract Format and Obtaining Approval from DGS/OLS 4.08
Approval and Commencement of Work 4.09
Approval of Amendments 4.10
Other Required Approvals
State Contract and Procurement Registration System
4.11
4.12
CHAPTER 5 – COMPETITIVE BIDDING METHODS
SECTION
Introduction 5.00
Table of Contents 5.01
Statutory and Regulatory References 5.02
Fundamental Rules 5.03
Preliminary Considerations and Decisions 5.04
Competitive Bidding Requirements and Alternatives 5.05
Comparison Chart of Bidding Methods 5.06
Differences Between IFBs and Primary RFPs 5.07
Primary RFP and Secondary RFP Differences 5.08
Invitation for Bids 5.11
Request for Proposals 5.15
Request for Proposals: Primary Method 5.20
Request for Proposals: Secondary Method (Point Count or High Score) 5.25
Required Language in Competitive Bidding Documents 5.30
State Contracting Manual – Volume I iv
Drafting an RFP 5.35
Guidelines for Criteria and Considerations in Evaluating RFPs 5.40
Tie Bids 5.45
Time for Completion of the Competitive Bidding Process 5.60
Posting and Notification Requirements 5.65
Competitive Bidding Issues 5.70
Advertising State-Contracting Opportunities 5.75
Contracts Exempt from Advertising in the CSCR and Competitive Bidding 5.80
Amendments 5.81
Multiple Awards 5.85
Contracts Under Ten-Thousand Dollars 5.90
CHAPTER 6 – CONTRACT AWARD PROTESTS
SECTION
Introduction 6.00
Table of Contents 6.01
Grounds for Protest 6.02
Protest Exclusions 6.03
Role of DGS in Contract Protest Hearings 6.04
Protest Affecting Vital Services 6.05
Procedure for Protesting an Award 6.10
Oral Hearing Guidelines 6.15
Decision on the Hearing 6.18
Costs of the Proceeding 6.19
Protests on Other Types of Solicitations 6.30
Notification of the Right to Protest 6.35
Minimizing Protest Exposure 6.40
CHAPTER 7 – MISCELLANEOUS CONTRACTING ISSUES
SECTION
Introduction 7.00
Table of Contents 7.01
Civil Service Considerations and Union Notice Requirements 7.05
Conflicts of Interest 7.10
State Contracting Manual – Volume I v
Intellectual Property 7.11
Reporting of Contracting Practices 7.15
Prompt Payment 7.20
Payee Data Records 7.25
Equipment Purchases 7.29
Contract Budgets 7.30
Availability of Funds 7.31
Advance Payments 7.32
Progress Payments 7.33
Contract Payment by State Purchase Card, Cal-Card 7.34
Insurance Requirements 7.40
Contracts with No Dollar Amount 7.45
Audits 7.50
Drug-Free Workplace Act of 1990 7.55
Equipment Rental Agreements 7.60
Purchase Options 7.61
Lease/Purchase Analysis for Equipment 7.62
Nondiscrimination Program 7.65
Recycled Product Content 7.70
Multiple Year Contracts 7.80
Contract Termination Clauses 7.85
Indemnification 7.86
Breach of Confidentiality by Contractor 7.90
CHAPTER 8 – BUSINESS PARTICIPATION PROGRAM
REQUIREMENTS
SECTION
Introduction 8.00
Table of Contents 8.01
Procurement Division Responsibility and Legal References 8.02
Introduction to DVBE Participation Program 8.10
DVBE Regulations 8.11
State Contracting Manual – Volume I vi
When to Apply the DVBE Goal to a Contract 8.12
Bidders’ Response to DVBE Requirements in a Solicitation 8.13
Qualifying as a DVBE 8.14
DVBE Bid Information 8.15
Management of DVBE Contract Requirements 8.16
DVBE Incentive Program 8.17
Annual Report of DVBE Participation 8.18
Certified Small and Microbusiness Program 8.20
Small Business Preference Program 8.21
Non-Small Business Preference Program 8.22
Prompt Payment of Small Businesses 8.23
Target Area Contract Preference Act (TACPA) 8.30
CHAPTER 9 – CONTRACT MANAGEMENT
SECTION
Introduction 9.00
Table of Contents 9.01
Responsibilities of a Contract Manager 9.04
Contract Manager “Don’ts” 9.05
Ethics 9.07
Record Keeping 9.09
Performance of the Contractor 9.11
Termination of the Contract 9.12
Closing of Service Contracts 9.14
Retention of Contract Records 9.16
CHAPTER 10 – PUBLIC WORKS CONTRACTS
SECTION
Introduction 10.00
Table of Contents 10.01
Definitions 10.05
Authorization of Public Works Contracts 10.10
Public Works Contracts Between $1,000 and $388,000 10.15
Public Works Contracts Between $388,000 and $929,000 10.20
State Contracting Manual – Volume I vii
Requirements of Public Works Contracts 10.25
Public Works Contracts Required Language 10.30
Non-collusion Declaration Appendix
CHAPTER 11 – ARCHITECTURAL AND ENGINEERING CONTRACTS
SECTION
Introduction 11.01
GLOSSARY OF TERMS
INDEX
State Contracting Manual – Volume I 1
1. INTRODUCTION
1.00 INTRODUCTION
(Rev 04/22)
This State Contracting Manual (SCM) is provided as a resource to persons involved in
California’s State contracting process. (GC § 14615.1.) It provides the policies,
procedures and guidelines to promote sound business decisions and practices in
securing necessary services for the State. This manual does not eliminate or override
statutory requirements, or requirements implemented by way of superseding Executive
Orders and Management Memos.
A. Volume 1 of the manual deals primarily with non-IT services, consultant services,
legal services, subventions, and interagency agreements. It does not cover real
estate lease transactions, commodities or IT acquisitions. Overviews of public
works contracts and architectural and engineering contracts are provided in
chapters 10 and 11, respectively. DGS/OLS should be contacted for assistance in
interpreting any section of Volume 1 of this manual or when seeking a variance
from established contracting requirements or practices.
B. Volume 2 contains information about delegated purchasing authority, commodities
acquisitions and protests, preference programs, non- competitive bidding,
leveraged procurement agreements, reporting requirements, and Information
Technology (IT) acquisitions. DGS/PD should be contacted for assistance in
interpreting Volume 2.
1.01 TABLE OF CONTENTS
(Rev 11/12)
DESCRIPTION SECTION
Introduction 1.00
Table of Contents 1.01
Availability of Manual 1.02
Guide to Usage of the Manual 1.03
Agency Responsibilities 1.04
Classification of Contracts 1.05
Circumvention of Responsibilities Prohibited 1.06
Standard Contracting Forms 1.07
State Contracting Manual – Volume I 2
1.02 AVAILABILITY OF THE MANUAL
(Rev 04/22)
The manual is available on the DGS/OLS webpage All contracting officials should
register for the subscription service provided by DGS/OLS for changes to the SCM
volume 1.
Registration can be accomplished online at: https://www.dgs.ca.gov/OLS/Resources.
1.03 GUIDES TO USAGE OF THE MANUAL
(Rev 11/12)
A. Table 1.1 provides a guide for interpreting the acquisition requirements
presented in this manual.
Table 1.1
Required or Discretionary Language
Requirements Limited Discretion Full Discretion
Key Words “must,” “shall,”
“mandatory,” or
“required”
“should” “may,”
“guidelines,”
“recommended
practices,” or
“examples”
Source Statutes, regulations,
State policies, DGS
policies required to
meet legal
responsibilities
DGS policies
related to
requirements or
considered to be
good business
practices
Policies,
procedures, and
guidelines
presented as
helpful aids
Compliance Must be followed
unless exempt by law
or granted exemption
by DGS
Need to be followed
unless the agency
has a good
business reason for
variance
Optional
Documentation Documentation
required
Brief notation in the
files suffices
None required
State Contracting Manual – Volume I 3
Consequence
for
noncompliance
Noncompliance may
cause violation of law
and/or rejection of
contract by DGS
Noncompliance
may affect
compliance with a
requirement or the
advisability of the
contract; DGS may
question and
request
documentation
None
B. Some mandatory requirements may be waived by DGS/OLS. Agencies seeking
an exemption from any mandatory requirement should apply in writing to the
Deputy Director & Chief Counsel of DGS/OLS. Any written exemptions should be
kept on file for audit purposes.
1.04 AGENCY RESPONSIBILITIES
(Rev 04/22)
Each State agency is responsible for its own services acquisitions program. This
responsibility includes ensuring the necessity of the services, securing appropriate
funding, complying with laws and policies, writing the contract in a manner that
safeguards the State’s interests, and obtaining required approvals.
The role of DGS/OLS includes:
• Approving contracts after execution by the State agency (PCC §§ 10295
and 10335)
• Designating an OLS attorney to agencies for review and approval of non-IT
services contracts. The designated attorney can serve as a resource during
the contracting process
• Overseeing State contracting practices (see generally GC §§ 14600,
14615(a))
• Improving the State’s contracting system (GC § 14600)
• Training State personnel in contract requirements
State Contracting Manual – Volume I 4
1.05 CLASSIFICATION OF CONTRACTS
(Rev 04/22)
A. Proper classification of acquisitions is necessary as a first step in
determining which solicitation process is appropriate for the contract, and
what elements are required to be in the contract.
B. Consider the following concepts for each acquisition:
1. Is it an Architectural & Engineering (A&E) Contract? Are the services
sought required by law to be performed by a licensed architect,
licensed registered engineer, licensed landscape architect,
construction project manager, licensed land surveyor, or environmental
service as defined in GC § 4525?
If so, the process contained in GC § 4525 must be followed. Note: An
agency must have adopted regulations in order to utilize the process in
GC § 4525.
2. Is it a Public Works Contract as defined in PCC § 1101? Does the work
involve erection, construction, alteration, repair or improvement of a
public structure, building, road, or other improvement?
If so, the contract is a public works contract. See SCM 1 chapter 10
for guidance.
3. Is it a contract for the purchase of a Commodity or Goods? (PCC §
10300, et seq.) Does the contract have as its sole or main purpose, the
buying of some tangible items such as equipment, parts, supplies, or
other merchandise? If so, further consideration must be made to
determine whether any services are being provided as well, and which
has the predominant value to the contract; the items being purchased,
or the services being rendered? The dollar value associated with the
services provided, or the value of the goods being supplied are factors
that should be considered. (See SCM volume 2.)
4. Is it an Information Technology (IT) acquisition? (PCC § 12100 et seq.)
Does the contract have as its sole or primary purpose, an information
technology procurement or activity? If so, further consideration must be
made. If the contract is determined to be an IT activity, the provisions
of the State Administrative Manual in section 5200 must be adhered to.
IT activities typically require additional documentation. When
determining whether a contract is for IT, one must consider the
predominant purpose or value of the activity, and whether information
technology skills and knowledge are involved as the primary purpose
of the contract or whether such knowledge or skills are used to further
an overarching purpose. For example, a contract to manage a health
benefits program may utilize software and computer hardware to fulfill
services required. Example: A contract for installing cable for a local
State Contracting Manual – Volume I 5
area network includes purchase of the wiring and plugs, but also
includes installation. The primary value is getting the cable installed, so
this would most likely be a service or Public Works contract if it were
being done in a public structure. (See SCM volume 2.)
5. Is it a contract for non-IT services? (PCC § 10335 et seq.) Does the
contract have as its sole or primary purpose providing non-IT services?
Services contracts are those that have someone doing something.
Many service contracts are easily identified, e.g., waste removal
services, cleaning services, etc. However, some services contracts are
more difficult to determine, especially when they involve other
disciplines as well. Example: A contract for carpeting may involve
purchase of carpet (commodity) as well as removal of old carpet and
pad (service), and installation of new carpet and pad (service). The
determining factor should be what is the primary focus of the contract
and expertise of the contractor. Is it the purchase of the item, or proper
installation?
6. Is it a consulting services contract? (PCC § 10335.5.) Does the
contract have as its sole or primary purpose, some type of
recommendation or product of the mind? Is the unique knowledge of
the individual and intellectual abilities of critical importance to the
success of the contract?
7. Is it a contract for legal services? (PCC § 10335.) A legal services
contract is a type of consulting services contract to obtain services
which must be performed by a licensed attorney.
1.06 CIRCUMVENTION OF RESPONSIBILITIES PROHIBITED
(Rev 3/03)
Statutes, regulations, and policies governing the State’s contracting process are
designed to protect the State’s interests. (PCC § 100.) Therefore, it is not appropriate to
seek artificial exceptions to contracting requirements that undermine the integrity of the
competitive bidding process. Pass-through contracts in which the vendor or another
governmental agency is doing something that an agency cannot lawfully do directly,
such as avoiding competitive bidding, is a common type of unlawful circumvention.
(PCC § 10340.)
1.07 STANDARD CONTRACTING FORMS
(Rev 1/14)
A. The most commonly used forms in the service contracting process are listed
below. Check the Internet site for the DGS Office of State Publishing (DGS/OSP)
at Office of State Publishing Homepage to verify you are using the most current
revision.
State Contracting Manual – Volume I 6
FORM NUMBER USE OF FORM
STD 4 Consultant Evaluation
STD 16 Department of Fair Employment and Housing (DFEH)
Contract Reporting Form
STD 17A Non-discrimination Certificate
STD 18 Non-discrimination Certificate (construction)
STD 19 Non Compliance Certification
STD 21 Drug Free Certification
RESD Form 23 Request for Project Undertaking (construction)
STD 204 Payee Data Record
STD 213 Standard Agreement (First page for State contracts and
Interagency Agreements under standardized contract
process)
STD 213A Standard Agreement Amendment (First page for
amendment to contract agreement under standardized
contract process)
STD 215 Agreement Summary
STD 807 Payment Bond (construction) PCC §§ 7103 and 10221
STD 810 Contract Report (Small Business Participation)
STD 811 Small Business Preference Request (construction)
STD 815 Contracts Register Advertising Form
STD 821 Request for Advertising Exemption
STD 830 Target Area Contract Preference Act (TACPA) Request
Form
OTHER Non-Competitively Bid (NCB) Contract Justification Form
B. Agencies are not authorized to make revisions to the standard forms without prior
approval from DGS.
State Contracting Manual – Volume I 7
2. THE BASIC CONTRACTING PROCESS
2.00 INTRODUCTION
This chapter describes the basic contracting process and the principal components of
the process.
2.01 TABLE OF CONTENTS
DESCRIPTION SECTION
Introduction
2.00
Table of Contents
2.01
Definition of a Contract
2.02
Preliminary Considerations
2.03
Overview of the Contracting Process
2.04
Elements of a Valid Contract
2.05
Authority to Sign a Contract
2.06
Standard Language
2.07
A DGS/OLS Review Checklist
Appendix
2.02 DEFINITION OF A CONTRACT
(Rev 11/12)
“A contract is an agreement to do or not to do a certain thing.” (CC § 1549.) It gives rise
to an obligation or legal duty enforceable in an action at law. (CC § 1428.) Contract and
Agreement are used interchangeably in the SCM. A contract must clearly identify the
parties to the contract, the term of the contract, the contract price (or in-kind value), and
a contract sets forth terms, conditions, and the statement of all work to be performed.
2.03 PRELIMINARY CONSIDERATIONS
(Rev 11/12)
The contracting process starts with the recognition of a need for services. From that
point the process varies depending on the type of services needed. Key considerations
include:
State Contracting Manual – Volume I 8
A. Time
When the services are needed is a critical factor. Sufficient time must be allowed
for internal agency process as well as required external review(s). (See SCM 1,
chapter 4.)
B. Civil Service
The State Constitution generally requires contracting to be limited to those
services that cannot be performed by civil service employees except as provided
for in GC § 19130.
C. Authority and Approvals
Many decisions require authorized approval, including final formal approval,
either by the agency or by DGS/OLS. Some contracts are legally exempt from
DGS/OLS approval. Some may require approval by other agencies. (See SCM 1,
chapter 4.)
D. Funding
Funding for the services is a crucial component and must be identified.
E. Competitive Bidding
Services obtained from the private sector are typically subject to a competitive
selection process. (See SCM 1, chapter 5.)
F. Management of the Contract
Management of the contract must be anticipated and planned during the
contracting process. Deliverables must be clearly described so that they can be
evaluated and payments can be approved. (See SCM 1, chapter 9.)
2.04 OVERVIEW OF THE CONTRACTING PROCESS
(Rev 11/12)
The following Table 2.1 gives a general overview of the State’s contracting
process. The process necessarily varies greatly depending on the circumstances
of the specific contract. Table 2.1 is provided to help in planning your contract.
Table 2.1
IMPORTANT
FACTORS
DECISIONS TO BE
1. Someone within the
agency must identify
the need for a
service, whether the
• What is the nature of
the service?
• What internal
procedures apply to
requesting services?
State Contracting Manual – Volume I 9
need is for a routine
renewal of an
existing essential
service or the
acquisition of totally
new or unique
services.
• What type of service
is needed?
• How necessary is the
service?
• When is the service
needed?
• Is this an ongoing or
one-time service?
• Is this an existing
service or a new
service?
• Is this service routine
or extraordinary?
• What are the possible
or probable sources
for the services?
• What justifications
need to be developed?
• Who has the authority
to approve the
request?
2. Services are
required to be
performed by civil
service employees
whenever feasible.
Such feasibility must
be considered
before seeking a
contract. (See GC
§19130)
• Is the service
available within your
department?
• Can another State
agency perform the
service?
• Is this routine or
extraordinary?
• What are the
estimated costs of
alternatives, including
in-house or
interagency services?
• Is a contract with a
non-State provider
really necessary?
• Which is the best
alternative? If in-house
service, the contracting
process stops. If inter-
agency service is best,
the process continues.
If a contract is justified,
the process continues.
3. Costs and the
availability of funds
are always a factor.
Alternatives range
from using already-
budgeted funds for
simple services to
seeking an
appropriation.
• What funds are
available to pay for
the services?
• Who has authority to
approve funding?
State Contracting Manual – Volume I 10
The Following Considerations Assume a Contract is Justified and Funds
are Available
4. The contractor
selection method
depends on the
services involved
and/or the
circumstances.
Different methods
impose different
requirements and
procedures.
• What is the nature of
the service?
• When is the service
needed?
• Is this an emergency?
• What is the estimated
cost?
• Are the sources for
the service limited?
• Is a contracted
source already
available?
• Can an existing
contract be
amended?
Select by competition,
such as:
• Invitation for Bids (IFB)
• Request for Proposals
(RFP)
• SB/DVBE two quote
method (GC §14838.5,
14838.7)
Select by other method
such as exploring:
• use of DGS LPAs
• use of statutory bid
exemptions
5. Formal competitive
bidding is generally
required by law or
policy. The formal
competitive bidding
process involves
numerous factors
and decisions.
• The contracting
opportunity must be
publicized, usually by
formal advertising.
• A solicitation package
containing all
specifications must
be developed and
must be available to
all competitors.
• Competition must not
be unnecessarily
restricted.
• Procedures must be
followed to ensure a
fair competition.
• The competitors’
responses must be
judged, and a winner
must be determined.
• The results must be
announced, and the
contract awarded.
• Who develops the
technical specifications
describing the services
to be performed?
• Who ensures that the
technical specifications
are necessary, will
achieve the desired
results, and do not
restrict competition?
• Who develops and
reviews the
specifications
describing general
contract requirements
and the solicitation
requirements?
• Who conducts
solicitation activities,
including advertising,
dealing with
competitors, receiving
and safeguarding
responses, opening
State Contracting Manual – Volume I 11
• The contract must be
written in accord with
the specifications and
the contractor’s
response to the
solicitation.
responses, evaluating
responses, and
notifying competitors?
• Who writes and
processes the
contract?
6. The contract must
be processed for
signature, approval
and distribution.
• The contract must be
signed by the
contractor.
• The contract must be
signed by the person
authorized to sign for
the agency.
• The Std. 215 must be
signed certifying
availability of funds
and indicating the
encumbrance of
funds.
• Additional approvals
must be obtained
depending on the
contract.
• The contract must be
distributed.
• Who approves the
contract?
• Are special approvals
required?
• Is final approval by
agency authorized or
is final approval
reserved to DGS?
• Who distributes copies
of the contract?
7. Management of the
contract must be
built into the contract
to facilitate
measurement of
achievement and
measurement of
contractor
performance
Management includes:
• Identifying the
deliverables and
ensuring satisfactory
delivery
• Monitoring progress,
especially for quality
and performance
deadlines
• Providing for audit,
especially for critical
compliance issues
• Reviewing invoices
for contract
compliance,
accuracy, and prompt
• Did the contractor
• satisfactorily perform
all required services?
• Should the contractor
be paid or should the
invoice be disputed?
• Is a formal evaluation
required or needed?
• Should the services be
stopped or continued?
• Should the contract be
renewed or rebid?
• How can the contract
or contracted services
be improved?
State Contracting Manual – Volume I 12
payment if invoice is
undisputed
• Tracking State
deadlines and use of
funds
• Identifying contract
and contractor
problems and
communicating these
to the contractor
• Should the
encumbered funds be
adjusted?
2.05 ELEMENTS OF A VALID CONTRACT
(Rev 11/12)
Each contract must contain the following information:
• Identification of the parties.
• Term for the performance or completion of the contract (dates or length of
time).
• Encumbrance of funds when required.
• Consideration (The contract must clearly express the maximum amount to
be paid and the basis on which payment is to be made: e.g., a fixed amount
regardless of time spent, billing based on time spent at a specified rate plus
actual expenses, or cost recovery.)
• Scope and deliverables (The work, service, or product to be performed,
rendered, and/or delivered.) Clear and concise language must be used to
describe the scope.
• Other general or unique terms and conditions of the agreement.
• Signature by a person for each party who is authorized to bind that party.
2.06 AUTHORITY TO SIGN A CONTRACT
(Rev 11/12)
A. A State agency’s authority to contract is limited to those officers who either have
statutory authority or have been duly authorized in writing by one who has
statutory authority.
Anyone who signs a contract should have sufficient knowledge and expertise in
the area of contracting and the goods or services being procured. If an individual
with statutory authority does not have sufficient knowledge or expertise in these
areas, that individual should have the contract reviewed by a knowledgeable
person prior to final signature.
State Contracting Manual – Volume I 13
Some important considerations for granting signature authority or assessing
one’s ability to effectively review a contract for approval are:
1. Training and/or certification in accordance with guidance provided by
DGS.
2. The procurement approach used.
3. The goods and/or services for which the department is contracting.
4. The complexity and value of the contracts or procurements.
5. The purchasing authority of the department.
6. The knowledge, experience, and expertise of the individual signing
the contracts.
7. Experience with the principles of sound contracting and procurement.
8. Familiarity with the process of contract formation, execution and
administration.
Agencies must maintain a written record of all persons authorized to sign
contracts and transmittals.
B. State boards and commissions either have statutory authority for the executive
officer to sign contracts, or the authority of the executive officer to sign contracts
is provided by resolution, order, or motion. Contracts in excess of $5,000 must be
accompanied by evidence of the applicable authority to sign the contract.
Contracts under $5,000 are generally deemed to pertain to ministerial duties and
do not need to be accompanied by evidence of the applicable authority to sign
the contract.
C. Local public entities authorize and approve execution of contracts through a
resolution, order, motion, or ordinance. A copy of such authority must be required
by State agencies unless payment will be made after performance is complete. A
copy of such authority should be retained in the contract file. (See SCM 1,
section 3.05.)
2.07 STANDARD LANGUAGE
(Rev 6/17)
The provisions noted in Table 2.2 are generally required. Many of the provisions are
contained in the State’s standard general terms and conditions (GTCs) which should be
incorporated by reference to the DGS/OLS website. Agencies should submit a basis for
non-use of clauses.
Table 2.2
Contract Provisions When Required Law/Statue
Audit by State Auditor All contracts over
$10,000
GC § 8546.7
State Contracting Manual – Volume I 14
Audits and access to
records
For contracts subject to
DVBE goals
PCC § 10115, et seq.
2 CCR § 1896.60, et
seq.
Nondiscrimination clause All contracts GC § 12990
Antitrust Claims All competitively bid
contracts
GC § 4550, et. seq.
Statement of compliance Contracts $5,000 or over
when not in bid
documents
2 CCR § 11109
Americans with
Disabilities Act (ADA)
All contracts 42 USC § 12101, et
seq.
National Labor Relations
Board
All contracts PCC § 10296
Drug-free workplace All contracts GC § 8350, et seq.
Progress payments All contracts where
progress payments will
be made
PCC § 10346
Recycled Content
Products
All contracts PCC §§ 6615,
12201(c), 12205
Termination &
Amendments
All contracts GC § 11010.5
Expatriate Corporations All contracts PCC § 10286.1
Priority hiring
considerations
Contracts in excess of
$200,000
W&I §§ 11200, 11349
PCC § 10353
2 CCR § 1896.30
Resolution of contract
disputes
All service contracts
should; consulting
services must; public
works contracts may
PCC §§ 10381, 22200,
et seq.
Validity All contracts requiring
DGS approval
PCC §§ 10295, 10335
Subject to availability of
funds
All contracts signed
before approval of
budget
State and Federal
budgets
State Contracting Manual – Volume I 15
Convict/Forced labor/or
sweatshop Labor
Sweatfree Code of
Conduct
All contracts for
purchase of goods or
commodities.
All contracts for
purchase or laundering
of apparel or garments.
PCC § 6108
Child support compliance All contracts exceeding
$100,000 (Interagency
Agreements are exempt
from this requirement)
PCC § 7110
Non eligible Alien All sole proprietor
contracts
8 USC § 1621, et. Seq.
Insurance requirements All contracts doing
hazardous works
State policy
Air/Water pollution
violation certification
All contracts over
$10,000
GC § 4477
Domestic partners All contracts $100,000
or over
PCC § 10295.3
Nondiscrimination in
provision of employee
benefits based on gender
identity
All contracts for goods
or services $100,000 or
over
PCC § 10295.35
Indemnity All contracts State policy
Prompt Payment All contracts GC § 927, et seq.
Consultant Services – Note: Needed in addition to “Contract Provisions”
listed
Amendment Consultant contracts PCC § 10335
Evaluation of contractor Consultant services PCC § 10367
Evaluation criteria Consulting services of
$5,000 or more
PCC § 10371
Progress schedule Consulting services of
$5,000 or more
PCC § 10371
Consultant résumés Consulting services of
$5,000 or More
PCC § 10371
State Contracting Manual – Volume I 16
Detailed cost analysis Consulting services of
$5,000 or More
PCC § 10371
Project coordinator Consultant services
Progress
reports/meetings
Consultant services PCC § 10371
Legal Services – Note: Needed in addition to “Contract Provisions” listed
above.
Legal cost and billing
guidelines
Contracts for legal
services
PCC § 10353.5
Legal litigation plans Contracts for legal
services
PCC § 10353.5
Case phasing of activities Contracts for legal
services
PCC § 10353.5
Legal budgets Contracts for legal
services
PCC § 10353.5
Legal malpractice Contracts for legal
services
PCC § 10353.5
Legal bill & law firm audits Contracts for legal
services
PCC § 10353.5
Subvention Contracts – Note: Needed in addition to “Contract
Provisions” listed
State purchase of
equipment
Subvention aid or local
assistance
State policy
Prior authorization for
reimbursement over
Subvention aid or local
assistance
State policy
Prior State approval for
training seminars, etc.,
and material
Subvention aid or local
assistance
State policy
Contracts with Federal funding – Note: Needed in addition to “Contract
Provisions” listed
Termination 30 days Contracts funded in
whole or in part by
State policy
State Contracting Manual – Volume I 17
Federal government,
State government, and
other public
Fund availability Contracts funded in
whole or in part by
Federal government, all
State policy
Other Contracts – Note: Needed in addition to “Contract Provisions”
listed above.
Prevailing wages Moving services over
$2,500
SAM § 3810
GC § 14920
Prevailing wages Public works LC § 1770, et seq.
State’s responsibilities for
repairs, liability
Contracts for equipment
rental
State policy
Equipment maintenance Contracts for equipment
rental
State policy
Interagency Agreements
How charges are
computed
All interagency contracts SAM §§ 8752 and
8752.1
Audit All interagency contracts
over
$10,000
GC § 8546.7
Advancing of funds Any interagency contract GC § 11257
Non-payment Transaction
Request
All interagency contracts GC § 11255
BL 10-10
UC, CSU and Authorized CSU Auxiliary
See UTC-116 (or
successor provisions)
Agreements with UC,
CSU or an Authorized
CSU Auxiliary
Organization
Ed. Code § 67325, et
seq.
State Contracting Manual – Volume I 18
CHAPTER 2 - APPENDIX
DGS/OLS REVIEW CHECKLIST
(Rev 04/22)
[Note: This checklist is provided to inform State agencies of the typical areas of review
and/or analysis performed by DGS/OLS. It should not be viewed as a limitation of
DGS/OLS contract review activities.]
A. THE CONTRACT COMPLIES WITH THE LAW.
1. Authority to contract out
a. Specific statute
b. GC § 19130 consideration
(1) Cost savings 19130(a) – State Personnel Board (SPB) process
required (2 CCR § 547.69 and §547.70)
(2) Other reasons 19130(b) (2 CCR § 547.60)
(a) See 19130(b)(1) Exempt under Constitution
(b) See 19130(b)(2) New State function and legislative authority
(c) See 19130(b)(3) Service not available: highly specialized or
technical
(d) See 19130(b)(4) Incidental to the purchase or lease
(e) See 19130(b)(5) Conflict of interest; need unbiased findings
(f) See 19130(b)(6) Emergency appointment
(g) See 19130(b)(7) Private Counsel, with Deputy Attorney
General (DAG) approval. Notice provided to Bargaining Unit
2 representatives of contract
(h) See 19130(b)(8) Contractor will provide things that are not
feasible for the State to provide
(i) See 19130(b)(9) Training when civil service is not available
(j) See 19130(b)(10) Urgent, temporary, or occasional services
when civil service delay would frustrate the purpose
2. Budget authority. (See SCM I section 2.03.D)
3. Legal method of procurement
a. Bidding generally required
State Contracting Manual – Volume I 19
(1) IFB
(2) RFP
(3) Two SB or DVBE quotes (GC §§14838.5, 14838.7)
B. Bidding exemptions
(1) Statutory
(2) DGS policy or NCB
4. Legal requirements met for type of contract
5. Authority to amend
B. THE CONTRACT MAKES GOOD BUSINESS SENSE AND THE COST IS
REASONABLE.
1. Good business sense
a. Drafted to obtain desired results
b. Scope of work specific and realistic
c. Maximum use of dollars
d. Deliverables clear, measurable, and concise
e. Realistic timetable
2. Reasonable cost
a. Consider whether:
(1) Bid is within estimate
(2) Bids cover a wide range
(3) Low bid is too low
(4) Low bid is too high
b. Has re-bidding been considered if bids are out of line?
C. THE CONTRACT USES CLEAR AND CONCISE LANGUAGE CONSISTENT
WITH THE TERMS OF SOLICITATION AND BID.
1. Term
a. Within fiscal year appropriation; and
b. If for multiple years, contingency language as appropriate
2. Scope of work
a. Specifications, requirements
b. Personnel, staffing
State Contracting Manual – Volume I 20
c. Coordination
d. Measurable results, deliverables
e. Timelines, progress reports
f. Evaluation, acceptance
3. Total amount and payment method, progress payments, withhold
4. Terms and conditions—standard and special
D. SECONDARY ISSUES AND SUPPORTING DOCUMENTATION ARE
REVIEWED.
1. Social issues (as appropriate)
a. Certified small business
b. Certified DVBE
c. TACPA
2. Drug-free workplace, other required certifications
3. Statement of compliance
4. Check of corporate standing
5. Other approvals (as applicable)
a. AG
b. SPB
c. DGS Office of Fleet Administration
d. DGS/ORIM
e. Records Management
f. DGS/OSP
6. Std. 204 noted
7. Resolution
8. Bonds
9. Ads, STD 821, or exemption noted
10. Negative evaluations
State Contracting Manual – Volume I 21
3. ADDITIONAL REQUIREMENTS FOR SPECIFIC TYPES
OF CONTRACTS
3.00 INTRODUCTION
This chapter covers specific requirements for various types of contracts. See Chapter 2
for the elements of a basic contract, Chapter 10 for public works contracts, and Chapter
11 for architectural and engineering contracts.
3.01 TABLE OF CONTENTS
(Rev 6/17)
DESCRIPTION SECTION
Introduction 3.00
Table of Contents 3.01
Consultant Services Contracts 3.02
Interagency Agreements 3.03
Leveraged Procurement/Master Agreements for Services and
Consulting Services
3.04
Contracts with Local Government 3.05
Contracts with other Governmental Entities & Public Universities 3.06
Legal Services Contracts 3.07
Expert Witness Contracts 3.08
Amendments 3.09
Emergency Contracts 3.10
Federally Funded Contracts 3.11
Hazardous Activities Contracts 3.12
Joint Powers Authorities 3.13
Wage and Benefit Requirements for Specific Types of Personal
Services
3.14
Contracts with Nonprofit Organizations 3.15
Revenue Agreements and Concession Contracts 3.16
State Contracting Manual – Volume I 22
Subvention and Local Assistance Contracts 3.17
UC, CSU, and Authorized CSU Auxiliary Organizations 3.18
IT and Telecommunications Contracts 3.19
Convention and Conference Facilities Contracts 3.20
Printing Services Contracts 3.21
Contracting for Students 3.22
Memberships 3.23
Fiscal Intermediaries 3.24
Commercial Office Moving Services 3.25
Elevator Maintenance Contracts 3.26
Contracting With Expatriate Corporations 3.27
Loss Leader 3.28
Darfur Contracting Act 3.29
Iran Contracting Act 3.30
The Congo – Securities Exchange Act 3.31
Tax Delinquencies, Contract Ban 3.32
Civil Rights Certifications (PCC § 2010) 3.33
Mandatory Organic Waste Recycling 3.34
3.02 CONSULTANT SERVICES CONTRACTS
(Rev 04/22)
A. A consultant services contract is a services contract of an advisory nature that
provides a recommended course of action or personal expertise. (PCC §
10335.5.)
1. The contract calls for a product of the mind rather than the rendition of
mechanical or physical skills.
State Contracting Manual – Volume I 23
2. The product may include anything from answers to specific questions to the
design of a system or plan.
3. Consulting services may include workshops, seminars, retreats, and
conferences for which paid expertise is retained by contract, grant, or other
payment for services.
B. Expert witness contracts and legal services contracts are types of consulting
services. (PCC § 10335.5.) These two types are exempt from competitive
bidding. (See SCM I, section 5.80.)
C. Consultant services contracts do not include:
1. Contracts between State agencies and the Federal government. (PCC §
10335.5.)
2. Contracts with local agencies, as defined in Revenue and Taxation Code §
2211, to subvene Federal funds for which no matching State funds are
required.
3. Contracts for architectural and engineering services. (GC § 4525.)
D. Agencies shall only use private consultants when the quality of work is at least
equal to that of agency resources. (PCC § 10371.) But such contracts must still
also comply with GC section 19130.
3.02.1 CONTRACT REQUIREMENTS
A. Consultant services contracts have certain requirements that do not apply to
other contracts. (PCC § 10371.)
1. Consultant services contracts of $5,000 or more shall contain detailed
performance criteria and a schedule for performance.
2. The contractor must provide a detailed analysis of the costs of performance
of the contract.
3. Consultant services contracts of $5,000 or more shall have attached as part
of the contract, a completed resume for each contract participant who will
exercise a major administrative role or major policy or consultant role, as
identified by the contractor.
B. A consultant contract should contain:
1. A clear description of the work to be done or the problem to be solved. (If a
problem cannot be clearly delineated, the agency must consider whether
the problem is sufficiently understood or is not deserving of a consultant's
attention.) The contract must specifically identify in realistic terms what the
consultant is to accomplish, including any desired approach to the problem;
practical, policy, technological, and legal limitations; specific questions to be
answered; the manner in which the work is to be done; a description of the
State Contracting Manual – Volume I 24
items to be delivered and measurable results they are required to achieve;
the format and number of copies to be made of the completed reports; and
the extent and nature of the assistance and cooperation that will be
available to the consultant from the State.
2. Time schedules, including dates for commencement of performance and
submission of progress reports, if any, and date of completion.
3. Manner of progress payments, whether and to what extent they will be
allowed, and, if appropriate, known or estimated budgetary limitations on the
contract price.
4. The dispute resolution clause should outline the steps to be taken by each
party in the event a dispute arises. (PCC § 10381.)
5. Final meeting requirements between the contractor and agency
management, when the contractor is to present his or her findings,
conclusions, and recommendations, when applicable.
6. Final report requirements that require the consultant to submit a
comprehensive final report, when applicable.
3.02.2 REVIEW OF TECHNICAL QUALIFICATIONS
The following criteria should be covered in the evaluation of technical qualifications
presented in response to an RFP or IFB:
A. Does the proposing firm understand the agency's problem? Oral presentations
may be arranged, if necessary.
B. Is the approach to the problem reasonable and feasible?
C. Does the firm have the organization, resources, and experience to perform the
assignment? Has the firm had experience in similar problem areas?
D. Has the firm submitted sufficient information to establish that the personnel it has
committed to the assignment have the appropriate professional qualifications,
experience, education, and skill to successfully complete the assignment?
3.02.3 REVIEW OF PRIOR PERFORMANCE EVALUATIONS
A. Before awarding a consulting services contract of $5,000 or more, an agency
must request a copy of any negative evaluations from DGS/OLS. (PCC § 10371.)
B. DGS/OLS shall send a copy of any evaluation report and response to the
contracting manager or contracting officer, or highest-ranking contracting official
of a State agency on receipt of a written, telephonic, or other form of request
stating the reason for the request. On receipt of a consultant services contract
submitted for DGS/OLS approval, DGS/OLS shall notify the awarding agency
within ten working days if a negative evaluation is on file for the contractor. (PCC
§ 10370.) To avoid possible delays in approvals of contracts submitted to
State Contracting Manual – Volume I 25
DGS/OLS, the awarding agency should document the review of the negative
evaluations in the space provided on form STD 215.
3.02.4 CONTRACTS WITH THE SAME CONSULTANT (PCC 10371(b))
Any agency entering into more than one consultant services contract with the same
contractor within a 12-month period for an aggregate amount of $12,500 or more, must
have each contract that exceeds the $12,500 aggregate amount approved by DGS
(PCC § 10371). After the $12,500 aggregate amounts are met, all contracts with the
same contractor, regardless of dollar amount, must be approved by DGS/OLS.
3.02.5 CONTRACTOR EVALUATIONS (PCC §§ 10367 and 10369(f))
Each contractor providing consultant services of $5,000 or more shall be advised in
writing on the standard contract that the performance will be evaluated.
A. One Contract/Contractor Evaluation, form STD 4, must be prepared within 60
days of the completion of the contract.
B. The agency shall document the performance of the contractor in doing the work
or in delivering the services for which the contract was awarded.
C. The evaluations shall remain on file by the agency for a period of 36 months. If
the contractor did not satisfactorily perform the work or service specified in the
contract, the agency conducting the evaluation shall place one copy of the
unsatisfactory evaluation form in a separate agency contract file and send one
copy of the form to DGS/OLS within five (5) working days of completion of the
evaluation.
D. Upon filing an unsatisfactory evaluation with DGS/OLS, the State agency shall
notify and send a copy of the evaluation to the contractor within 15 days. The
contractor shall have 30 days to submit a written response to the evaluation to
the agency in the department under the contract and to send it to the awarding
agency and the department. The contractor’s response shall be filed with the
evaluation in the agency’s separate contract file and in DGS/OLS’s files.
E. The evaluations and contractor responses on file with the agencies and
DGS/OLS are not public records. They should be maintained in a separate file.
(PCC § 10370.)
3.02.6 PARTICIPATION OF AGENCY PERSONNEL
A. Agencies receive the greatest benefits from consultants when the project is a
joint undertaking and agency personnel are active participants. Their participation
provides the employees with training opportunities and knowledge of what the
consultant has done, why it was done, and how the agency can benefit by it. The
work often represents knowledge that may not be derived simply through the
analysis of the consultant’s formal report. Agency personnel working with the
consultant provide project continuity at the operating level in subsequent months.
Teamwork between the consultant and agency employees can also foster
State Contracting Manual – Volume I 26
support for the project and enhance its chances for success.
B. Each contract should identify a person (or position) in the agency who will be the
project coordinator. This person will have the overall responsibility to evaluate
and follow up on the work of the consultant. Other staff time should be allotted for
the project according to the nature and complexity of each engagement.
C. The contract shall provide a progress schedule and milestones, such as a series
of progress reports or meetings on a regular basis to allow the agency to
determine whether the consultant is on the right track and whether the project is
on schedule, to provide communication of interim findings, and to afford
opportunities for resolving disputes so that remedies can be developed quickly
(PCC § 10381(c)).
3.02.7 FOLLOW-ON CONTRACTS PROHIBITED (PCC §10365.5)
(Rev. 04/22)
A. A person, firm, or subsidiary awarded a consulting services contract is prohibited
from submitting a bid or being awarded a contract for the services or goods
suggested in that consulting services contract except:
1. Exception: A person, firm, or subsidiary may be awarded a subcontract of
no more than 10% of the total monetary value of the consulting services
contract.
2. This prohibition applies to non-IT and IT contracts. (See PCC § 10430(b).)
3.03 INTERAGENCY AGREEMENTS
(Rev 6/17)
A. An interagency agreement (I/A) is a contract between two or more California
State agencies. (GC § 11256.)
1. I/As may not be used for contracts with campus foundations, the federal
government, local entities, JPAs, or other states.
2. For contracts with UC, CSU, and Authorized CSU Auxiliary Organizations,
see SCM I, section 3.18 to determine whether the Model Agreement
Template and model contract terms apply.
B. Special provisions apply:
1. I/As are exempt from advertising in the CSCR.
2. I/As are exempt from competitive bidding.
Note: If the entity performing the service is using subcontracts
or purchasing goods, those services and goods should be
incidental and typically should be competitively bid. See SCM
1, section 3.06. Both parties to the I/A must follow State laws
and State contracting requirements.
State Contracting Manual – Volume I 27
3. I/As may provide for advancing of funds (GC §§ 11257 through 11263 and
SAM § 8758.1).
C. Requirements are as follows:
1. An Interagency Agreement STD 213 must be used.
2. Under the State’s standard contracting process, the contract should
reference the State’s standard current interagency terms and conditions by
reference to the DGS/OLS website (e.g., GIA 610).
3. I/As shall include a provision that the charges have been or will be
computed in accordance with State requirements as noted in State
Administrative Manual (SAM) §§ 8752, and 8752.1 unless there is a legal
reason for not doing so. The reason should be noted. SAM §§ 8752 and
8752.1 are included in the State’s current standard terms and conditions
(GIA 610).
4. I/As involving the expenditure of public funds in excess of $10,000 shall
contain a provision that the agreement is subject to the examination and
audit by the State Auditor for a period of three (3) years after final payment
under the agreement (GC § 8546.7). This provision is included in the State’s
current standard terms and conditions (GIA 610).
5. DGS/OLS approval is required for I/As in accordance with SCM I, sections
4.03 and 4.04. (GC § 11256; SCM 1, chapter 4.)
D. Department of Finance Exception:
According to DOF, pursuant to Government Code section 13295.5, departments
requiring services from DOF are not required to execute formal interagency
agreements.
3.04 LEVERAGED PROCUREMENT/MASTER AGREEMENTS FOR
SERVICES AND CONSULTING SERVICES
(Rev 04/22
A. Leveraged Procurement Agreements (LPAs) are awarded by DGS. DGS has
unique statutory authority to award such agreements (PCC §§ 10290.1 and
10298). State and local agencies may contract with suppliers who are awarded
LPAs. There are various types of LPAs, including but not limited to: Master
Service Agreements (MSAs), CMAS, Cooperative Agreements, and Statewide
Contracts.
1. LPAs take advantage of the State’s buying power. Prices are often less than
those a single agency could obtain on its own. State agencies can use LPAs
in accordance with User Instructions specific to the LPA to be utilized.
2. LPAs take care of the bidding process and other administrative details.
Depending on the particular agreement, Civil Service justification (GC §
State Contracting Manual – Volume I 28
19130), and DVBE goals may or may not have been dealt with. Agencies
using LPAs should ensure these requirements are documented in their own
contract files.
3. LPAs allow an agency to obtain needed services quickly and easily,
avoiding the delay and uncertainty of the bid process. Most LPAs, especially
those with multiple vendors, have User Instructions that explain how the
LPAs are to be used. User Instructions for different LPAs have varying
requirements. It is the responsibility of the ordering/contracting agency to
follow the requirements in the User Instructions for that particular LPA and
to adhere to all other applicable legal and SCM requirements.
4. State agencies must not exceed LPA purchasing authority dollar thresholds
as identified on the agency’s Purchasing Authority Approval Letter. User
Instructions for Cooperative Agreements may indicate a lower dollar
threshold or “cap.” State agencies must not exceed a “cap” or purchasing
authority dollar thresholds.
5. LPA orders/contracts for non-IT services require DGS approval, just like
other services contracts. (See SCM I, section 4.03.) Such approvals are
done through DGS/OLS, except CMAS which is done through DGS/PD.
6. For additional information regarding LPAs, see SCM volume 2. For lists of
available LPAs, see the DGS/PD webpage.
B. Intra-agency master agreements are contracts awarded by a department for the
use of the divisions within that department. Intra-agency master agreements may
differ from agency to agency depending on program needs and statutory
authority, but all must comply with statutory and SCM contract requirements. Any
agency wishing to enter into such agreements should first discuss the agreement
with its DGS/OLS attorney.
3.05 CONTRACTS WITH LOCAL GOVERNMENT
(Rev 11/12)
When one of the contracting parties is a county, city, district, or other local public body,
the contract shall be accompanied by a copy of the resolution, order, motion, ordinance
or other similar document from the local governing body authorizing execution of the
agreement. When performance by the local government entity will be completed before
any payment by the agency, such as a room rental or a one-time event, a resolution is
not needed.
3.06 CONTRACTS WITH OTHER GOVERNMENTAL ENTITIES AND
PUBLIC UNIVERSITIES
(Rev 6/17)
A. Government entities/auxiliaries exempt from competitive bidding:
Agreements for services and consultant services do not require competitive bids
or proposals if the contract is with:
State Contracting Manual – Volume I 29
1. A California State agency, State college or State university. (See SCM I,
section to determine whether or not the Model Agreement Template and
model contract terms/UTCs apply.)
2. A state agency, state college or state university from another state
3. A local governmental entity, including those created as a Joint Powers
Authority (JPA), and including local government entities from other states.
4. An auxiliary organization of the CSU, or a California community college.
(See SCM I, section 3.18 to determine whether or not the Model
Agreement Template and model contract terms/UTCs apply.)
5. The Federal Government
6. A foundation organized to support the Board of Governors of the California
Community Colleges, or
7. An auxiliary organization of the Student Aid Commission established
under Education Code § 69522.
B. Administrative overhead fees: Agencies shall assure that all administrative
fees are reasonable considering the services being provided. Agencies may only
pay overhead charges on the first $25,000 for each subcontract. These overhead
limitations may be waived when contracts are with the Federal government and
cost recovery requirements result in higher published rates. The overhead may
not exceed the published rates.
C. No subcontracting to circumvent competitive bidding: Services to be
provided by entities listed in section A above are to be performed primarily with
the staff of the public entity or, in the case of the educational institutions,
auxiliaries or foundations, by the faculty, staff or students associated with the
particular educational institution. Agreements with entities listed in section A are
not to be used by State agencies to circumvent the State’s competitive bidding or
other contracting requirements. (PCC § 10340.)
D. Subcontracting without limitation: Services may be subcontracted without
limitation only when the subcontracting is justified and not for the purpose of
circumventing state contracting requirements and:
1. The primary agreement is a subvention agreement, (See 3.17); or
2. The total of all subcontracts does not exceed $50,000 or 25% of the total
contract, whichever is less, and that subcontracting is not done for the
purpose of circumventing competitive bidding requirements; or
3. All subcontracts are with entities listed in section A.
E. Subcontracting subject to conditions: If the total of all subcontracts exceeds
$50,000 or 25% of the total contract, whichever is less, then higher levels of
subcontracting might be permissible if the subcontract is justified and not for the
State Contracting Manual – Volume I 30
purpose of circumventing state contracting requirements, still conforms to section
3.06.B and C above, and:
1. Meets one of the categories in 3.06 D.; or
2. Prior written approval from DGS/OLS has been received; or
3. Certification by the government entity that the subcontractor has been
selected pursuant to a competitive bidding process that seeks at least three
(3) bids from responsible bidders; or
4. Approval by the agency secretary (or highest executive officer if no agency
secretary exists), explaining the reason the subcontract(s) are included in
the public entity contract rather than being separately bid and contracted for
by the department, and attesting that the selection of the subcontractor(s)
without competitive bidding was necessary to promote the
agency/department program needs and was not done for the purpose of
circumventing competitive bidding or other state contracting requirements.
F. This section is intended to limit, not increase, the amount of subcontracting if any
in public entity contracts. It is not intended to create a basis for using public entity
contracts to procure third-party services or goods for state agencies. It is
intended to allow some limited subcontracting on an exceptional basis, under
appropriate documented circumstances, where the subcontract is integral to the
work being performed under contract with the public entity and the contract work
is performed primarily by staff of the public entity.
G. If a contract submitted to DGS for approval does not identify subcontracts, but
the contract subsequently involves subcontracts, then, if the subcontracted
amount exceeds the limits in D.2 above, the contract shall be amended to identify
the subcontracts (name, staffing, portions of the work to be performed, and
budget detail) and the amendment shall be submitted to DGS for approval.
Note: When determining the amounts or percentages being sub-
contracted, do not include amounts or percentages sub-contracted
to exempt entities in 3.06 A.
3.07 LEGAL SERVICES CONTRACTS
(Rev 11/12)
A. Legal services contracts are not subject to competitive bidding or advertising.
They must be authorized by the Attorney General unless specifically exempted
by statute. In general, the law requires agencies to use the Attorney General as
their legal counsel; however, with written consent by the Attorney General,
agencies may contract for legal services. This consent must be obtained before
seeking DGS/OLS approval (GC § 11040, et seq.).
B. State agencies must provide written notification of the request to the AG to the
designated representative of State Employees Bargaining Unit 2 within five (5)
business days of the request to the AG. Those State agencies not required to
State Contracting Manual – Volume I 31
obtain the consent of the AG per GC § 11040, shall provide written notice of any
proposed contract for outside legal counsel to the designated representative of
State Employees Bargaining Unit 2 five (5) business days prior to the execution
of the contract by the State agency. Written notice shall include the following: a
copy of the complaint or other pleading, if any, that gave rise to the litigation or
matter for which a contract is being sought, or other identifying information; the
justification for the contract per GC § 19130(b); the nature of the legal service to
be performed; the estimated hourly wage to be paid under the contract; the
estimated length of the contract; the identity of the person or entity entering into
the contract with the State. This notice requirement does not apply to contracts
for expert witnesses or consultations in connection with a confidential
investigation or any confidential component of a pending or active legal action.
(GC § 11045.)
C. A copy of the contract and any amendments must be sent to the designated
representative for State Employees Bargaining Unit 2 at or before the time of
submittal to DGS/OLS for approval. (GC § 11045(c).)
D. Consent to amend the contract need not be obtained from the Attorney General if
the amendment merely alters the length of the contract or involves terms related
to the agency’s choice of, or fiscal relationship with, the outside counsel. If the
contract scope of work is to be amended, consent must be obtained from the
Attorney General.
E. Legal services contracts must contain the following provisions. The contractor
shall:
1. Agree to adhere to legal cost and billing guidelines designated by the
agency.
2. Adhere to litigation plans designated by the agency.
3. Adhere to case phasing of activities designated by the agency.
4. Submit and adhere to legal budgets as designated by the agency.
5. Maintain legal malpractice insurance in an amount not less than the amount
designated by the agency.
6. Submit to legal, bill audits and law firm audits if so requested by the agency.
The audits may be conducted by employees or designees of the agency or
by any legal cost-control provider retained by the agency for that purpose.
F. A certification effective January 1, 2003, and pursuant to Business and
Professions Code § 6072, must be included in legal services contracts of
$50,000 or more if they are to be performed within California:
“Contractor agrees to make a good faith effort to provide a minimum
number of hours of pro bono legal services during each year of the
contract equal to the lesser of 30 multiplied by the number of full time
State Contracting Manual – Volume I 32
attorneys in the firm’s offices in the State, with the number of hours
prorated on an actual day basis for any contract period of less than a full
year or 10% of its contract with the State. Failure to make a good faith
effort may be cause for non-renewal of a State contract for legal services,
and may be taken into account when determining the award of future
contracts with the State for legal services.”
Note: The contractor may be required to submit to a legal cost and
utilization review as determined by the agency (PCC § 10353.5).
3.08 EXPERT WITNESS CONTRACTS
(Rev 04/22)
A. When a consultant is retained as an expert witness for litigation purposes, the
rate paid should be consistent with the complexity and difficulty of the testimony
to be given, the going rate for similarly qualified consultants, and the
qualifications and reputation of the particular consultant. The contract should
detail exactly what the consultant is to do, e.g., provide reports, submit to
depositions, testify in court, or make other appearances.
B. Contracts solely for the purpose of obtaining expert witnesses for litigation are
exempt from advertising and bidding requirements (PCC § 10335.5).
C. Use of litigation experts pursuant to PCC § 10335.5(c)(3) must be supported by a
written justification, which demonstrates that litigation is “likely” rather than
theoretical. Other non-litigation services or services that are not considered
expert witness services (see Evidence Code section 801, et seq.) do not qualify
for the advertising and bidding exemption of PCC 10335.5.
3.09 AMENDMENTS
(Rev 04/22)
A. An amendment is any modification to a contract.
1. It should contain the same degree of specificity for changes that the original
contract contained for the same item.
a. The items of work covered by the amendment should be clearly written
as part of the contract. Example: “Scope of work Exhibit X is hereby
amended to include additional items of work as shown on Exhibit X1”
b. Paragraphs being amended should be clearly identified. Example:
“Paragraph X is hereby amended to read: The total amount of this
contract is... “
2. Amendments must be entered into before the expiration of the original
contract.
Note: Do not use such wording as, “This contract is effective
from (amendment date) to ending date.” Such terminology has
State Contracting Manual – Volume I 33
the legal effect of moving the starting date of the entire contract
up to the amendment date. The effective date of the
amendment can be specified without affecting the contract
period. Example: “The effective date of this amendment is . . .”
3. If the original contract was subject to DGS/OLS approval, the amendment is
also subject to DGS/OLS approval unless it only extends the original time
for completion of performance of the contract for a period of one year or
less. A contract may be amended only once under this exemption (PCC §
10335). (See SCM 1, chapter 4.)
4. If the original contract was not subject to DGS/OLS approval but the
amendment makes the contract as amended subject to DGS/OLS approval
because the total value of the contract exceeds applicable dollar value
thresholds for approval, the amendment must be approved by DGS/OLS.
Submit a copy of the original contract and any other amendments to
DGS/OLS when seeking approval of the amendment. (See SCM 1, chapter
4.)
5. Contracts awarded on the basis of a law requiring competitive bidding may
be modified or amended only if the contract so provides or if so authorized
by the law requiring competitive bidding (See SCM 1, chapter 5; PCC §
10335 and GC § 11010.5). Contract language authorizing an amendment
must be specific (such as an express option year at the same rates and
terms), not generic (such as merely stating generally that the parties can
amend). See SCM 5.81.
Note: In some instances, contracts not providing for
amendments may still be amended if an approved NCB is
obtained.
6. If the amendment has the effect of making the contract subject to any other
contract requirements, those requirements must be complied with, including
requirements related to lease/purchase analysis, and additional restrictions
and approvals required for the State’s indemnification or holding harmless
the contractor, addition of hazardous work, or a change in the rate of
compensation from the rate bid.
7. If the amendment when added to the original contract and any other
amendments exceeds $50,000 (or $149,999.99 if your agency has an
exemption letter), the amendment must be submitted to DGS/OLS for
approval.
8. When an amendment is subject to DGS/OLS approval, a STD 215 should
be completed, explaining the authority and the reason for the amendment.
The amendment should be transmitted to DGS/OLS in accordance with the
procedure detailed in SCM 1, chapter 4.
State Contracting Manual – Volume I 34
9. When an amendment changes or corrects contract terms by “striking” out
contract terms, both parties signing the agreement must initial each
“strikeout.”
10. When an amendment changes the contract amount, the amount changed by
the amendment must be stated, along with the new total contract amount.
Example:
“This amendment adds $1,000 to the contract. The
total amount of the contract will not exceed $(new
contract total).”
11. An amendment may not be used to circumvent the competitive bidding
process. A non-competitively bid contract justification (NCB) may be
required. (See SCM 1, chapter 5.)
12. Extension of the contract cannot be used to circumvent the termination of
availability of funds. (See GC § 16304, 2 CCR § 610, FY Budget Act.)
13. Amendments to a contract that either change the name of the vendor or
change the vendor because of a change in business status must be
accompanied by official documentation showing the change. This could
include the certified filing from the Secretary of State or the sales agreement
signed by both parties.
3.10 EMERGENCY CONTRACTS
(Rev 04/22)
Emergency is defined in PCC § 1102 as “a sudden, unexpected occurrence that poses
a clear and imminent danger, requiring immediate action to prevent or mitigate the loss
or impairment of life, health, property, or essential public services.” To qualify as an
emergency, a contract must meet all elements of this statutory definition.
Emergency contracts are exempt from advertising and competitive bidding, and do not
require an NCB.
Ordinarily, services contracts should not be commenced before formal approval by
DGS/OLS if dollar amounts require DGS/OLS approval. However, in emergency
circumstances an award may be made with the approval of the agency head or their
designee without DGS/OLS approval. Thereafter, the contract should be sent to
DGS/OLS for approval. Other required approvals may be deferred in the same manner.
(See SCM 1, section 4.07.)
3.11 FEDERALLY FUNDED CONTRACTS
(Rev 04/22)
A. All contracts, except for State construction projects that are funded in whole or in
part by the Federal government, must contain a 30-day cancellation clause and
the following provisions:
State Contracting Manual – Volume I 35
1. It is mutually understood between the parties that this contract may have
been written for the mutual benefit of both parties before ascertaining the
availability of congressional appropriation of funds to avoid program and
fiscal delays that would occur if the contract were executed after that
determination was made.
2. This contract is valid and enforceable only if sufficient funds are made
available to the State by the United States Government for the fiscal year
_____________for the purpose of this program. In addition, this contract is
subject to any additional restrictions, limitations, or conditions enacted by
the Congress or to any statute enacted by the Congress that may affect the
provisions, terms, or funding of this contract in any manner.
3. The parties mutually agree that if the Congress does not appropriate
sufficient funds for the program, this contract shall be amended to reflect
any reduction in funds.
4. The department has the option to invalidate the contract under the 30-day
cancellation clause or to amend the contract to reflect any reduction in
funds.
B. Exemptions from provisions A.1 through A.4 above may be granted by the
Department of Finance provided that the director of the State agency can certify
in writing that Federal funds are available for the term of the contract.
C. GC § 8546.4(e) provides that State agencies receiving Federal funds shall be
primarily responsible for arranging for Federally required financial and
compliance audits, and shall immediately notify the Director of Finance, the State
Auditor, and the State Controller when they are required to obtain Federally
required financial and compliance audits.
D. Agencies that may be eligible for Federal Emergency Management Agency
(FEMA) funding and/or reimbursements should consult the Governor’s Office of
Emergency Services (Cal OES) on contract provisions required by Title 2 of the
Code of Federal Regulations, Part 200.
3.12 HAZARDOUS ACTIVITIES CONTRACTS
(Rev 04/22)
Hazardous activities contracts of $10,000 or more require approval by DGS/OLS and
DGS/ORIM.
A. Hazardous activities are activities performed by the contractor that may result in
substantial risk of serious injury to persons or damage to property. Such activities
include but are not limited to the following types of work or service:
1. Major repairs or alterations, or new construction of buildings. Contracts in
excess of $50,000 are defined as major. Contracts for lesser amounts may
be determined to be hazardous depending on the risk of damage or injury.
State Contracting Manual – Volume I 36
2. Excavation, drilling, or demolition.
3. Fumigation, crop or agricultural spraying, or application of chemicals of any
type that may result in substantial risk of serious injury to persons or
damage to property.
4. Elevator maintenance.
5. Transporting of persons by any mode of transportation. Automobile liability
insurance is required in addition to public liability insurance.
6. Use or maintenance of any aircraft (fixed wing or rotor) or watercraft. Aircraft
liability insurance is required in addition to public liability insurance.
Automobile or motorcycle racing, rodeos, thrill shows, fireworks exhibitions,
or carnivals.
7. Treatment, removal, storage, or any other handling of hazardous
substances including but not limited to toxic waste, petroleum waste,
asbestos, and like substances.
B. Regardless of the contract amount, insurance is required if hazardous activities
are included in the performance of a contract. It is recommended that insurance
be required on all contracts regardless of the hazardous nature. DGS/ORIM is
available to provide additional consultation on all insurance and liability matters.
1. Contracts for hazardous activities must be submitted to DGS/ORIM for
review to ensure that the contract and the certificate of insurance comply
with the provisions of SCM 1, section 7.40 and that the insurance coverage
meets applicable standards.
2. If the contract and accompanying insurance certificate are deemed
appropriate, DGS/ORIM will certify the contract as meeting insurance
requirements. If complete contracts are submitted to DGS/ORIM,
DGS/ORIM will forward the contract to DGS/OLS for review and approval.
Otherwise an approved copy of the STD 215 will be forwarded to the
contracting agency.
C. Contracts for hazardous activities shall contain the following provisions:
1. That the contractor must furnish to the State a certificate of insurance
stating that liability insurance of not less than $1,000,000 per occurrence for
bodily injury and property damage liability combined is presently in effect for
the contractor. (Adjust the amount in the contract language if higher
insurance is required.)
2. That the contractor agrees that the bodily injury liability insurance herein
provided for shall be in effect at all times during the term of this contract. In
the event said insurance coverage expires at any time or times during the
time of this contract, the contractor agrees to provide, at least 30 days
before said expiration date, a new certificate of insurance evidencing
State Contracting Manual – Volume I 37
insurance coverage as provided for herein for not less than the remainder of
the term of the contract or for a period of not less than one year. New
certificates of insurance are subject to the approval of DGS/ORIM, and the
contractor agrees that no work or services shall be performed prior to such
approval. The State may, in addition to any other remedies it may have,
terminate this contract should contractor fail to comply with these provisions.
3.13 JOINT POWERS AUTHORITIES
(Rev 6/17)
Joint Powers Authorities (JPAs) are formed through agreement between two or more
public agencies for the purpose of jointly exercising any power common to the
contracting parties. The State may contract with a JPA for services, without being a
member of the JPA. JPAs are treated as public entities and as such, contracts with
JPAs are exempt from competitive bidding. A board resolution or other similar
document from the JPA authorizing execution of the agreement with the State is
required unless services will be completed prior to payment from the State. (See GC §
6502.)
Note: Contracts with JPAs must still meet all State contract requirements
including GC § 19130, DGS contract approval, not using JPAs as a pass-
through for other contracts (see SCM 1, section 3.06) and verification that
the JPA rates are reasonable.
3.14 WAGE AND BENEFIT REQUIREMENTS FOR SPECIFIC TYPES
OF PERSONAL SERVICES (GC §19134)
(Rev 04/22)
A. Personal services contracts of the types listed below are required by statute to
contain provisions that ensure that specified employee benefits and wage levels
are provided to the Contractor’s employees who perform the services of the
agreement (covered employees). This requirement applies to the following types
of contracts:
1. Contracts that exceed a term of 90 days and are for janitorial,
housekeeping, custodian, food service, security guard, laundry or window
cleaning services, including but not limited to, the job classes identified in
the current Memorandum of Understanding between the State and
Bargaining Unit 15; and
2. Subcontracts that include employees providing services meeting the
conditions in 3.14.A.1 above at State leased buildings of 50,000 sq. ft. or
more where the State occupies 100% of the floorspace of the facility.
B. In addition to the 85% wage requirement, the Contractor must provide the
following “Employee Benefits” to covered employees either through a purchased
plan or by self-insurance:
1. Basic health care, as identified in 28 CCR § 1300.67
State Contracting Manual – Volume I 38
2. Dental services
3. Vision services
4. Holiday Pay
5. Vacation
6. Retirement
C. The Contractor can meet the “Employee Benefits” portion of GC § 19134
requirement by providing:
1. Actual “Employee Benefits” costing not less than 85% of the State cost for
employees doing similar work; or
2. Cash Payment in lieu of providing Employee Benefits, in an amount not less
than 85% of the State of California’s cost for employees doing similar work;
or
3. A combination of Employee Benefits and Cash Payments in lieu totaling not
less than 85% of the State cost for employee benefits for a State of
California employee performing similar work.
Note: This is in addition to the required GC § 19134 wages.
D. Wage and Employee Benefit Calculations
1. By February 1 of each year, CalHR will publish a Schedule of Employee
Benefit Rates and Wages online at the CalHR web site.
2. State agencies must use this Schedule to determine the required Employee
Benefits and wages in Qualifying Contracts during the year in which they
are published.
3. For the Employee Benefits portion of GC § 19134, agencies may select for
any Qualifying Contract either the Detailed Rates or the Blended Rate
appearing on the most recent Schedule.
4. Based on the rates published by CalHR, the Department of Finance shall
issue an annual Budget Letter providing State agencies with budget
instructions regarding reimbursements to State agencies for the costs of GC
§ 19134 payments.
E. Solicitations for Qualifying Contracts shall include provisions requiring
compliance with GC § 19134, including the following:
1. Bidders shall include in their bids provision for Employee Benefits and/or
Cash Payments to all Covered Employees as well as the 85% wage
requirement. Contracting agencies shall provide to bidders the State
employee benefit cost amounts and 85% wage amounts to be used in
State Contracting Manual – Volume I 39
preparing the bids (based on the Schedule of Employee Benefits Rates and
Wages published by CalHR). Rate changes for benefits or wages occurring
subsequent to issuance of a solicitation, but prior to the bid due date, shall
be included in an addendum to the solicitation.
2. Solicitations for Qualifying Contracts and Resulting Contracts shall contain a
provision that the contractor must submit monthly reports to the contracting
agency documenting compliance with GC § 19134 as detailed in section
3.14.G below.
3. Any Employee Benefit or wage rate changes (as published by CalHR) shall
be given effect by contract amendment. If the contract term is less than one
year, the Employee Benefit rates and wages in effect at the time of the bid
due date shall apply for the entire contract term.
4. A provision allowing for adjusting Employee Benefits and/or Cash Payment
amounts in the event of an amendment to the Schedule of Employee
Benefit Rates published by CalHR during the term of the contact.
5. Notice that the contract is subject to audit for compliance with the provisions
of GC § 19134.
6. Notice that failure to comply with provisions of GC 19134 is a material
breach, which may constitute grounds for immediate termination by the
State.
F. Bids for Qualifying Contracts shall include, in addition to all other requirements
specified in the solicitation:
1. The method the bidder has chosen to fulfill the Employee Benefit
component of GC § 19134, either by (a) providing Employee Benefits, or
(b) providing Cash Payments, or (c) providing a combination of Employee
Benefits and Cash Payments.
2. The total cost of Employee Benefits and/or Cash Payments based on the
CalHR Rate Schedule in effect at the time the bids are due. For purposes of
bidding only, the contracting agency may instruct the bidder to assume that
the rates in effect at the time bids are due will be effective through the life of
the contract, notwithstanding that the rates are in fact subject to change.
3. Before execution of the contract, employers choosing to offer actual
Employee Benefits instead of Cash Payment in lieu shall provide the names
of insurance providers and terms of the coverage.
G. Reporting and Monthly Statements: Contractors shall provide monthly statements
to the contracting agency during the term of a Qualifying Contract. These
statements shall include:
1. The number of Covered Employees who received GC § 19134 Employee
Benefits and wages in the preceding month;
State Contracting Manual – Volume I 40
2. The name of each Covered Employee who received GC § 19134 Employee
Benefits and wages in the preceding month;
3. The number of hours each Covered Employee worked on the Qualifying
Contract in the preceding month;
4. The amount paid to each Covered Employee for Employee Benefits and/or
Cash Payments in the preceding month;
5. The hourly wage paid to each Covered Employee;
6. The total monthly cost of Employee Benefits and wages paid to each
Covered Employee in the preceding month, excluding any administrative
cost
H. Audits: Qualifying Contracts and documents relating to implementing GC §
19134 may be audited by the contracting State agency, the Department of
General Services, and/or the Bureau of State Audits.
I. Breach: GC § 19134(e) states that failure to provide benefits or cash-in-lieu
payments to employees constitutes a “material breach” for any contract for
personal services covered by that section. A breach may result in immediate
contract termination by the State of California.
3.14.1 JANITORIAL/BUILDING MAINTENANCE CONTRACTS: ADDITIONAL
REQUIREMENTS
Effective for contracts entered into after January 1, 2002: Any contractor or sub-
contractor providing janitorial and/or building maintenance services in California, that is
awarded a contract to provide such services at a new site(s) must retain for 60 days, the
current employees employed at that site(s) by the previous contractor/sub-contractor.
The awarding authority shall obtain from the previous contractor employee information
and provide the same information to the new contractor so the new contractor can make
the necessary notifications required by Labor Code § 1060, et seq.
3.15 CONTRACTS WITH NONPROFIT ORGANIZATIONS
(Rev 11/12)
Contracts may be made between the State and a private entity that is a nonprofit
corporation. (Int. Rev. Code § 501(c).) Bidding requirements would apply unless exempt
by statute or the contract is for subvention or local assistance.
3.16 REVENUE AGREEMENTS AND CONCESSION CONTRACTS
(Rev 11/12)
Contracts in which the State receives income. Examples include, but are not necessarily
limited to:
State Contracting Manual – Volume I 41
A. Contracts between the State and private or public entity, in which the State is
performing services and receiving payment (sometimes also referred to as a
reimbursement agreement).
B. Contracts that involve income-generating activities, where the State receives a
certain percentage of the income, rebate, or other payment from the vendor,
rather than paying the vendor for services, such as: recycling agreements, and
State Parks concession contracts. Income-generating contracts typically must be
competitively bid (or an NCB obtained) and are subject to other standard contract
requirements and approvals.
Note: This section does not create authority for performing revenue, reimbursement or
concession contracts, it merely describes types that may exist. Agencies typically must
have statutory authority to support performance of unique agreements such as these.
3.17 SUBVENTION AND LOCAL ASSISTANCE CONTRACTS
(Rev 11/12)
A. Those agreements providing assistance to local governments and aid to the
public directly or through an intermediary, such as a nonprofit corporation
organized for that purpose. The agency’s budget would have to allow for this
assistance.
B. Because subvention aid or local assistance contracts are generally not awarded
to a low bidder through competitive bidding, these contracts should contain
adequate control language and should address the necessity and
reasonableness of the cost in the contract submittal.
3.17.1 SUBVENTION AID OR LOCAL ASSISTANCE CONTRACT TRANSMITTAL
(Rev 11/12)
A. The Contract Transmittal form, STD 215, for subvention aid cost-reimbursement
types of contracts must:
1. Advise whether the contracting agency, with the advice of the State
Personnel Board, has determined that the reimbursable salaries do not
exceed salaries payable to State personnel for similar classifications; and
2. Identify the classifications and rates involved if the reimbursable salaries
exceed State rates, and state the reason for such higher rates, and how the
agency’s interests are served by the contract.
B. The transmittal should detail:
1. The factual basis for the contracting agency’s determination that the other
reimbursable costs and any fixed unit rates are reasonable in amount;
2. The basis for selection of the particular contractor; and
State Contracting Manual – Volume I 42
3. The contracting agency’s compliance with any special statutory
requirements applicable to the particular program.
3.17.2 SUBVENTION AID OR LOCAL ASSISTANCE CONTRACT FISCAL
CONTROL PROVISIONS
A. Payment provisions in subvention aid contracts should be on a cost-
reimbursement basis with a ceiling specifying the maximum dollar amount
payable by the agency. Contracts must set forth in detail the reimbursable items,
unit rates, and extended total amounts for each line item. Among other matters,
the following information should be documented:
1. Identify and justify direct costs and overhead costs, including employee
fringe benefits;
2. Monthly, weekly or hourly rates as appropriate and personnel classifications
should be specified, together with the percentage of personnel time to be
charged to the contract, when salaries and wages are a reimbursable item;
3. Rental reimbursement items should specify the unit rate, such as the rate
per square foot; and
4. If travel is to be reimbursable, the contract must specify that the rates of
reimbursement for necessary traveling expenses and per diem shall be set
in accordance with the rates of CalHR for comparable classes and that no
travel outside the State of California shall be reimbursed unless prior written
authorization is obtained from the agency.
B. Subvention aid contracts must specifically reserve title to the agency for State-
purchased or State-financed property, which is not fully consumed in the
performance of the contract, even when the property is purchased in whole or in
part by Federally supplied funds (absent a Federal requirement for transfer of
title).
1. The contract must include a detailed inventory of any State-furnished
property, and the agency must comply with the policies and procedures
regarding State-owned property accounting set forth in the State
Administrative Manual § 8640, et seq. Provisions must be included
regarding the usage, care, maintenance, protection, and return to the
agency of the property.
2. If purchase of equipment is a reimbursable item, the equipment to be
purchased should be specified. Automotive equipment should be purchased
by the DGS/Procurement Division. The contracting State agency should
arrange for purchase of all other major equipment items by the
DGS/Procurement Division, as well as other items when economies can be
achieved by so doing, with the cost to be deducted from the amount payable
to the contractor.
State Contracting Manual – Volume I 43
C. Payments are not permitted for construction, renovation, alteration, improvement,
or repair of privately owned property when such work would enhance the value of
the property to the benefit of the owner.
D. The contract should require prior authorization in writing by the agency before the
contractor will be reimbursed for any purchase order or subcontract exceeding
$2,500 for any articles, supplies, equipment, or services. The contract should
also require the contractor to provide in its request for authorization all particulars
necessary for evaluation of the necessity or desirability of incurring such cost and
the reasonableness of the price or cost. Three competitive quotations should be
submitted or adequate justification provided for the absence of bidding.
E. The contract should reserve prior agency approval controls over the location,
costs, dates, agenda, instructors, instructional materials, and attendees at any
reimbursable training seminar, workshop or conference and over any
reimbursable publicity or educational materials to be made available for
distribution. The contractor should be required to acknowledge the support of the
agency when publicizing the work under the contract in any media.
F. The contract must require the contractor to maintain books, records, documents,
and other evidence pertaining to the reimbursable costs and any matching costs
and expenses and to hold them available for audit and inspection by the State for
three years.
3.18 UC, CSU, AND AUTHORIZED CSU AUXILIARY ORGANIZATIONS
(Rev 04/22)
A. Agreements with the Regents of the University of California (UC), the Trustees of
the California State University (CSU), and with Authorized CSU Auxiliary
Organizations do not require advertising or bidding when the agency directly
contracts with the UC, CSU, or Authorized CSU Auxiliary Organization to do the
work utilizing UC, CSU, or Authorized CSU Auxiliary Organization faculty, staff
and/or students. (See SCM I, section 3.06.)
B. Research, training, and service or grant agreements with UC, CSU, and
Authorized CSU Auxiliary Organizations should use the Model Agreement
Template and model contract terms (UTC-220 or its successor), unless both
contracting parties mutually determine that a specified standard contract
provision is inappropriate or inadequate for a specified contract.
1. DGS maintains the UTCs, a model agreement template, and related
information on the DGS/OLS website.
2. The UTCs were established pursuant to Education Code section 67325 et
seq.
C. CSU maintains and updates a list of Authorized CSU Auxiliary Organizations.
The list is available on the DGS/OLS website. Agreements with an Authorized
CSU Auxiliary Organization shall incorporate the alternate provision, “4. Liability,”
also available on the DGS/OLS website.
State Contracting Manual – Volume I 44
D. If the agreement is not for research, training or services, or has been exempted
from the Model Agreement Template and model terms pursuant to Education
Code section 67327(d), then the agreement can be treated as an Interagency
Agreement if with UC or CSU (see SCM I, section 3.03), or as an agreement with
another government entity/public university if with an Authorized CSU Auxiliary
Organization (see SCM I, section 3.06).
Note: These contracts and agreements cannot be used to circumvent the State’s
competitive bidding requirements. Subcontracting and purchases under these contracts
and agreements should be competitively bid in a manner similar to that required by the
State. (See also SCM 1, section 3.06.)
3.19 IT AND TELECOMMUNICATIONS CONTRACTS
(Rev 04/22)
See SCM Volume 2 and the California Department of Technology.
3.20 CONVENTION AND CONFERENCE FACILITIES CONTRACTS
(Rev 11/12)
Services for conventions and conference facilities, including room rentals, do not have
to be competitively bid if under $250,000.00. However, they must generally follow the
requirements of other service es contracts.
The bidding exemption for facilities does not cover other types of services that may be
needed for a convention or conference (e.g. training, consulting, etc.). If other types of
services are needed, agencies must contract for those following standard contract
requirements (e.g. GC § 19130, bidding, etc.).
3.21 PRINTING SERVICES CONTRACTS
(Rev 04/22)
Government Code section 14850 states that all state printing shall be done in the Office
of State Printing, also known as the Office of State Publishing. For additional
information about these requirements and processes, refer to State Administrative
Manual section 2800, et seq.
As contracts awarded by State agencies for printing work are personal services within
the meaning of GC section 19130, State agencies must comply with GC section 19130
in contracting out for printing services. Contracting agencies should also be aware of
MOU provisions which require advance notice to potentially affected unions. See, e.g.,
Bargaining Unit 1 MOU section 14.8.C which requires that departments provide a copy
of an IFB or RFP to a designated union representative at the time of posting, if the
proposed contract calls for services provided by that bargaining unit. See also, GC §
19132; SCM 7.05.D.
State Contracting Manual – Volume I 45
3.22 CONTRACTING FOR STUDENTS
(Rev 6/17)
A. When contracting for students, GC section 19133 requires that:
1. Work must be related to the student’s field of study.
2. Students cannot accrue civil service status.
3. Students cannot be employed for more than 194 days in the 365 days
beginning with the day of initial employment.
4. Use of students cannot cause displacement of civil service employees.
B. GC section 19133 provides:
“Any State agency may enter into an agreement with any public or private
institution of higher education in California, nonprofit campus foundation, or State
higher education foundation to provide part-time employment to students
attending a public or private institution of higher education that contracts with the
State agency, or to students attending a public or private institution which is
affiliated with a nonprofit campus foundation, or a State higher education
foundation that contracts with a State agency, in work related to the field of study
of the student.”
C. Contracts must contain language describing the work the students are to
perform, as well as the field of study which is related to the work the students are
to perform.
D. All contracts must specify by name which educational institutions can provide
students – e.g., if the contract is with a campus foundation, only educational
institutions which have an executed and approved letter of affiliation with the
foundation contractor.
E. Contracts issued for student assistants per GC section 19133 are not subject to
competitive bid requirements.
F. Due to an exception having been granted, contracts entered into with University
Enterprises for student assistants under GC section 19133 should use the GTC
standard terms instead of the UTC model terms.
3.23 MEMBERSHIPS
(Rev 11/12)
Memberships in professional organizations for represented employees are governed by
the 21 collective bargaining agreements and payment is on a reimbursement basis
(through a travel claim). Memberships in professional organizations for non-represented
employees are governed by CalHR rules and payment is on a reimbursement basis
(through a travel claim). These memberships, for both represented and non-represented
State Contracting Manual – Volume I 46
employees, are not to be purchased through the State’s procurement process (that is a
STD 65).
Departmental memberships in professional organizations are considered a service and
therefore, must be procured via a service order or STD 213, depending on the dollar
amount. Departmental memberships are not to be purchased through DGS/PD’s
procurement process (that is, via STD 65).
3.24 FISCAL INTERMEDIARIES
(Rev 11/12)
State agencies must follow the guidelines provided in SAM 8002.1 whenever planning
the use of other entities to receive money or make disbursements on behalf of the
State. SAM § 8002.1 requires obtaining Department of Finance approval for use of a
fiscal agent.
3.25 COMMERCIAL OFFICE MOVING SERVICES
(Rev 11/12)
Contracts exceeding $2,500 with a carrier for commercial office moving services must
conform to the requirements contained in SAM § 3810 which provide for such contracts
to be with a carrier whose drivers and supporting personnel are operating under current
collective bargaining agreements or who are maintaining the prevailing wages,
standards, and conditions of employment for its driver and supporting personnel. (GC §
14920.) Agencies must include such requirements in Invitations for Bids and contracts.
Agencies may also wish to check for the availability of such services through an LPA.
3.26 ELEVATOR MAINTENANCE CONTRACTS
(Rev 6/17)
Elevator maintenance contracts are usually considered hazardous (see SCM 3.12.). It is
recommended contracts for elevator maintenance be for a term of five years and that
they contain a provision authorizing the State to terminate on 30 days’ written notice.
3.27 CONTRACTING WITH EXPATRIATE CORPORATIONS
(New 11/12)
California PCC section 10286.1 generally provides that a State agency may not enter
into any contract with an expatriate corporation (as defined by code) or its subsidiaries.
However, the chief executive officer (CEO) of a State agency or his or her designee
may waive the prohibition against contracting with such an entity, if the CEO has made
a written finding that the contract is necessary to meet a compelling public interest.
“Compelling public interest” includes, but is not limited to, ensuring the provision of
essential services, ensuring the public health and safety or an emergency as defined in
PCC section 1102. (PCC § 10286.1(c).)
If your agency determines that a contract with an expatriate corporation or one of its
subsidiaries is necessary, submit a copy of the PCC section 10286.1(c) waiver when
submitting the contract to DGS/OLS for approval.
State Contracting Manual – Volume I 47
3.28 LOSS LEADER
(Rev04/22)
Public Contract Code section 10344(e) requires that RFPs for services contracts
involving furnishing of equipment, materials, or supplies must contain the following
statement:
“It is unlawful for any person engaged in business within this state to sell or use
any article or product as a “loss leader” as defined in Section 17030 of the
Business and Professions Code.”
3.29 DARFUR CONTRACTING ACT
(New 11/12)
PCC sections 10475 et seq., the Darfur Contracting Act of 2008, establish restrictions
against contracting with vendors doing certain types of business in Sudan. The Act sets
forth criteria to determine if a vendor is a “scrutinized company” and therefore ineligible
to bid on or submit a proposal for State contracts. When a company submitting a bid or
proposal has or within the previous three years has had business activities or other
operations outside the United States, they must execute a certification stating they are
not a scrutinized company as defined, or demonstrate they obtained permission under
the statute. (PCC §§ 10478, 10477(b).) The Act includes penalties for false
certifications. (PCC § 10479.)
3.30 IRAN CONTRACTING ACT
(New 11/12)
PCC sections 2202 et seq., the Iran Contracting Act of 2010, establish restrictions
against contracting with vendors that provide specified levels of goods or services or
other investment activities, as defined, in the energy sector of Iran. The Act requires that
DGS post a list of persons determined to fall within the Act’s prohibitions, and to update
the list every 180 days. Agencies receiving bids or proposals, or entering or renewing
contracts valued at $1 million or more must obtain a certification from the vendor
certifying they are not on the list and are not a financial institution extending credit to an
ineligible vendor on the list. Agencies should independently check the DGS list,
available on DGS/PD’s website, to verify the certification. (PCC § 2204.) The Act
includes certain exceptions. (PCC § 2203(c).)
3.31 THE CONGO – SECURITIES EXCHANGE ACT
(New 11/12)
PCC § 10490 establishes restrictions on contracting for certain goods and services
relating to compliance with the Securities Exchange Act of 1934. It is anticipated the
federal government will post a list of scrutinized companies that will form the basis for
this contracting ban. DGS will issue further instructions for compliance with this ban
once the federal list is available.
State Contracting Manual – Volume I 48
3.32 TAX DELINQUENCIES CONTRACT BAN
(New 11/12)
Public Contract Code section 10295.4 provides that a state agency shall not enter into
any contract for goods or services with a contractor whose name appears on either list
of the 500 largest tax delinquencies pursuant to Section 7063 or 19195 of the Revenue
and Taxation Code. This prohibition applies to contracts executed on or after July 1,
2012. FTB and BOE will post and periodically update lists of the 500 largest tax
delinquencies on their websites as required by law. Starting July 1, 2012, prior to
executing contracts, state agencies must check the FTB and BOE lists to ensure the
proposed awardee/vendor is not on either list.
3.33 CIVIL RIGHTS CERTIFICATIONS (PCC § 2010)
(New 6/17)
Public Contract Code section 2010 requires potential contractors on contracts of
$100,000 or more to certify that they are in compliance with various civil rights laws.
See SCM section 7.65 for further information.
3.34 MANDATORY ORGANIC WASTE RECYCLING
(New 6/17)
A. Pursuant to Public Resources Code section 42649.8 et seq. (AB 1826), as of
April 1, 2016, any business (including a public entity) that produces 8 cubic yards
of organic waste a week is required to arrange for organic waste recycling.
“Organic waste” means food waste, green waste, landscape and pruning waste,
nonhazardous wood waste, and food-soiled paper waste that is mixed in with
food waste. (PRC 42649.8(d).)
1. The threshold drops to 4 cubic yards of organic waste produced weekly as
of January 1, 2017.
2. The threshold changes to 4 cubic yards of commercial solid waste produced
weekly as of January 1, 2019.
3. Subsequently, if the Department of Resources Recycling and Recovery
(CalRecycle) determines that statewide disposal of organic waste has not
decreased by half, the threshold would decrease to 2 cubic yards of
commercial solid waste produced weekly as of January 1, 2020.
B. According to CalRecycle, state agencies are businesses that must abide by the
requirements of this law. The law provides businesses a choice of actions they
may take to comply. (See PRC § 42649.81(b).)
C. State agencies that enter contracts for services, such as gardening or
landscaping services that generate organic waste, must require compliance with
the requirements of this Act, and therefore State agencies should include in such
contracts provisions necessary to help ensure compliance. (See PRC §
42649.81(e).)
State Contracting Manual – Volume I 49
4. STANDARD CONTRACT FORMAT AND DGS CONTRACT
APPROVAL
4.00 INTRODUCTION
(Rev 1/14)
This chapter presents the policies and procedures related to standard contract format
and obtaining contract approval from DGS/OLS. Exemptions from such approval are
also covered.
4.01 TABLE OF CONTENTS
(Rev 6/17)
DESCRIPTION SECTION
Introduction 4.00
Table of Contents 4.01
Responsibility for Contract Approval 4.02
Contracts Requiring DGS/OLS Approval 4.03
Contracts Not Requiring DGS/OLS Approval 4.04
Exemption Letters 4.05
Certain State and Federally Funded Grants Exempt from
Approval by DGS/OLS
4.06
Approval of Emergency Contracts 4.07
Standard Contract Format and Obtaining Approval from
DGS/OLS
4.08
Approval and Commencement of Work 4.09
Approval of Amendments 4.10
Other Required Approvals 4.11
State Contract and Procurement Registration System 4.12
State Contracting Manual – Volume I 50
4.02 RESPONSIBILITY FOR CONTRACT APPROVAL
(Rev 11/12)
A. Each State agency is responsible for making sure that its contracts comply with
applicable legal requirements and are based on sound business practices.
DGS/OLS provides the final approval if required by law.
B. In some instances additional approvals may be needed, such as those from the
Attorney General, State Personnel Board, State Fire Marshal, DGS/ORIM,
DGS/OSP, or other DGS offices. (See SCM I, section 4.11.)
C. Contract approval by DGS serves to assist State agencies by:
1. Ensuring effective compliance with applicable laws and policies.
2. Conserving the fiscal interests of the State and preventing improvident acts.
3. Applying contract knowledge and legal expertise prior to final approval.
D. Remedies and Penalties:
1. PCC § 10420 - Every contract or other transaction entered into in violation
of Chapter 2 of the PCC is void, unless the violation is technical or
nonsubstantive.
2. PCC § 10421 - Civil action may be brought in Superior Court to determine a
violation of Chapter 2 of the PCC. If a violation is found the contract shall be
void.
3. PCC §§ 10422 - 23 - Any State employee or person contracting with the
State who corruptly performs an official act or corruptly permits the violation
of any contract made under Chapter 2 of the PCC is guilty of a felony.
4. PCC §10424 - provides that a violation of PCC §§ 10422 or 10423 may
make the employee or the person contracting with the State liable to the
State for double the amount the State may have lost.
5. PCC § 10425 - Willful violation of any other provision of Chapter 2 of the
Public Contract Code shall constitute a misdemeanor.
4.03 CONTRACTS REQUIRING DGS/OLS APPROVAL
(Rev 04/22)
DGS/OLS has statutory authority under several sources to approve contracts. PCC §§
10295, 10297, 10335 and GC § 11256 are the primary legal authority for DGS/OLS’
review and approval of contracts. GC § 14615 is the legal authority for the supervision
of the State’s financial and business policies, and GC § 14616 is the legal authority for
some exemptions from DGS/OLS approval of contracts.
State Contracting Manual – Volume I 51
As a general rule, DGS/OLS approval is required on all services contracts over $50,000;
or at $150,000 and above if an agency has applied for and received this higher
exemption level (see SCM 1, section 4.05). The approval requirement applies to all non-
IT services contracts, including but not limited to consulting services and interagency
agreements, subject to express exemptions identified in section 4.04 below.
Individual agencies may have specific statutes affecting their particular contracting
programs. Some specific types of contracts which require DGS/OLS review/approval,
regardless of dollar amount, include but are not limited to the following:
1. Contracts that limit the contractor’s liabilities or require the State to
indemnify or to hold the contractor harmless;
2. Contracts that require the State to assume liabilities beyond the State’s
control;
3. Contracts that provide for advance payment for services or rental;
4. Any provision creating a contingent liability against the State (e.g., those
vendors’ printed rental contracts obligating the user of rented equipment to
serious contingent liabilities);
5. Contracts that seek to modify the State’s standard terms and conditions
(GTCs, CCCs, and/or GIAs).
Contracts involving a hazardous activity of $10,000 or more require DGS/OLS and
DGS/ORIM review and approval. (See SCM 1, section 3.12.)
4.04 CONTRACTS NOT REQUIRING DGS/OLS APPROVAL
(Rev 04/22)
A. The law requires all non-IT services contracts to be approved by DGS/OLS
unless the contract is exempt from approval. (PCC § 10295.) See section 4.03
above.
A services contract is exempt from DGS/OLS approval if:
1. It is specifically exempt from approval by statute (See, e.g., PCC §§
10295(c) and 10430); or
2. It is $50,000 or less (subject to exceptions noted in section 4.03 above).
(GC §§ 11256, 14616); or
3. It has been exempted from approval by an exemption letter issued by
DGS/OLS (PCC §10351); or
4. It is a federally or State-funded grant that meets the standards described by
the Attorney General. (See 58 Ops.Cal.Atty.Gen. 586 (1975); 63
Ops.Cal.Atty.Gen. 290 (1980); 74 Ops.Cal.Atty.Gen. 10 (1991); see also
SCM § 4.06.) Note: This exemption applies when the State is issuing a
State Contracting Manual – Volume I 52
grant, it does not exempt all agreements merely because they are paid for
with federal and/or other grant funds.
5. It is an interagency agreement over $50,000 and less than $1,000,000 that
uses the current GIAs (including SAM 8752 and 8752.1 cost provisions)
without modification and that has no direct or indirect subcontracting (GC §
11256), subject also to the following:
a. Note: This exemption does not apply when contracting with CSU, UC,
or any other state agency exempt from Division 2, Part 2, Chapter 2 of
the Public Contract Code (PCC 10290 et seq.), all of which remain at
the contracting agency’s standard $50,000 or $150,000 exemption
level;
b. Agencies shall not use I/As to circumvent any State law or contracting
requirements;
c. Agencies shall not use I/As to obtain any third-party IT goods or
services nor any third-party non-IT goods or services;
d. DGS reserves the right to audit exempt contracts at the contracting
agency’s expense;
e. If DGS determines an agency is failing to abide by the conditions of
this exemption, DGS reserves the right to revoke the exemption such
that that agency would then be required to submit to DGS for approval
all I/As of $5,000 or more (or such other amount as DGS establishes
when revoking or reducing this exemption);
Although these exempt contracts do not require DGS/OLS approval,
review/approval services are available on request for any contract, regardless of
value.
B. If an exempt contract is amended, the amendment may trigger the DGS/OLS
approval requirement for the same reasons noted in 4.03 and 4.04 above (e.g.
increase in dollar amount, modifying GIAs, adding subcontracts, etc.).
C. DGS reserves the right to audit agencies regarding the above-referenced
exemptions.
4.05 EXEMPTION LETTERS
(Rev 6/17)
DGS may exempt contracts up to $150,000 from review if certain conditions are met.
Such exemptions are provided through exemption letters.
State Contracting Manual – Volume I 53
Table 4.1
Factor Authority General Considerations
All Services,
Consultant
Services,
and
Interagency
Agreements
PCC § 10351
(services and
consultant services)
GC § 11256 (state
agencies)
• Under $150,000
• Agency officer responsible and
directly accountable for
contracting program
• Written policies and procedures
• Management system
• Contract training program
• Audit every two (2) years
• Reporting procedures
• Follow any limitations identified
in the exemption letter
Application for an exemption letter or renewal should be made by written request to the
Director of DGS.
4.06 CERTAIN STATE AND FEDERALLY FUNDED GRANTS EXEMPT
FROM APPROVAL BY DGS/OLS
(Rev and renumbered 11/12)
The Attorney General (AG) has opined that certain federally and State-funded grants
are not subject to approval by DGS/OLS. The AG opinions are based primarily on the
nature of a grant compared with a services contract as described in the law. (See 58
Ops.Cal.Atty.Gen 586 (1974) and 63 Ops.Cal.Atty.Gen. 290 (1980).)
The AG opinions present the following factors as relevant to whether a contract qualifies
as an exempt grant:
A. The grant must fall under specific statutory authority. Without specific statutory
authority, a grant is an illegal gift of public funds.
B. The grant must not benefit the State. Even if the award was made pursuant to an
authorized grant program, it is not exempt from approval (unless exempted by
specific statute). Common benefits which would indicate a contract rather than a
grant include:
1. Services are provided to the State.
2. The State obtains title to equipment, copyrights, or patents.
3. The State is relieved from a statutory obligation to perform the services
(usually services to the public).
State Contracting Manual – Volume I 54
C. Performance under the grant must not be controlled by the State. The grant must
fund the grantee’s program, not the State’s program.
Agencies shall not circumvent State contracting requirements by labeling contracts as
“grants.” In addition, an agreement is not a grant simply because it is paid for with
federal and/or grant funds, rather, the above additional factors must be considered for
proper characterization of the agreement.
4.07 APPROVAL OF EMERGENCY CONTRACTS
(Rev and renumbered 11/12)
“Emergency” is defined in PCC § 1102 as “a sudden, unexpected occurrence that poses
a clear and imminent danger, requiring immediate action to prevent or mitigate the loss
or impairment of life, health, property, or essential public services.”
The law recognizes exceptions from competitive bidding in emergencies (PCC §§
10340 (b)(1) and 10371 (d)), but no exception is provided from contract approval. The
basic policy is to respond to the emergency as circumstances demand and then to
obtain the formal approval(s) as soon as practicable. However, before the start of the
work, the contract must be verbally authorized by someone with authority at the agency
to initiate a contract in such situations. If there is any question about whether the
circumstances qualify as an emergency, DGS/OLS should be contacted as soon as
possible. The contract will be processed on an expedited basis as discussed in SCM 1,
section 4.08 C.
4.08 STANDARD CONTRACT FORMAT AND OBTAINING APPROVAL
FROM DGS/OLS
(Rev 04/22)
Below are general guidelines regarding the standard format for State contracts (which
applies for agreements with third parties and for interagency agreements) and what
documents to include when submitting a contract to DGS/OLS for approval.
A. Required Supporting Documents
1. The Contract
Under the State’s standardized contract format, the contract contains:
a. STD 213: Contract page 1, which should identify the following
attachments and number of pages:
b. Exhibit A: Scope of Work
c. Exhibit B: Budget Provisions
1) Include sufficient budget detail to describe expenditures and
justify the costs of the contract;
2) Include budget contingency language. Sample language:
State Contracting Manual – Volume I 55
Budget Contingency Clause
It is mutually agreed that if the Budget Act of the current year
and/or any subsequent years covered under this Agreement does
not appropriate sufficient funds for the program, this Agreement
shall be of no further force and effect. In this event, the State shall
have no liability to pay any funds whatsoever to Contractor or to
furnish any other considerations under this Agreement and
Contractor shall not be obligated to perform any provisions of this
Agreement.
If funding for any fiscal year is reduced or deleted by the Budget
Act for purposes of this program, the State shall have the option
to either cancel this Agreement with no liability occurring to the
State, or offer an agreement amendment to Contractor to reflect
the reduced amount.
d. Exhibit C: General Terms and Conditions.
1) Reference the current version of the State’s standard terms and
conditions (e.g., “GTC 04/2017” or subsequent version; use the
GIAs for I/As; use the UTCs for agreements with UC, CSU and
Approved CSU Auxiliary Organizations.)
2) The GTCs (or GIAs or UTCs as applicable) should be
incorporated in the contract by reference to the DGS/OLS website
location.
3) Some GTCs are mandated by statute and some are policy based.
4) The GTCs incorporate by reference certain mandated contractor
certification clauses (“CCC’s”). A copy of the current CCC’s must
be separately executed by the contractor and retained in the
contract file.
e. Exhibit D [optional]: Typically a department’s own special terms and
conditions.
f. Other Exhibits/Attachments (optional, as needed).
2. Contract Transmittal form, STD 215. This form must be fully completed and
must contain an explanation sufficient to afford a basis for approval,
including:
a. The purpose and necessity or desirability of the contract or interagency
agreement;
b. The reasonableness of the cost of the services;
c. The legal authority for the contract or amendment;
State Contracting Manual – Volume I 56
d. Funding information and accounting officer signature;
e. Government Code section 19130 subsection with attached signed
justification containing specific and detailed facts as required by Tit. 2
CCR § 547.60 - 547.60.1, and certification of compliance with union
notice requirements; and
f. Any other relevant information necessary to understand the proposed
transaction.
g. The form STD 215 shall also contain the name, telephone number, and
email address of the contact person in case questions arise or
additional information is needed by DGS/OLS reviewing attorney. The
contact person is the staff member who regularly deals with DGS/OLS
on contract matters. A copy of the STD 215 will be retained on file at
DGS/OLS.
h. Within ten working days of an award, an agency must report the award
of each contract over $5,000 to DFEH, including contracts with the
University of California. Information required is specified in 2 CCR §
11114. (This requirement does not apply to contracts with other
California State agencies or with the Federal government.) Use STD
16 for reporting purposes, submitted to
CompliancePrograms@dfeh.ca.gov. Check the box on the reverse
side of the STD 215 that this requirement has been complied with.
3. Bidding documents (i.e. IFB/RFP). If the contract was awarded
by competitive bid, submit a copy of the IFB/RFP and a list of
bids or similar evaluation summary. During review, DGS/OLS
may ask for copies of bids/proposals and other evaluation
materials as needed. If fewer than three (3) bids or proposals
were received, document the awarding agency's efforts to
obtain at least three (3) competitive bids. (See SCM I, section
5.70.B.)
4. The California State Contracts Register (“CSCR”) ad. The ad
as well as all other ads used to advertise the contract must
accompany the contract to final approval. A printout of the
electronic version of the CSCR ad or a copy of the confirmation
printout is sufficient substantiation of that ad. Ad
documentation should demonstrate ad(s) were posted for at
least the minimum number of days required by law.
5. Documentation of other required approvals. (See, e.g. SCM 1, section
4.11.)
6. Late justification: If the contract is submitted to DGS/OLS after the start date
of the contract, agencies must include a written late justification. Depending
on the degree of lateness, DGS/OLS may ask for additional justification
information and/or sign-offs from the agency.
State Contracting Manual – Volume I 57
B. Electronic Submittals
1.
2021 NOTE: Due to extraordinary circumstances arising from the Covid-19
pandemic, in early 2020 DGS/OLS shifted from paper submittals to
electronic. DGS/OLS issued instructions to contracting agencies regarding
the content and format for electronic submittals. Please contact DGS/OLS
for a copy of those instructions. Until further notice, agencies should submit
only those documents identified in the instructions, unless otherwise
requested. Electronic submittals are currently sent to:
DGSOLSContact@dgs.ca.gov.
2.
DGS/OLS anticipates implementing a new ServiceNow electronic submittal
platform in 2022. DGS/OLS will provide further guidance as that new
submittal system is implemented. Once that system is implemented,
agencies should submit the contract and supporting documents identified in
section 4.80.A above.
3.
As part of the new process commenced in 2020 and going forward,
Agencies are responsible for submitting required documentation to the State
Controller’s Office.
4. After approval by DGS/OLS, an approved version of the STD 213 will be
provided to the contracting agency.
C. Contract Approval Time
DGS strives to complete the review and approval process in ten working days or
less.
Note: Expedited review is available in exceptional circumstances on request.
D. In addition to the above requirements, DGS/OLS asks individuals involved in the
preparation and transmittal of documents to DGS/OLS to consider the following:
1. Ensure that all information on the STD 215 is complete and specifically
relates to the contract being submitted.
2. When completing the forms, review by a DGS/OLS attorney is made easier
and more efficient if the form can be easily read. Reducing the type font in
order to squeeze in an explanation is not recommended. If your narrative
requires more space, enter “see attached” and include additional pages as
needed. This way, the length of your explanation is not limited by the size of
the box, and it makes it easier to complete the contract review.
3. When amending a contract by replacing entire sections, review is made
more efficient by highlighting the changes being made. For example, if
replacing an entire scope of work that is contained in several pages and
only a few items are being changed, please boldface or underline the actual
changes. This will expedite the review process, and focus the attorney’s
review on the actual changes involved in the amendment.
State Contracting Manual – Volume I 58
E. The State is in the process of transitioning to FI$Cal, a business transformation
project in the areas of budgeting, accounting, procurement, and cash
management. (See www.fiscal.ca.gov.)
1. Currently, FI$Cal has not resulted in any change to the process for
submitting hardcopy contracts to DGS/OLS for review and approval.
2. For agencies enrolled in FI$Cal, once DGS/OLS approves and returns a
contract to the contracting agency, it is the contracting agency’s obligation
to upload the approved contract into Fi$Cal.
F. E-Signature Policy: State Administrative Manual section 1240 identifies the
permissible types of e-signatures and the requirements for using e-signatures,
automatic or electronic transactions, and electronic records in transacting state
business. Contracting entities are responsible for complying with SAM 1240 as
well as any State Controller’s requirements. (Historical references: MM 17-03,
MM 18-03.)
4.09 APPROVAL AND COMMENCEMENT OF WORK
(Rev 04/22)
A. Legal Requirements
The approval by DGS/OLS is the final, formal approval of the contract. When
DGS/OLS’ approval is required, contracts for services should not begin before
receipt of approval; payment for services may not be made until the contract is
approved by DGS/OLS or, in the case of an exempt contract, until it is formally
approved by the agency. (See PCC §§ 10295 and 10335.
B. Necessity of Time Management
In light of the legal requirements for contract approvals, it is important for
contracting departments to timely execute and timely submit contracts.
Contracts should be submitted to DGS/OLS for approval a sufficient time in
advance of the contract start date to afford the opportunity for adequate review
and discussion as may be needed.
C. Consultant Contracts
The law does not permit consultants to start work before formal contract
approval, except in an emergency. When it is necessary for a consultant to start
work before approval of the contract, the circumstances must be noted in the
contract file as an emergency in accordance with PCC § 10371(d).
D. Warning to Contractors
1. Contracts are not valid unless and until approved by DGS/OLS if such
approval is required by law. (PCC §§ 10295, 10335.)
2. The contractor should be warned not to start work before receipt of the
State Contracting Manual – Volume I 59
approved contract. The warning can be provided in the IFB or RFP, at the
time of the award, or at the time the contract is sent to the contractor for
signature.
3. If the contract is not approved and the contractor has begun work, the
contractor may be considered to be a volunteer or the contractor may have
to pursue a claim for payment by filing with the Government Claims
Program. The State has no legal obligation unless and until the contract is
approved.
Note: If a late contract is approved, authorized services provided by the
contractor can be paid from the beginning date of the contract.
4.10 APPROVAL OF AMENDMENTS
(Rev 11/12)
A. If the original contract was approved by DGS/OLS, any amendment must be
approved by DGS/OLS except for the following:
1. If an amendment only extends the original time for completion of
performance for a period of one year or less, the amendment is exempt
from approval by DGS/OLS. This exemption can only be used once. (PCC §
10335(d)(1).) Note: this exception only covers extensions of time “to
complete performance,” such as extending a final report due date. It does
not cover other types of amendments, such as amendments that extend
time to use the contractor for additional as-needed or hourly rate type
services, or amendments that change (increase, decrease, alter) the scope
of work, budget, or terms and conditions. (See PCC § 10335(d)(3).)
2. Even though the extension cited above is exempt from approval, upon
completion of the amendment, a fully executed copy of the amendment and
a form STD 215 explaining the reason for the extension must be sent to
DGS/ OLS if the original contract was subject to DGS/OLS approval. (PCC
§ 10335(d)(1).)
B. To obtain DGS/OLS approval of an amendment, the amendment should be
submitted to DGS/OLS with a STD 215 and all supporting documentation, along
with a copy of the original agreement, any intervening amendments and the STD
215s for each.
C. See SCM 1, chapters 3 and 5 for other information about amendments.
4.11 OTHER REQUIRED APPROVALS
(Rev 04/22)
The following are examples of additional approvals required for certain types of
contracts. Documentation of the approval must be included as supporting
documentation when submitting the contract package to DGS/OLS for approval:
State Contracting Manual – Volume I 60
A. GC §19130(a) cost savings contracts – copy of Notice to SPB and the SPB
determination if a union requested review.
B. Legal Services contracts – copy of DOJ approval memo (or statutory authority to
contract out); other pre-approvals as required.
C. Hazardous Activities – DGS/ORIM approval stamp.
D. Fiscal Agent contracts – DOF approval.
E. Financial Compliance Audits– prior written approval of the Controller and DOF for
contracts for financial or compliance audits, unless the agency is required by
State law to obtain an annual audit. (Govt. Code § 8546.4(e).)
F. Public Entities - May require a resolution.
G. Printing Services – DGS/OSP approval. (See SCM § 3.21.)
4.12 STATE CONTRACT AND PROCUREMENT REGISTRATION
SYSTEM
(New 6/17)
A. The State Contract and Procurement Registration System (SCPRS) is an
Internet-based application developed as a contract tracking system that provides
a centralized database of acquisitions of goods and services.
B. Historical Notes: In 2003, DGS issued MM 03-09 requiring state agencies to
register acquisitions of goods and services above $5,000 in SCPRS. In 2015,
DGS issued MM 15-02 updating SCPRS policy. In June 2016, DGS issued MM
16-03 stating current SCPRS policy (see items C through E below), including
transition instructions for agencies not yet transacting in FI$Cal.
C. Effective January 4, 2016, the state transitioned from the BidSync system to the
FI$Cal system for reporting acquisitions of goods and services in SCPRS.
D. Effective July 1, 2016, agencies must report all acquisitions of goods and
services, regardless of dollar amount, in Fi$Cal SCPRS.
1. For agencies exempt from or not yet transacting in Fi$Cal, acquisitions paid
with a credit card that are under $2,500 and executed without a purchase
document are exempt from the SCPRS reporting requirement.
E. SCPRS Registration Number: FI$Cal does not generate a SCPRS registration
number and therefore it is no longer a requirement to document a SCPRS
registration number on contract documents (such as Std. 65 or Std. 213).
State Contracting Manual – Volume I 61
5. COMPETITIVE BIDDING METHODS
5.00 INTRODUCTION
This chapter provides recommended guidelines and procedures that should be used
when seeking vendors and contractors to perform services and for consultant service
contracts. Most of these guidelines are based on existing State policy and established
practices; some are also based on statutory requirements.
5.01 TABLE OF CONTENTS
(Rev 11/12)
DESCRIPTION SECTION
Introduction 5.00
Table of Contents 5.01
Statutory and Regulatory References 5.02
Fundamental Rules 5.03
Preliminary Considerations and Decisions 5.04
Competitive Bidding Requirements and Alternatives 5.05
Comparison Chart of Bidding Methods 5.06
Differences Between IFBs and Primary RFPs 5.07
Primary RFP and Secondary RFP Differences 5.08
Invitation for Bids 5.11
Request for Proposals 5.15
Request for Proposals: Primary Method 5.20
Request for Proposals: Secondary Method (Point Count or High
Score)
5.25
Required Language in Competitive Bidding Documents 5.30
Drafting an RFP 5.35
Guidelines for Criteria and Considerations in Evaluating RFPs 5.40
Tie Bids 5.45
Time for Completion of the Competitive Bidding Process 5.60
State Contracting Manual – Volume I 62
Posting and Notification Requirements 5.65
Competitive Bidding Issues 5.70
Advertising State-Contracting Opportunities 5.75
Contracts Exempt from Advertising in the CSCR and Competitive 5.80
Amendments 5.81
Multiple Awards 5.85
Contracts Under Ten-Thousand Dollars 5.90
5.02 STATUTORY AND REGULATORY REFERENCES
(Rev 1/14)
A. Public Contract Code Sections
1. DVBE participation and incentives. (PCC § 10115 see also Mil &Vet code §
999, et seq.)
2. Service contracts. (PCC §§ 10295, and 10335 et seq.)
3. Consultant services contracts. (PCC §§ 10295, and 10335 et seq.)
4. Conflict of interest by current and former State employees. (PCC §§ 10410
– 10411.)
B. Government Code Sections
1. Target Area Contract Preference Act (TACPA) (GC §§ 4530 – 4535).
2. Antitrust claims (GC §§ 4550-4554).
3. Small business bidder preference (GC § 14838).
4. Nondiscrimination compliance programs (GC § 12990).
5. California State Contracts Register advertising (GC §§ 14825 - 14829.2).
6. SB and DVBE quotes (GC §§ 14838.5, 14838.7)
C. Title 2, California Code of Regulations
1. Contract protest procedures (section 1195).
2. Application of small business, TACPA, and DVBE regulations (section 1896
et seq.).
State Contracting Manual – Volume I 63
5.03 FUNDAMENTAL RULES
(Rev 10/98)
A. An agency may not draft any competitive bidding document (i.e., IFB or RFP) in a
manner that limits bidding directly or indirectly to any one bidder. (PCC § 10339.)
B. Services may not be split to avoid the need to advertise or obtain competitive
bids. In particular, a series of related services that would normally be combined
and bid as one job cannot be split into separate tasks, steps, phases, locations,
or delivery times to avoid adhering to a State law, policy, or departmental
procedure. (PCC § 10329.)
C. Sealed bids must be received at the place and by the time stated in the IFB or
RFP. Bids received after the time stated in the solicitation document is not valid
regardless of the circumstances causing the late submittal. (PCC § 10341.)
D. The sealed cost bids for an IFB and RFP primary must be publicly opened. (PCC
§§ 10341 and 10344.)
5.04 PRELIMINARY CONSIDERATIONS AND DECISIONS
(Renumbered and revised 11/12)
Many of the questions and decisions needed to establish a sound basis for a final
contract must be addressed by the contract users. They are the individuals most
concerned with both quality and usability of what will be produced under the contract.
They are the individuals best equipped to ask and to answer the main questions about
the performance leading to the final service or product that prompts the need for the
contract.
Primary Contracting Considerations:
1. What type of service is needed and why and when is it needed?
2. Can services be provided within the agency?
3. Can another State agency provide the service through an Interagency
Agreement? (If agency staff cannot provide the services, a justification
consistent with GC § 19130 is required.)
4. If an outside contractor is to be used, how will the contractor be obtained?
Will it be necessary to competitively bid, or does one of the exemptions to
bidding apply?
5. What type of contract is involved? Goods, IT goods, IT services, IT
consulting services, non-IT services, non-IT consulting services?
Note: The Scope of Work is the key to a satisfactory contract. The level of
satisfaction depends on fully assessing and defining the contract need. The
determination of a level of quality sufficient to meet the need and guarantee the
State Contracting Manual – Volume I 64
desired outcome and identification of the capability and qualifications required of
a contractor to accomplish the outcome will produce a successful contract.
5.05 COMPETITIVE BIDDING REQUIREMENTS AND ALTERNATIVES
(New 11/12)
Contracts must be competitively bid using the Public Contract Code process, unless
there is a legally authorized basis for bid exemption. (PCC §10340(a).) Basic grounds
for exemption include:
A. Statutorily Exempt.
B. Non-competitively bid exemption (NCB) or Special Category (SCR) approval.
1. DGS Approved Exemptions (PCC § 10348)
2. Categorical Exemptions
See SCM I, section 5.80 for more information regarding exemptions and alternative
methods for award.
5.06 COMPARISON CHART OF BIDDING METHODS
(Rev 04/22)
There are three basic types of services contract solicitations: Invitation for Bid, Primary
Request for Proposal, and Secondary Request for Proposal. (See PCC§§ 10340-
10345.)
Table 5.1
CONSIDERATIONS INVITATION FOR
BID
PRIMARY RFP SECONDARY RFP
When this method
is typically used
To obtain simple,
common, or routine
services that may
require personal or
mechanical skills.
Little discretion is
used in performing
the work.
Examples: routine
pest control,
equipment
maintenance,
uniform rentals
To obtain complex
services in which
professional
expertise is
needed and may
vary. Where
different methods
and approaches
may be applied
during
performance.
Examples:
professional
services such as
auditing,
To obtain very
complex and/or
unique services in
which professional
expertise and
methods may vary
greatly.
Creative or
innovative
approaches are
needed.
Examples: public
relations and
advertising,
complex research
State Contracting Manual – Volume I 65
specialized data
collection
projects
Cost/value of
services
$10,000 or more $10,000 or more $10,000 or more
CSCR advertising Yes Yes Yes
Formal bidder
Q&As with submittal
deadline
Optional Optional Optional
Bidders' conference
or site inspection
Optional, but
bidders’ conference
is rarely needed for
an IFB.
Optional. Held if
needed to clarify
service needs.
Optional. Held if
needed to clarify
service needs.
How award is made Lowest responsible
bidder: public bid
opening
Lowest qualified
responsible
proposer; public
bid opening
Highest-scored
responsible
proposer
Oral Interviews Not applicable. Optional. Held if
needed.
Optional. Held if
needed.
What information is
submitted
Bid form and other
material deemed
necessary by the
awarding agency.
Narrative proposal
and a separate
envelope
containing cost
information.
Narrative proposal,
including a cost
component, in one
envelope
Statement of Work
(SOW)
considerations
SOW contains all
contract
requirements
except price.
Objectives, major
tasks, and
timelines are
identified.
Proposer offers
detailed work
plans, methods,
etc.
Goals and
objectives are
stated. Proposer
offers detailed work
plans, approaches,
methods, etc.
State Contracting Manual – Volume I 66
How small business
preference is
applied
The cost bid of a
certified small
business is reduced
for evaluation
purposes by 5 % of
the lowest cost bid
offered by a
noncertified small
business.
The bid of a
certified small
business is
reduced for
evaluation
purposes by 5% of
the lowest cost
offered by a
noncertified small
business.
Certified small
business will have
its points increased
by 5% of the total
points awarded to
the highest scored
non-small business
bidder.
Is TACPA applied? If the total contract
is more than
$100,000 and the
work site is not
fixed.
If the total contract
is more than
$100,000 and the
work site is not
fixed.
If the total contract
is more than
$100,000 the work
site is not fixed.
DVBE participation
required?
Determined by
Agency
Determined by
Agency
Determined by
Agency
5.07 DIFFERENCES BETWEEN IFBs AND PRIMARY RFPs
(Rev 1/18)
The general differences are indicated in Table 5.2. To easily distinguish the two
methods, different terminology is used. Generally, in IFBs the terms Bid and Bidder are
used, and in RFPs the terms Proposal and Proposer are used, although the PCC uses
them interchangeably.
Table 5.2
INVITATION FOR BID PRIMARY REQUEST FOR
PROPOSAL
Bidders may need to certify only that
they meet the IFB requirements.
Bidders acknowledge that they meet
the IFB requirements.
Narrative proposals containing varying
amounts of proposer information are
usually required to be submitted.
Sealed bids or price quotes are
submitted. A single-envelope or two-
envelope process may be used.
Sealed cost proposals are submitted in
separate envelopes from the narrative
proposals.
A pass/fail determination is made for
responsiveness to IFB requirements.
This can be accomplished after bids
are opened and read aloud.
Proposals are reviewed for
responsiveness to RFP format
requirements. Proposals may be rated
or scored. Cost/price offerings of
State Contracting Manual – Volume I 67
qualified proposers are opened and
read aloud for responsible proposers.
Bidders' conferences are optional but
are rarely needed.
Bidders' conferences are optional but
are often held to clarify the services
being sought.
To obtain services valued at $10,000 or
more.
Same as for IFB.
IFBs are used to secure simple
services calling for routine personal or
mechanical skills. Work methods are
standard, or little discretion exists in
terms of how the work is performed.
RFPs secure complex services calling
for technical and/or professional skills
and expertise. The proposer uses
discretion in applying various
approaches or methods.
Bidder capabilities are not rated or
scored. Bidders either pass or fail IFB
requirements.
Proposer qualifications, capability, and
experience may be scored on
evaluation criteria stated in the RFP.
The statement of work (SOW) is clearly
stated. Bidders are generally told what,
how, when, and where work and
services are to be done.
The SOW contains as much
detail/depth as possible but may
include an agency’s needs, goals, and
objectives. Proposers are relied on to
recommend methods or approaches to
meet an agency’s needs.
Award is made to the lowest
responsible bidder.
Same as for IFB.
5.08 PRIMARY RFP AND SECONDARY RFP DIFFERENCES
(Rev 6/17)
Table 5.3 outlines the differences between primary and secondary RFPs.
Table 5.3
PRIMARY RFP SECONDARY RFP
Services are complex, but not uncommon
or unique.
Examples: Complex data collection,
auditing
Services are complex, uncommon, or
unique.
Examples: Public relations and
advertising, complex research and
consulting
State Contracting Manual – Volume I 68
Performance requires varying methods or
approaches but not innovation or
creativity.
The methods and approaches used may
not differ significantly from one proposer
to another, which allows costs to be used
as the deciding factor for making the
award.
Performance requires unusual,
innovative, or creative techniques,
methods and approaches.
The quality of expertise and approaches,
methods, and innovation used may differ
significantly from one proposer to
another.
The statement of work (SOW) is fairly
well defined in terms of services or
functions that must be performed, as are
the time frames that are required.
The SOW is less precisely defined and
may contain only the agency’s business
needs, goals or objectives that must be
met.
Costs proposals are submitted in a
separate sealed envelope apart from the
narrative proposal.
Price may appear as a section within the
narrative proposal and must be a
significant factor. Price does not mean
cost effectiveness.
Narrative proposals are reviewed,
evaluated, and scored for compliance
with format, content, and qualification
requirements.
Narrative proposals are evaluated and
scored. Oral interviews are optional.
Passing points may be set to determine
the finalists.
Cost proposals are not scored. The cost component is either scored
against criteria stated in the RFP or
subjected to a formula to convert the
quoted cost into score or point values.
Qualified proposals that are responsive to
the RFP requirements will have their
cost/price proposals publicly opened and
read.
Cost proposals are not announced or
publicly read.
Following the opening and reading of cost
proposals, cost proposals are then
adjusted for applicable small business,
TACPA, and DVBE Incentives.
Cost proposals are adjusted for
applicable small business, TACPA, and
DVBE Incentives.
A certified small business receives an
amount equal to 5 % of the lowest cost
proposal submitted by a non-certified
small business reduced from its cost
proposal.
A certified small business will have its
total points increased by 5% of the total
points awarded to the highest scored
non-small business bidder.
Award is to the responsible proposer
offering the lowest cost for its services.
Award is to the responsible proposer
earning the highest overall score.
State Contracting Manual – Volume I 69
5.09 RESERVED
(Rev 11/12)
[Former content of 5.09 has been merged into 5.30.]
5.10 RESERVED
(Rev 11/12)
[Former content of 5.10 was moved to 5.70.]
5.11 INVITATION FOR BIDS
(Rev 11/12)
A. An Invitation for Bids (IFB) must be exact and clear to ensure that all bids
received will be competitive as the result of all bidders bidding on exactly the
same work or equipment, specifications, and contract obligations.
An IFB seeks an answer to the following:
“Here is exactly what we need to have done. Here are the qualification
requirements, performance specifications, time frames, and requirements that
must be met. How much will you charge us?”
B. An IFB must indicate the specific requirements of the State. Timely bids are
reviewed to determine which bidders meet the requirements indicated in the IFB.
For each specific requirement, a basic yes or no answer is required. There is no
“fully,” ”barely,” “almost,” or “exceeded” level of evaluation. After identifying which
bidders are responsive to all requirements stated in the IFB, it is then a matter of
determining which bidder is offering the lowest cost for its services.
C. All bids may be rejected whenever the agency determines that the cost is not
reasonable, the cost exceeds the amount estimated, or otherwise in the best
interest of the State. Although many agencies reserve the right to reject all bids,
no bid may be rejected arbitrarily or without reasonable cause.
5.15 REQUEST FOR PROPOSALS
(Rev 10/05)
A. A Request for Proposals (RFP) must be as precise as possible to ensure that all
proposals are accomplishing the same goal. An objective evaluation procedure
must be used to determine which proposers have complied with the RFP
requirements and to whom the contract should be awarded.
B. An RFP seeks an answer to the following:
“Here is what we wish to accomplish. Here are the qualification requirements,
performance specifications, time frames, and other requirements that must be
met. How would you accomplish the job for us and for how much?”
State Contracting Manual – Volume I 70
C. An RFP should not be used when the service or equipment to be hired is
standard, routine, or common, or when there is a standard associated with the
service or equipment to be hired. For example, the hiring of a pest-control firm to
do routine exterminations should be accomplished through an IFB, not an RFP.
D. There are two (2) methods for evaluating proposals and awarding contracts
(PCC § 10344):
1. Primary Method: By this method, the contract is awarded to the responsible
and qualified proposer offering the lowest cost for its services. For more
information on the primary RFP method, see SCM I, section 5.20.
2. Secondary Method: This method requires evaluation of proposals by an
evaluation committee with the award made to the responsible proposer
earning the highest score. For more information on the secondary RFP
method, see SCM 1, section 5.25.
E. Before soliciting proposals, agencies must determine which method of evaluation
will be used in order to include the appropriate information in the RFP, as follows:
1. A comprehensive evaluation plan must be developed and finalized. All
rating and scoring factors which are to be considered must be included,
criteria for considering costs to the State must be developed, and the
evaluation plan must provide for a fair and equitable evaluation of all
proposals (PCC § 10344).
2. All proposals and all evaluation and scoring sheets must be available for
public inspection at the conclusion of the scoring process (PCC § 10342).
F. When an evaluation committee is appointed:
1. The voting members used in the selection process shall be from the agency
soliciting the proposals or awarding the contract.
2. Private consultants may not be voting members of the committee and may
only be used to provide clarification or subject matter expertise to the
committee members.
3. If the contract is awarded by a State board or commission, the
recommendations of an evaluation committee shall be considered advisory
in nature, and the board or commission must make the ultimate decision
unless statute expressly permits the board or commission to delegate that
responsibility.
State Contracting Manual – Volume I 71
5.20 REQUEST FOR PROPOSALS: PRIMARY METHOD
(Rev 3/03)
A. In addition to the requirements identified elsewhere in this chapter, an RFP
primary must include a requirement that each proposer submit its proposal with
the cost proposal and all cost information in a separate, sealed envelope (PCC §
10344).
B. Proposals received as a result of the primary RFP method must be evaluated
and the contract awarded in the following manner:
1. Review all eligible proposals (i.e., those filed on time and in the manner
prescribed) to determine which ones meet the format requirements and the
standards specified in the RFP. Proposals meeting the minimum standards
and format requirements can then be rated or scored. Proposal standards
should be set so that every proposer deemed to meet the standards
specified in the RFP could perform at the required level.
2. The sealed envelopes containing the cost proposal for those proposals that
meet the format requirements and standards shall then be publicly opened
and read. The contract must be awarded to the lowest-cost responsible
proposer.
5.25 REQUEST FOR PROPOSALS: SECONDARY METHOD (POINT
COUNT OR HIGH SCORE)
(Rev 11/12)
A. Use of the secondary RFP method should be limited to those instances in which
agencies are seeking a unique solution to a problem or situation that cannot
necessarily be resolved by the lowest bidder (i.e., when the methods,
approaches, and procedures to be used in performing the work are of primary
importance).
B. When scoring a proposal, cost/value effectiveness and cost adequacy may be
judged, evaluated and awarded points as part of the technical score, but this
must be in addition to the cost points (PCC § 10344). Agencies should discuss
the RFP with their assigned DGS/OLS attorney if considering developing a
solicitation where cost points (dollars/actual price component) are less than 30%
of the total points, or risk non-approval of the resulting contract.
The following formula may be used for the award of cost points:
Lowest cost proposal is awarded the maximum cost points. Other proposals are
awarded cost points based on the following calculation:
Lowest Proposer’s Cost = (factor) X maximum cost points = cost points for other
proposer
Other Proposer’s Cost
State Contracting Manual – Volume I 72
EXAMPLE: Lowest cost proposal = $ 75,000
Other proposal = $100,000
30 cost points available
(Lowest cost proposal) $75,000 = ¾ x 30 = 22.5 cost points awarded to
$100,000 other proposal
C. Proposals received as a result of the secondary RFP method must be evaluated
and the contract awarded in the following manner (PCC § 10344):
1. Review all eligible proposals (i.e., those that are received in the time and
manner prescribed) to determine which ones meet the format requirements
specified in the RFP.
2. Those proposals that meet the format requirements shall then be submitted
to an agency evaluation committee. The evaluation committee will evaluate
and score proposals using the methods specified in the RFP. The contract
must be awarded to the responsible proposer whose proposal is given the
highest score by an evaluation committee.
5.30 REQUIRED LANGUAGE IN COMPETITIVE BIDDING DOCUMENTS
(Rev 6/17) [** Pending Update to TACPA 5.30.A.10 To Be Released Soon **]
A. All competitive bid proposal packages (IFBs and RFPs) shall contain (as
applicable):
1. Date, time, and place bids are due (PCC §§ 10341, and 10344)
2. Small Business Preference Program information (GC § 14835) (SCM 1,
chapter 8)
3. DVBE participation goals (PCC § 10115 et seq.) (SCM 1, chapter 8)
Each State agency is required to have DVBE participation goals in contracts
for construction, professional services, materials, supplies, equipment,
alteration, repair, or improvement (PCC § 10115 et seq.) except those
services subject to Chapter 6 commencing with GC § 16850. Participation
goals apply to the overall dollar amount expended each year by the
awarding agency. Each agency is allowed to determine the dollar level and
types of contracts that are subject to or exempt from DVBE goal
participation. If the contract is of a type or total dollar amount subject to
DVBE participation in accord with departmental procedures or regulations,
the bid document used to procure such services, should contain applicable
DVBE participation instructions and forms and DVBE audit language. For
information on DVBE participation goals, refer to applicable State agency
policies, procedures, or regulations or the statutes on this topic. (See SCM
1, chapter 8.)
4. DVBE Incentive or Documentation of Incentive Exemption (GC §§ 14600,
14615; 2 CCR § 1896.99.100) (SCM 1, chapter 8).
State Contracting Manual – Volume I 73
5. Conflict of Interest provisions (PCC §§ 10410, 10411); these provisions are
now in the CCCs, available on the DGS/OLS website.
6. Corporate qualifications to do business in California (R&TC § 23101); these
provisions are now in the CCCs, available on the DGS/OLS website.
a. When contracts are to be performed in the State by corporations, the
contracting agencies should obtain verification that the contractor is
currently qualified to do business in California in order to ensure that all
obligations due to the State are fulfilled.
b. “Doing business” is defined in Revenue and Taxation Code § 23101 as
actively engaging in any transaction for the purpose of financial or
pecuniary gain or profit. Although there are some statutory exceptions
to taxation, rarely will a corporate contractor performing services within
the State not be subject to the franchise tax.
c. Both domestic and foreign corporations (those incorporated outside of
California) must be in good standing in order to be qualified to do
business in California. Agencies may determine whether a corporation
is in good standing by accessing the Office of the Secretary of State’s
web site at www.sos.ca.gov.
d. Contracting and approving agencies may obtain assistance from the
Franchise Tax Board in evaluating a contractor’s claim of exemption.
Inquiries should be directed to the Exempt Organizations Unit desk,
telephone (916) 845-4171.
7. Drug-free requirements (GC § 8350 et seq.); these provisions are now in the
GTCs available on the DGS/OLS website
8. Statement of Compliance (GC § 12990(a - f), 2 CCR § 11109); this
provision is now in the CCCs, available on the DGS/OLS website
9. Antitrust claims (GC §§ 4552, 4553, and 4554); this provision is now in the
GTCs, available on the DGS/OLS website
10. TACPA preference, if applicable (GC § 4530, et seq. and 2 CCR §
1896.30); [** Pending Update to be Released Soon **]
Each IFB or RFP for goods or services, in which the cost is estimated to be
in excess of $100,000, except when the work site is fixed by the terms of the
contract, should contain a provision applying work site and hiring
preferences, as applicable, to eligible California-based firms. Bidders and
proposers may apply for such preferences by means of a Target Area
Contract Preference Request - STD 830S (for services) or STD 830G (for
goods) (2 CCR § 1896 et seq., see also SCM 1, chapter 8). Contact
DGS/Dispute Resolution/Preference Program Section for information on
TACPA at (916) 375-4604 or (916) 375-4600.
State Contracting Manual – Volume I 74
11. Protest procedures (SCM 1, chapter 6);
12. Loss leader provisions (PCC § 10344).
13. Darfur Certification (PCC § 10475 et seq.)
14. Iran Contracting Act Certification (PCC § 2202)
15. Insurance requirements (see SCM 1, §§ 3.12, 7.40)
16. Priority Hiring Considerations for Contracts with a Value in Excess of
$200,000; these provisions are now in the GTCs available on the DGS/OLS
website.)
Every contract for services in excess of $200,000 shall contain a provision
requiring the contractor to give priority consideration in filling vacancies in
positions funded by the contract to qualified recipients of aid under Welfare
and Institutions Code § 11200 (PCC § 10353).
17. Civil Rights Certification PCC § 2010 (see SCM 1, § 3.33)
B. The general terms and conditions of the contract and any unique provisions
should be included in the bid document to inform bidders of these requirements.
See also 5.35.4.
5.35 DRAFTING AN RFP
(Renamed 11/12)
In addition to other requirements set forth in this chapter, further consideration should
be given to effective drafting of RFPs. The more thoroughly that a State agency
communicates its specific needs, requirements, goals, and objectives in the RFP, the
more complete, responsive, and acceptable the proposals received will be.
A. RFPs should include:
1. A statement of work that contains:
a. A clear, precise description of the work to be performed, services to be
provided, problem to be solved, or the goals and objectives to be met.
b. An explanation in realistic terms of what the proposer is expected to
accomplish including any desired approach to the problem and the
specific functions, tasks, or activities that must be performed, in their
order of importance and probable sequence.
c. Practical and policy information, technological requirements or
specifications, and legal limitations, if any.
d. Specific questions to be answered or issues to be addressed.
e. Performance timelines or completion dates.
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f. Required quality control standards to be met, if applicable.
g. A description of the items, products, or results to be delivered.
h. The format and number of copies of the completed progress reports
and final report, if applicable.
i. The extent and nature of the assistance and cooperation from the
State that will be available to the proposer.
2. Proposal instructions should contain a description of the format that
proposals must follow and the elements they shall contain. The factors to be
used in proposal evaluation and contractor selection may not be changed or
added after the RFP has been distributed without adequate notice to all
potential proposers through an addendum. RFPs must provide:
a. Specifications, including:
• Standards the agency will use in evaluating proposals.
• Information on how the State will select the winning proposal.
b. Time schedules, including:
Date to submit questions or seek clarification of the RFP
• Date of Proposers’ Conference, if applicable.
• Date on which the proposals must be submitted.
• Timetable the agency will follow in reviewing and evaluating
proposals.
• Date of cost proposal opening.
• Date of award.
• Anticipated contract term, including commencement and
completion dates.
3. Notice of payment terms or restrictions, including:
a. Whether and to what extent progress payments will be allowed.
b. Whether payments are subject to payment withholds.
c. Penalties for late or inadequate performance.
4. Known or estimated budgetary limitations on the contract price, if applicable.
Applicable contract provisions, including:
a. Actual or sample contract language or boilerplate contract provisions
that will appear in the resulting contract.
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b. It is important to include any terms or provisions that will place a
contingent liability on the contractor or affect the contractor's operating
costs.
5. Requirements those prospective proposers must address or include in their
proposal, if applicable, such as the following:
a. A description of the proposer's qualifications, including:
• Proof that the proposer, if a corporation, is in good standing and
qualified to conduct business in California.
• For proposers that are nonprofit organizations, proof of nonprofit
status.
• Copies of current business licenses, professional certifications, or
other credentials.
• Proof of financial solvency or stability (e.g., balance sheets and
income statements for one year or more), as deemed applicable.
• A list of current or former references for whom the proposer has
performed similar work.
b. A brief list of similar types of contracts that were successfully
concluded, with a sample of such work.
c. A description of the lead personnel and anticipated supporting
personnel to be employed during performance (by classification or title)
and their qualifications to perform the work.
d. Identification of a project coordinator (recommended for all bid
documents but required when consultants are sought).
e. Résumés for each major contract participant who will exercise a major
policy, administrative, or consultative role in carrying out the services
(required by law for consultant contracts).
f. An overall description of the techniques, approaches, and methods to
be used in performing the services. For cost reimbursement contracts
with consultants, the amount of time and manpower to be expended
and the equipment and facilities to be utilized, if applicable.
g. If subcontractors are contemplated, identification of those persons or
firms, the portions and monetary percentages of the work to be done
by the subcontractors how they were selected and why, résumés of
each major subcontract participant, and a description of how
subcontracted work will be controlled, monitored, and evaluated
h. The total cost of the project, with a detailed breakdown showing how
the costs were determined, and the desired method of payment. The
detailed budget breakdown may include:
State Contracting Manual – Volume I 77
• Identification of position/classification titles funded.
• Salary rates or ranges.
• Percentage of time devoted to the work.
• Fringe benefits.
• Operating expenses.
• Travel and per diem expenses.
• Overhead or indirect costs.
• Subcontractors with the same type of cost details.
• Other costs.
6. Identification of services provided on a flat fee, lump sum, or unit rate basis.
5.40 GUIDELINES FOR CRITERIA AND CONSIDERATIONS IN
EVALUATING RFPs
The following are suggested criteria that may be used in evaluating proposals:
1. Does the proposing firm understand the agency's problem or needs?
2. Can the proposer fit this work into its existing obligations?
3. Is the approach to the problem, recommended method, and procedure
reasonable and feasible?
4. Do the expected results, outcomes, and deliverables appear to be
achievable in a timely manner, given the approaches, methods and
procedures proposed?
5. Does the firm have the organization, management capability and
competency, fiscal and personnel resources, and experience to perform the
services being sought?
6. Has the firm had experience performing work of a similar nature, size, and
scope?
7. Does the proposer's past experience complement the services being
sought, or is the proposer’s past experience appropriate to qualify the
proposer to perform these services?
8. What are the professional qualifications of the personnel that the firm will
commit to the project?
9. Has the proposer allocated sufficient staff resources?
10. Has the proposer addressed all goals, objectives, service demands, and
required deliverables specified in the RFP?
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11. Does the proposer appear to be capable of handling and resolving
unanticipated complications and delays without interrupting the delivery of
services?
12. Are any proposed timelines for performance presented by the proposer
feasible?
13. Did the proposer include plans that will show how performance will be
monitored and measured to ensure that all services are successfully
performed and that the objectives, goals, and requirements are met?
14. Does the proposer appear to have the capacity to manage fiscal resources
responsibly?
15. Does the proposer have sound fiscal, accounting and cost-monitoring or
budget-monitoring procedures in place?
5.45 TIE BIDS
(Rev 11/12)
Agencies should provide for a tiebreaker in the solicitation document setting forth how
the contract award will be made in the event of a tie. An example of permissible
tiebreaker is a coin toss.
Such event must be observed by witnesses and ideally the affected bidders would be
invited. See SCM 1, section 8.21.C for ties between certified small businesses and
DVBEs.
5.60 TIME FOR COMPLETION OF THE COMPETITIVE BIDDING
PROCESS
(Rev 11/12)
A. The bidding process often takes three to eight months from the time the
advertisement is placed until the award is made. Resolution of protests may add
a delay of one to three months.
B. The time needed to complete a bid proposal process will depend on the type of
competitive bidding method used, the complexity of the services required, the
number of bids or proposals received, whether a bidders'/proposers' conference
is held, whether DVBE participation is required, whether protests are received,
and other factors.
5.65 POSTING AND NOTIFICATION REQUIREMENTS
(Rev 4/15)
A. RFP. After selecting a bidder for possible contract award under an RFP (Primary
or Secondary):
1. The agency must post, in an area accessible to the public, a letter of intent
to award (PCC § 10345).
State Contracting Manual – Volume I 79
Note: Agencies may post the letter of intent on their Internet
Homepage in addition to, but not in lieu of, the public posting.
2. The contract cannot be awarded for a period of 5 working days (starting the
day after posting), during which time the agency must allow all bidders
access to all the bid information including all responses and score sheets
used in the evaluation (PCC § 10345).
B. IFB. After selecting a bidder for possible contract award under an IFB:
1. The agency must post, in an area accessible to the public, including any
Internet site identified in the IFB, for at least 5 working days prior to
awarding the contract, a letter of intent to award if requested in writing by
any bidder who has submitted a bid (PCC § 10345(a)(1)).
2. If the lowest bidder is not being awarded the contract, the low bidder must
be notified of that fact 5 working days prior to contract award. The notice
should also include the reason why the lowest bidder is not being awarded
the contact.
3. If the agency is awarding to the lowest responsible bidder, and no requests
have been made to publicly post a letter of intent, the agency may award
the contract without delay.
5.70 COMPETITIVE BIDDING ISSUES
(Rev 04/22)
A. Advertising. Potential bidders must be formally notified of the bid opportunity
through CSCR advertisement, unless an advertising exemption (approved Std
821) has been received. (Govt. Code § 14827.2.)
B. Less than three bids. If three (3) competitive bids are not received, the State
agency will prepare a complete explanation as to why less than three (3)
competitive bids were received; provide a justification as to the reasonableness
of the price; provide the names and addresses of the firms, or individuals
specifically notified of the contracting opportunity; and retain this document in the
agency’s contract file (PCC § 10340).
C. Preferences for certified small businesses, microbusinesses and non-small
businesses subcontracting preference. There are preferences to be applied to
eligible certified small businesses, microbusinesses and non-small businesses,
which subcontract with at least 25% certified small businesses (See SCM 1,
sections 8.20 and 8.21). Additional preferences under TACPA shall be granted
as applicable when cost of the service will exceed $100,000 and the work site will
not be fixed by the terms of the contract.
Exceptions for IT services, architectural and engineering services and situations
involving multiple contract awards are noted in the cited regulations. Additional
information on TACPA can be obtained from the DGS Dispute
State Contracting Manual – Volume I 80
Resolution/Preference Program section (See 2 CCR § 1896 et seq. and SCM 1,
chapter 8).
D. DVBE Participation Requirements and Incentive (See SCM 1, chapter 8).
E. There is no requirement to award a contract if, in the opinion of the State agency,
no bids or proposals were received containing a reasonable contract price or if
there is another business-based reason not to make an award.
F. Rejection of non-responsible bidder. Under very specific circumstances, after
identifying the first-ranked bidder in a solicitation and before issuing an intent to
award, an agency may decline to award a contract to the first-ranked bidder upon
a finding that the first-ranked bidder is not “responsible” under the statutorily-
based standard and as interpreted by case law. An agency cannot make a
unilateral finding of non-responsibility and proceed with an alternative award.
Instead, the law requires that the agency provide the winning bidder with due
process including notice of the specific documented reasons that the winning
bidder is not responsible and provide the winning bidder with a meaningful
opportunity to be heard and to refute those reasons. As this requires an agency
to develop a process conforming with legal due process requirements the agency
should consult its legal division for guidance and to promulgate regulations as
appropriate. See City of Inglewood v. Superior Court (1972) 7 Cal.3d 861; Taylor
Bus. Service Inc. v. San Diego Board of Education (1987) 195 Cal.App.3d 1331;
Boydston v. Napa Sanitation District (1990) 222 Cal.App.3d 1362; Advanced
Real Estate Services, Inc. v. Superior Court (2011) 196 Cal.App.4th 338
5.75 ADVERTISING STATE-CONTRACTING OPPORTUNITIES
(Rev 1/18)
A. Contracts of $10,000 or more must be advertised in the CSCR for at least 10
working days, unless exempt from bidding. Agencies cannot release solicitations
prior to publication in the CSCR. Contracts awarded as an NCB and
amendments that require an NCB approval, will be published in the CSCR by
DGS/PD as part of the NCB approval process. No agency action is required to
publish the NCB approval. (GC §§ 14827.1 -14827.3; PCC § 10335(a).)
B. CSCR advertising procedures are as follows:
1. Advertising in the CSCR is now done through the DGS eProcurement
system. Agencies should submit advertisements using the DGS
Procurement Division’s Internet Web page:
https://www.caleprocure.ca.gov/pages/index.aspx. Agencies may contact
CSCR eProcurement help desk at (916) 375-2000 or eprocure@dgs.ca.gov
for additional information.
2. DGS charges a fee for each ad that appears in the CSCR.
C. Under appropriate circumstances, agencies may obtain an exemption from
advertising. This is done on a STD 821 submitted to DGS/Procurement Division.
An exemption from advertising eliminates the CSCR advertising requirement
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only; it is not an exemption from bidding. If DGS/Procurement Division approves
a form STD 821 for an advertising exemption, DGS will publish a notice of
exemption in the CSCR.
D. Re-bids: Agencies conducting a re-bid need not obtain an approved Exemption
from Advertising or re-advertise the contract opportunity in the CSCR, if:
1. The re-bid occurs within three (3) months of the publication of the original
CSCR advertisement;
2. Notice of rebid is provided to persons who are a UNSPSC match in
eProcurement in addition to anyone who otherwise notified the contracting
agency of their interest in the original solicitation; and
3. No material change to the solicitation.
5.80 CONTRACTS EXEMPT FROM ADVERTISING IN THE CSCR AND
COMPETITIVE BIDDING
(Rev 04/22)
As noted in section 5.05, competitive bidding is required unless there is a legally
authorized basis for bid exemption. Key exemption categories are identified below.
A. Statutory Exemptions
1. Contracts of less than $5,000 (PCC §§ 10335(a), 10335.5(c)(5)).
2. Contracts of less than $5,000 where only per diem or travel expenses, or a
combination thereof, are to be paid (PCC § 10335(a)).
3. Emergency contracts. The work or service is for the immediate preservation
of the public health, welfare, safety, or protection of State property (PCC §§
1102, 10340).
4. Contracts with other California State agencies, and California State
University and University of California campuses (PCC §§ 10335(a),
10340(b)(3); GC § 11256; see also SCM 1, sections 3.03 and 3.18.).
5. Contracts with other public entities, including contracts with another state,
local, or Federal agency; a state agency, state college, or state university of
another state; a local government entity of another state; auxiliaries of CSU
or the California community colleges; or an organization acting as a
governmental agency under a joint powers agreement (PCC §§ 10335(a),
10340(b)(3); see also SCM 1, section 3.06.A).
6. Contracts solely for the purpose of obtaining expert witnesses for litigation
(PCC § 10335.5(c)(3).
7. Contracts for legal defense, legal advice, or legal services by an attorney or
the attorney’s staff (PCC §10335.5(c)(4)).
State Contracting Manual – Volume I 82
8. Community Based Rehabilitation Program (CRP). Contracts with business
entities operating Community Based Rehabilitation Program (CRP), that are
justified under one of the exceptions in GC § 19130(b), and that meet the
criteria established by Welfare and Institutions Code §1 9404 (PCC
§10340). Note: Contracts with CRPs that are justified under GC § 19130(a)
are required to be competitively bid.
9. Small Business/DVBE Option (GC §§ 14838.5; PCC §§ 10335.5(c)(6),
10340(b)(6)).
a. This option allows for an award under the following conditions:
1) The contract is awarded to a certified small business, micro-
business or disabled veteran-owned business;
2) The contract award is greater than $5,000 and less than
$250,000; and
3) Quotes were received from at least two certified small businesses
or micro-businesses; or two certified disabled veteran-owned
businesses.
b. An award based on receiving only one quote is not permitted under
this method.
c. Mixing quotes (e.g. one SB and one DVBE) is not permitted under this
method.
d. The code does not expressly require award to the low quote, however,
if award will be made by other than low quote, the agency must
document the business reasons and cost reasonableness basis for
selecting the other quote.
e. No particular format or timing is required under this option. Agencies
have discretion as to how to obtain the quotes. Agencies should
provide vendors sufficient information
about the services on which the vendors can formulate a quote,
including copy of the proposed contract (e.g. scope, payment
provisions, and terms).
f. The small business preference is not applicable under this method.
g. There is no protest right for this method. (GC § 14838.5.) Therefore
agencies should not cite protest provisions when soliciting quotes.
h. Use of this method is capped at $250,000 for the entire contract term,
including any option years and/or amendments. If an agency believes
the contract may exceed $250,000, they should use a different
solicitation method, such as an IFB or RFP. If quotes come in over
State Contracting Manual – Volume I 83
$250,000, the agency would need to resolicit, either scaling down the
project to lower the quotes or using a different solicitation method.
i. For public works, the dollar range for which this two-quote method can
be used is $5,000 to $388,000 (or other project cost limit amount as
may periodically be issued by the Director of Finance pursuant to PCC
§ 10105). (GC § 14838.7.)
10. Contracts for the development, maintenance, administration, or use of
licensing or proficiency testing examinations (PCC § 10340(b)(7)).
11. Other Specific Statutory Exemption. The STD 215 should identify the
statutory citation supporting the exemption.
B. DGS Approved Exemptions (PCC § 10348)
The State is committed to promoting fair and open competition whenever it is required
or otherwise feasible. There are, however, circumstances under which a department
may award a contract or amendment to a vendor on a non-competitive basis even
though there is no express statutory exemption from bidding. Under Public Contract
Code section 10348, DGS is authorized to determine when an award can be made
without competition. DGS may do so on a case-by-case basis for a department’s
application (NCB/SCR) as described in section B.1 below, and on a pre-approved
categorical basis as described in section B.2 below.
1. Non-Competitive Bid (NCB) or Special Category Request (SCR).
a. An NCB transaction is a contract for goods or services or both when
only one vendor is afforded the opportunity to provide the specified
goods or services.
b. An SCR is similar to an NCB but involves a group of related contracts
rather than a single contract. (For example: the need for several types
of physician medical specialty services at a remote prison.) All SCRs
have a maximum authorized dollar limit and a maximum “window of
approval” not to exceed 3 calendar years from the date of the DGS/PD
approval.
Departments must track all SCR transactions to ensure they remain within
the approved limit.
c. NCBs/SCRs for non-IT services should be used only when a
department can establish the circumstances necessitating a no-bid
contract or amendment. Poor planning should not be the reason for
seeking an NCB/SCR.
d. NCB/SCR application forms and instructions are located on DGS/PD’s
website.
When submitting an NCB/SCR request, departments
should address all questions on the form to establish the
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basis for restricting the goods or services to one supplier
(e.g., the consequences of not receiving NCB/SCR
approval, price analysis), and obtain required signatures.
Departments should submit NCB/SCR applications to
DGS/PD for review and approval. A department should not
execute an NCB/SCR contract or amendment unless and
until DGS approves the NCB/SCR application.
2. DGS Categorical Exemptions (PCC § 10348; historical references: SAM
1233, MM 03-10).
a. Services contracts using a DGS LPA;
b. Subvention and local assistance contracts as defined in SCM 1,
section 3.17. This exception applies only when services are provided
to the public and not specifically to a State agency;
c. Maintenance agreements under $250,000 per year for equipment that
is under documented warranty, or where there is only one authorized
or qualified representative or where there is only one distributor in the
area for parts and services under $250,000.00 per year;
d. Contracts where the state is unable to compete and select a different
contractor because a contractor has already been selected by a
federal, state, city, county, or other regulatory entity to perform a
service in a specific geographical area (e.g., refuse and/or sewage
disposal contracts where there is an exclusive franchise agreement
that has no exception for the state);
e. Public entertainment contracts for State-sponsored fairs and
expositions;
f. Contracts that can only be performed by a public entity as defined in
Unemployment Insurance Code § 605(b);
g. Contracts for conference or meeting facilities, including room
accommodations for conference attendees, not to exceed $250,000;
h. Contracts for ambulance services (including but not limited to 911)
when there is no competition because the contractor is designated by
a local jurisdiction for the specific geographic region; (historical
reference: MM 05-04.)
i. Contracts for emergency room hospitals, and medical groups,
physicians, and ancillary staff providing services at emergency room
hospitals, when a patient is transported to a designated emergency
room hospital for the immediate preservation of life and limb and there
is no competition because the emergency room hospital is designated
State Contracting Manual – Volume I 85
by a local emergency medical services agency and medical staffing is
designated by the hospital.
This exemption covers only those services provided in response to the
emergency room transport; (historical reference: MM 05-04.)
j. Contracts with health maintenance organizations (HMOs) through a
cooperative agreement with the Centers for Medicare and Medicaid
Services (CMS) to pay monthly premium payments for
medical/Medicare eligible members, where services are essential or
necessary for health and safety;
k. Proprietary subscriptions, proprietary publications and/or technical
manuals regardless of media format, up to $250,000. This includes
access to pre-existing proprietary research data through a non-IT
services contract, however “subscription” is not intended to include the
performance of any personal services (such as, but not limited to,
consulting, advice, research);
l. Rental of proprietary postage meters if they are interfaced and
intermembered with existing mailing equipment and there is only one
authorized manufacturer’s branch or qualified dealer representative
providing services for a manufacturer in a specified geographical area.
This exemption applies only in circumstances where annual postage
meter rental services are less than $100,000;
m. Departmental memberships in professional organizations, provided it is
solely a membership and does not include the performance of any
personal services. Note: Memberships for represented employees are
governed by applicable collective bargaining agreements and
memberships for non-represented employees are governed by CalHR
rules; (See SCM 1, section 3.23.)
n. Contracts for non-IT services training for state personnel if the cost of
the training contract does not exceed $50,000 and the cost of multiple
training contracts with a single contractor does not exceed $50,000
cumulatively in any 12-month period. (Historical reference: MM 11-05.)
The exemption is for pre-existing training courses; it does not cover
development of training or other personal or consulting services.
Agencies shall not split contracts to avoid competitive bidding or other
contract requirements. Agencies with recurring training needs should
assess the cumulative amounts departmentally and generally should
go out to bid if there are ongoing and/or department-wide needs.
o. The cost paid to a publication to place a solicitation advertisement,
when advertisement is required by law, such as public works
solicitation ads in a local newspaper and trade paper, or an A & E
solicitation ad in a professional society publication. (See SCM I §§
10.20, 11.05.)
State Contracting Manual – Volume I 86
p.
Contracts valued under $10,000. These contracts may be but are not
required to be advertised or competitively bid. State agencies may
obtain one price quotation from a responsible supplier that provides a
reasonable price; if, however, there is reason to believe a response
from a single supplier is not fair and reasonable, then the state agency
must obtain at least two price quotations from responsible suppliers.
State agencies should retain documentation establishing how the price
was determined to be fair and reasonable. Contracting entities should
consider the information in SCM Volume II for additional guidance.
Contracting entities are encouraged to consider obtaining price quotes
from certified Small Businesses and Disabled Veteran Business
Enterprises (SB/DVBE) for these contracts.
5.81 AMENDMENTS
(Rev 04/22)
Competitive bidding requirements and exemptions should be evaluated when
contemplating an amendment (PCC § 10335).
A. Amendments to competitively bid contracts. A competitively bid contract can only
be amended without NCB approval under the following circumstances:
1. The contract provides for the particular type of amendment (not merely a
generic statement about the parties being able to amend) and:
a. The additional years or additional tasks were anticipated and evaluated
in the IFB/RFP (i.e. exercise of an option to renew that was included in
the IFB/RFP); or
b. The amendment does one, but not both, of the following, and there is
no change in the scope of work:
i. Adds time only to complete performance, not to exceed one
year. Note: “time only” means time to complete performance of
the original agreement, such as extending the due date for a
final report on a fixed-fee agreement. An amendment that
provides for additional as-needed services (such as extended
use of hourly fee or pay-per-service type arrangements) is not
“time only” within the meaning of this exemption; or
ii. The amendment adds not more than 30% (not to exceed
$250,000) of the original contract. Note: this increase must be
supported by specific business reason, such as in a unit rate
contracts (e.g. per test, per sample, etc.) usage was higher than
the original good-faith estimates/multipliers used in the
solicitation. This permits flexibility when exceptional
unanticipated circumstances warrant; but it should not be used
in circumstances such as paying a contractor more on a fixed
fee bid, and should not be standard operating procedure.
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This time-or-money amendment exemption can only be used once.
Further amendments would require NCB approval or a new bid for
services. For example, a department cannot amend for time, then
attempt to amend to add money.
2. Amendments to existing contracts under the same terms and the same or
lower rates where a protest or other legal action delays the award of a new
contract. These amendments should only last during the period the protest
or legal action is pending until a new contract can be executed, but in no
case shall the amendment extend beyond six (6) months. (See SCM §
6.05.)
3. Amendments to an existing contract to correct incidental errors such as:
State’s clerical error in transposition of numbers from bid response to
contract, typographical errors in a contract number, name, or address, or
change in or omission of a contact name or phone number.
B. Amendments to statutorily exempt contracts. Determine if the statute supporting
the original award also supports exemption of the amendment.
C. Amendments to NCB contracts. Generally, an amendment to an NCB contract
will require a new NCB. An NCB contract can only be amended if the amendment
is within scope of the original NCB application and approval (e.g. amount, term,
scope of work, reason for not bidding, etc.). If the amendment changes
information originally described in the NCB, or is based on grounds other than
those described in the original NCB, a new NCB approval is needed for the
amendment. As a general rule: “Once an NCB, always an NCB.” Thus, for
example, if an agreement or amendment is awarded by NCB, agencies cannot
then add additional time or money using 5.81.A.1.
5.85 MULTIPLE AWARDS
(Rev 11/12)
Most agencies do not have statutory authority to make master contract/multi-vendor
type awards. In certain limited circumstances, agencies may develop multi-vendor
awards, provided the awards still follow the PCC methodology (i.e. IFB or primary RFP
award to low cost bidder or secondary RFP award to high point count proposal).
For example, if services are needed in several regions, an agency might develop a
consolidated solicitation to award multiple contracts, one per region. Alternatively, in
unique circumstances such as for essential services where a back-up contractor is
needed, an agency might develop a solicitation to award a primary and secondary
contract, with work going primarily to the first ranked contractor, and only then to the
back-up vendor(s) in order of next-best cost/score rankings, under specified conditions.
Absent express statutory authority, departments cannot award to a list of vendors and
then assign work through informal quotes or other rotational process. All work must be
directed to 1st rank (IFB low bid or RFP Secondary high point) vendor, before moving to
2nd ranked.
State Contracting Manual – Volume I 88
The solicitation must identify the number of awards to be made, how awardees will be
selected, and how work will be distributed (e.g. by region or by low bid or high point
count ranking). Any agency wishing to explore these options due to exceptional
circumstances requiring backup ranked contractors should first consult their assigned
DGS/OLS attorney.
5.90 CONTRACTS UNDER TEN-THOUSAND DOLLARS – PRICE
QUOTATION(S)
(Rev 04/22)
Contracts under $10,000 are not required to be advertised or competitively bid. State
agencies may obtain one price quotation from a responsible supplier that provides a
reasonable price; if, however, there is reason to believe a response from the single
supplier is not fair and reasonable, then the state agency must obtain at least two price
quotations from responsible suppliers. State agencies should retain documentation
establishing how the price was determined to be fair and reasonable. (Gov. Code, §
14827.3; Pub. Contract Code, § 10348.) Contracting entities are encouraged to
consider obtaining price quotes from certified Small Businesses and Disabled Veteran
Business Enterprises (SB/DVBE) for these contracts.
State Contracting Manual – Volume I 89
6. CONTRACT AWARD PROTESTS
6.00 INTRODUCTION
(Rev 04/22)
The protest process covered in this chapter applies only to non-IT services or consulting
services contracts that are awarded through an Invitation for Bid (IFB) or Request for
Proposal (RFP) process. Protests of other types of solicitations are summarized in
Section 6.30.
Legal references: PCC §§ 10341 - 10345 and Title 2 California Code of Regulations §§
1195 - 1195.6.
Some information about the rules to be followed in deciding a protest may be helpful. It
is generally the rule that the party challenging the decisions of an administrative agency
bears the burden of proof that the awarding agency has committed an error in the bid
process sufficiently material to justify invalidation of its proposed award, or that its
decisions are lacking a rational basis and are, therefore, arbitrary and capricious.
An example of a material error would be, among others, failure of the awarding agency
to follow pertinent State statutes and regulations or the provisions of its own bid
document. When scores of an Evaluation Committee are at issue, more than the
opinion of the protestant that scores should have been different, or that different scores
could have been awarded based on the same information, is required to invalidate
scoring decisions. In view of these parameters, the focus of the reviewing authority
(here, DGS) is usually whether the protestant has met its burden of proof that the
awarding agency has committed a material error in the conduct of the bid process.
6.01 TABLE OF CONTENTS
(Rev 11/12)
DESCRIPTION SECTION
Introduction 6.00
Table of Contents 6.01
Grounds for Protest 6.02
Protest Exclusions 6.03
Role of DGS in Contract Protest Hearings 6.04
Protest Affecting Vital Services 6.05
Procedure for Protesting an Award 6.10
Oral Hearing Guidelines 6.15
State Contracting Manual – Volume I 90
Decision on the Hearing 6.18
Costs of the Proceeding 6.19
Protests on Other Types Of Solicitations 6.30
Notification of the Right to Protest 6.35
Minimizing Protest Exposure 6.40
6.02 GROUNDS FOR PROTEST
(Rev 11/12)
A. Those who may protest are as follows:
1. For IFBs, any proposer who claims it is the lowest responsible bidder
meeting the specifications for the contract.
2. For RFPs, any proposer who claims that the State agency failed to follow
the procedures specified in either subdivision (b) or (c) of PCC § 10344.
B. There is no basis for protest if the awarding agency rejects all bids or proposals,
based on the best interests of the State.
6.03 PROTEST EXCLUSIONS
(Rev 11/12)
There is no jurisdiction for the DGS to consider a protest if:
A. The protestant was not a bidder or proposer;
B. The protestant has not alleged that it was the lowest responsible bidder or the
highest-scored proposer;
C. The protestant is not in a position to make a supportable assertion that it was the
lowest responsible bidder or should have been the highest-scored proposer;
D. The protest was not submitted timely;
E. The grounds for the protest do not meet the permissible grounds stated in the
PCC; or
F. The contract award is for a type of contract not subject to the protest procedures.
This category includes public works contracts awarded under the State Contract
Act (PCC §10100 et seq.); contracts for professional architecture or engineering
services under GC § 4525; contracts awarded under GC §§ 14838.5 and
14838.7.
State Contracting Manual – Volume I 91
6.04 ROLE OF DGS IN CONTRACT PROTEST HEARINGS
(Rev 11/12)
If the protest is based on permissible grounds, DGS will decide the protest and prepare
a written decision. Following confirmation by staff that legal prerequisites have been met
for a protest, the Director of DGS appoints a hearing officer who will:
A. Determine whether to review and decide the issues by written submission or oral
hearing.
B. Render a written decision within 30 days of the final submission of evidence.
6.05 PROTEST AFFECTING VITAL SERVICES
(Rev 11/12)
If a protest is filed and cannot be resolved before the need for vital services occurs, the
agency may extend an existing contract for up to six months at the same or lower rates.
The extension should indicate an end date of up to six months or the award of a new
contract, whichever occurs first. If there is no existing contractor, if the existing
contractor does not wish to continue, or if a longer extension is needed, an NCB would
be required.
6.10 PROCEDURE FOR PROTESTING AN AWARD
(Rev 6/17)
A. A contract award may not be made until one of the following occurs:
1. (IFB process) If the contract is not being awarded to the low bidder, the
agency must notify the low bidder at least five working days prior to award
that the contract is not being awarded to the low bidder. The notification
must be “by telegram, electronic facsimile transmission, overnight courier,
Internet transmission, or personal delivery.” (PCC § 10345(a).)
2. (IFB process) On written request from any bidder, the awarding agency
must post a notice of the proposed contract award in a place accessible by
the general public, including any Internet site identified in the IFB at least
five working days prior to awarding the contract. (PCC § 10345(a)(1).)
3. (RFP process) The agency must post a notice of the proposed contract
award in a place accessible by the general public, including any Internet site
identified in the RFP for at least five working days prior to awarding the
contract. (PCC § 10345(b).)
B. Inspection of bids is required as follows:
1. (IFB process) After bid opening, all bids shall be available for public
inspection. (PCC § 10342.)
State Contracting Manual – Volume I 92
2. (RFP process) All proposals and all evaluation and scoring sheets shall be
available for public inspection at the conclusion of the committee scoring
process. (PCC § 10344(c)(2).)
C. There are time limits in which to file a protest. A protest must be filed with the
agency and DGS after notice of intent to award the contract if notice was
required, but before the actual award. (PCC § 10345.)
D. Once a protest is filed, the contract may not be awarded until the protest is
withdrawn or DGS has rendered a decision. (PCC §§ 10345(a)(2), 10345(b)(1).)
E. After filing a protest, the protestant has five (5) calendar days to file a detailed
written statement of the protest grounds if the original protest did not contain the
complete grounds for the protest. (PCC §§ 10345(a)3), 10345(b)(2).)
F. Upon receipt of a protest, DGS/OLS:
1. Sends the protestant an acknowledgment letter which includes copies of the
protest statutes and regulations and informs the protestant that it must
submit a full and complete statement specifying grounds of protest within
five calendar days of filing of the notice of protest.
2. Requests information on a designated form from the awarding agency
regarding the agency contact person and other administrative details. The
agency should complete and return the form to DGS/OLS within 24 hours.
Failure to promptly complete and return the form will delay the protest
process. In addition, if the agency is aware of any reason that the protest
should not go forward, this would be communicated to DGS/OLS at this time
(See SCM 1, section 6.03).
3. Reviews the protest to determine whether DGS has jurisdiction. If DGS
does not have jurisdiction, DGS/OLS issues a written notice of dismissal.
4. Assigns a Hearing Officer to the protest if DGS has jurisdiction. The Hearing
Officer determines whether the protest will be resolved by written
submission or public oral hearing.
a. Written Submission Process: DGS/OLS sends a Hearing Notice to all
interested parties, setting the due date for written submissions.
b. Oral Hearing Process: DGS/OLS sends a Hearing Notice to all
interested parties of the date, time and place of the hearing at least five
(5) calendar days before the hearing date. The Hearing Notice will also
include a due date for written submissions. DGS/OLS will arrange for
the hearing to be recorded.
State Contracting Manual – Volume I 93
6.15 ORAL HEARING GUIDELINES
(Rev 11/12)
A. The hearing is conducted as a fair hearing;
B. Informal procedures are followed;
C. No oath is given;
D. Witnesses and participants are advised to be truthful, accurate, and to the point;
E. Liberal rules of evidence apply;
F. Comments must be relevant to the protest issues;
G. Statements may be allowed from the interested parties, their witnesses, or
authorized representatives;
H. Cross-examination may be permitted at the discretion of the hearing officer; and
I. All interested parties are given the opportunity to present their positions.
6.18 DECISION ON THE HEARING
(Rev 11/12)
The hearing officer’s decision is a final administrative decision based on the record
produced. The decision will recite the basis for the hearing officer’s decision. DGS has
no jurisdiction to consider any appeal to the hearing officer’s decision.
6.19 COSTS OF THE PROCEEDING
(Rev 6/17)
A. All DGS costs of the protest proceeding are charged to the State agency
involved.
B. For Oral Hearings, any interested party may arrange to have a court reporter
present at that party’s cost and parties may request copies of transcripts from the
court reporter at their own cost.
6.30 PROTESTS ON OTHER TYPES OF SOLICITATIONS
(Rev 6/17)
A. Protests about contracts for commodities, telecommunications, and IT goods and
services are made to DGS or the Department of Technology, in accordance with
applicable codes (see, e.g., PCC §§ 10306, 10326.2(d), 12102.2(g), 12125).
B. Protests about contracts for public works, grants, A&E services, repair or
maintenance of personal property, or any other type of solicitation not specifically
covered by another statute may be heard by DGS if both parties agree to its
jurisdiction.
State Contracting Manual – Volume I 94
6.35 NOTIFICATION OF THE RIGHT TO PROTEST
(Rev 04/22)
A. Agencies should include information for protesting the award of contracts in all
IFBs and RFPs. This should advise protestants that the initial protest letter
followed within five calendar days by a detailed, written statement of protest,
(both of which should include the IFB/RFP number, and the name of the State
agency involved and the agency contract person) should be submitted to both of
the following:
• Department of General Services
Office of Legal Services
Attention: Bid Protest Coordinator
707 Third Street, 7th Floor, Suite 7-330
West Sacramento, CA 95605
Email: OLSProtes[email protected].gov
• The awarding agency [insert contracting department’s name,
address, and email/fax number if electronic filing is accepted]
B. Protests may be sent to DGS by regular mail, email, courier or personal delivery.
Protestants should include their email address if they have one and advise the
DGS Bid Protest Coordinator if they will accept service of documents pertaining
to the protest via email.
6.40 MINIMIZING PROTEST EXPOSURE
(Rev 11/12)
To minimize protest exposure and to enhance the likelihood of prevailing at a hearing,
the agency should ensure that:
1. All solicitation packages are prepared with the appropriate clauses, phrases,
and documents, and each is in compliance with all statutory and policy
requirements;
2. All solicitation packages are written with clear and easily understood
instructions;
3. Evaluators are carefully instructed on the evaluation approach to be used;
4. Sound decisions are made when determining a bidder’s responsiveness to
IFB or RFP requirements;
5. All bidders are treated fairly and impartially;
6. All bidders are given access to identical information and facts about the bid
documents, statement of work, and qualification requirements;
7. The waiver of immaterial defects in any one bid or proposal does not unduly
prejudice other bids or proposals or affect the price;
State Contracting Manual – Volume I 95
8. Bidders are given timely and prompt access to all applicable IFB or RFP
evaluation materials following the posting of a notice of intent to award; and
9. All inquiring bidders are informed of the reasons their bids or proposals are
deemed nonresponsive.
State Contracting Manual – Volume I 96
7. MISCELLANEOUS CONTRACTING ISSUES
7.00 INTRODUCTION
This chapter covers miscellaneous contracting issues that arise in various types of
contracts.
7.01 TABLE OF CONTENTS
(Rev 6/17)
DESCRIPTION SECTION
Introduction 7.00
Table of Contents 7.01
Civil Service Considerations and Union Notice 7.05
Conflicts of Interest 7.10
Intellectual Property 7.11
Reporting of Contracting Practices 7.15
Prompt Payment 7.20
Payee Data Record 7.25
Equipment Purchases 7.29
Contract Budgets 7.30
Availability of Funds 7.31
Advance Payments 7.32
Progress Payments 7.33
Contract Payment by State Purchase Card, Cal-Card 7.34
Insurance Requirements 7.40
Contracts with No Dollar Amount 7.45
Audits 7.50
Drug-Free Workplace Act of 1990 7.55
Equipment Rental Agreements 7.60
State Contracting Manual – Volume I 97
Purchase Options 7.61
Lease/Purchase Analysis for Equipment 7.62
Nondiscrimination Program 7.65
Recycled Product Content 7.70
Multiple Year Contracts 7.80
Contract Termination Clauses 7.85
Indemnification 7.86
Breach of Confidentiality by Contractor 7.90
7.05 CIVIL SERVICE CONSIDERATIONS AND UNION NOTICE
REQUIREMENTS
(Rev 04/22)
A. Basic considerations are as follows:
Contracting for Personal Services, in lieu of using civil service personnel, is permitted
only if the standards outlined in GC § 19130 (a) or (b) are met. (See 2 and 3 below.)
1. Section 19130(a) permits contracting for personal services to achieve cost
savings.
a. Any State agency proposing to execute a contract based on cost
savings to the State as justification for not using civil service personnel,
must first notify the State Personnel Board of its intention (GC § 19131;
2 CCR section 547.69).
b. Section 547.73 of the SPB regulations provides that the cost savings
achieved shall be either 10% or more of the civil service costs of
performance or shall be at least $50,000 in 1988 dollars (as annually
adjusted and communicated by SPB) and at least 5% of the civil
service cost of performance. Pursuant to SPB Memorandum, as of
January 17, 2017, the 1988 dollar equivalent, as adjusted under the
California Consumer Price Index, is $105,757.178. (See SPB website
for future annual updates.)
c. When submitting a GC §19130(a) contract to DGS/OLS for approval,
the contracting department must include a copy of the Notice of Intent
filed with the SPB and, if an employee organization requested review,
a copy of SPB’s decision.
State Contracting Manual – Volume I 98
2. GC § 19130(b) permits contracting for personal services when any of the
requirements of GC § 19130(b) are met. (See also SPB Regulations 2 CCR
§ 547.60.)
a. Contracts awarded on the basis of GC § 19130(b) are subject to
review at the request of an employee organization representing State
employees. For standards of review see PCC § 10337.
b. SPB regulations require that whenever an agency executes a personal
services contract under GC § 19130(b), the agency shall document,
with specificity and detailed factual information, the reasons why the
contract satisfies one or more of the conditions specified in GC §
19130(b).
1) The written justification shall be signed by a person who is
authorized to do so and who signs based on his or her personal
knowledge, information, or belief that the written justification
correctly reflects the reasons why the contract satisfies GC §
19130(b). The date of signing, the representative’s name, title,
address, email address, and telephone number shall be included
and legible. (Tit. 2 CCR § 547.60(a).)
2) The agency shall maintain the written justification for the duration
of the contract and any extensions of the contract or in
accordance with the record retention requirements of Tit. 2 CCR §
26, whichever is longer. (Tit. 2 CCR § 547.60(b).)
3) If approval from DGS is required for a contract covered by GC §
19130(b), the agency shall include with its contract transmittal the
written justification described in Tit. 2 CCR § 547.60. (Tit. 2 CCR
§ 547.60.1.)
c. Departments must retain all data and information relevant to the
contract and necessary for a specific application of the standards set
forth in GC § 19130(b) in the event that the State Personnel Board’s
review is requested. For standards of review see PCC § 10337.
B. GC § 19130(c) requires that all persons who provide services to the State under
conditions that constitute an employment relationship shall, unless exempted by
Article VII (Section 4) of the California Constitution, be retained under an
appropriate civil service appointment. Therefore, State law and policy require that
each State agency’s contract for services with individuals be executed and
administered in a manner consistent with the establishment of an independent
contractor status and not the creation of a civil service appointment. (See Labor
Code §§ 2750.3, 3351; Unemp. Ins. Code § 621.)
State Contracting Manual – Volume I 99
C. Contract disapproval by the SPB: GC § 19135 provides:
1. If a contract is disapproved by SPB or its delegate, a state agency shall
immediately discontinue that contract unless ordered otherwise by SPB or
its delegate. The state agency shall not circumvent or disregard SPB’s
action by entering into another contract for the same or similar services or to
continue services that were the subject of the contract disapproved by SPB
or its delegate.
2. A state agency ordered to discontinue a contract shall serve notice of the
discontinuation of the contract to the vendor within 15 days from the SPB’s
final action unless a different notice period is specified. A copy of the notice
must also be served on the SPB and the employee organization that filed
the contract challenge. Failure to serve this notice may be grounds for
rejection of future contracts for the same or similar services that were
discontinued.
D. When contracting outside state civil service pursuant to one or more of the
conditions set forth in Government Code section 19130(b), agencies must
comply with applicable statutory, regulatory and MOU requirements to provide
notice to unions. This notice is required for original contracts and amendments.
1. Government Code section 19132 union notice requirements.
a. Unless a personal services contract pursuant to GC 19130(b) is
necessary due to a sudden and unexpected occurrence that poses a
clear and imminent danger requiring immediate action to prevent or
mitigate the loss or impairment of life, health, property, or essential
public services, the contract shall not be executed until the state
agency proposing to execute the contract has notified all organizations
that represent state employees who perform the type of work to be
contracted. (GC § 19132(b)(1).)
b. The notice shall include the following: a full copy of the proposed
contract, information to enable employee organizations to determine
the type of work to be performed under the contract, applicable
exemption criteria under Government Code section 19130(b),
estimated value of the contract, the contract term and the employee
organizations notified of the contract If the contracting agency cannot
determine which employee organizations should be notified or
concludes that no represented employees perform or could perform
the work, the contracting agency shall notify all employee
organizations representing each of the bargaining units within state
civil service. To the extent allowed by the California Public Records Act
or other law, the notifying agency may redact specific confidential or
proprietary information from the notice. (GC § 19132(b)(2); GC § 6250
et seq.; Tit. 2 CCR § 547.60.2.)
State Contracting Manual – Volume I 100
c.
DGS has established a process for agencies to certify notification
compliance. (GC § 19132(b)(3); historical reference: MM 14-01.)
i. Notifications shall be made to the employee organization
contacts identified in their respective bargaining unit
agreements or as otherwise indicated by the employee
organization. CalHR will maintain a list of these representatives
on its website: https://www.calhr.ca.gov/state-hr-
professionals/Pages/personal-services-contracts.aspx
ii. Contracts requiring DGS approval shall not be submitted for
approval until all parties have signed and the appropriate
employee organizations notified.
iii. Certification of compliance shall be made by the highest level
official of the contracting agency or his or her designee.
a) For contracts requiring a STD 215, the certification is done
as indicated on the STD 215 (check box and signature).
b) For contracts not requiring a STD 215, the certification
shall be on a separate signed sheet in the contract file that
says: “I hereby certify compliance with Government Code
Section 19132(b)(1).”
iv. It is recommended that notice be provided as soon as a fully
developed contract is available to enable reasonable time for
review. This timing could vary depending on the type,
complexity, amount, and method of contract award.
v. The law does not specify the mode of communication. Notice
could be done, for example, electronically by email, mailing
electronic media, or posting to a website that automatically
notifies the union representative(s) and that provides easy
access to the full copy of the proposed contract.
2. Bargaining Unit 2 notice requirements: Government Code section 11045
establishes separate notice requirements for legal services contracts. (See
SCM 3.07.B and C.)
3. Other bargaining unit notice requirements: Some bargaining unit
contracts/MOUs have additional requirements for providing notice of
solicitations and/or contracts to affected unions. Agencies should review
bargaining unit contracts/MOUs to ensure the agencies are aware of and
are complying with these notifications.
State Contracting Manual – Volume I 101
7.10 CONFLICTS OF INTEREST
(Rev 6/17)
A. IS THERE A CONFLICT OF INTEREST? The phrase “conflict of interest” covers
several subjects. It requires State agencies to closely examine who is doing the
work under the contract. Agencies should develop a plan to review conflict of
interest issues.
IS OR WAS THE CONTRACTOR A STATE EMPLOYEE? State agencies need
to determine whether the contractor is a former or current State employee who is
prohibited from contracting under the PCC §§10410 – 10411 or GC 87401 et
seq.
1. CONSULTANT CONTRACTS: State agencies must determine whether a
consultant’s proposed duties create any reporting requirements under the
Political Reform Act.
Under some circumstances, consultants may be required to report
economic interests; may be prohibited from receiving gifts; and/or may be
disqualified from participating in certain decisions. Covered consultants may
include:
a. Individuals performing services acting as a consultant with authority to:
• Approve a rate, rule or regulation.
• Adopt or enforce a law.
• Issue, deny, suspend, or revoke any permit, license, application,
certificate, approval, order, or similar authorization or
entitlement.
• Authorize your agency to enter into, modify, or renew a contract
provided it is the type of contract that requires agency approval.
• Either grant agency approval to a contract that requires your
agency’s approval and to which your agency is a party; or grant
approval to the specifications for such a contract.
• Grant agency approval to a plan, design, report, study, or similar
item.
• Adopt, or grant agency approval of, policies, standards, or
guidelines for the agency, or for any subdivision of the agency.
b. Individuals who serve, under contract, in a staff capacity with the
agency and in that capacity participate in making a governmental
decision as defined in 2 CCR 18702.2.
c. Individuals who perform the same or substantially all the same duties
for the agency that would otherwise be performed by an individual
State Contracting Manual – Volume I 102
holding a position specified in the agency's Conflict of Interest Code
under GC § 87302.
2. IS THERE A PROHIBITED FINANCIAL INTEREST PRESENT? State
employees and certain consultants may be prohibited from participating in
decisions or participating in “making contracts” if they have a financial
interest. See GC §1090 et seq. and GC § 87400 et seq. Contracts made in
violation of GC § 1090 are void (GC § 1092).
3. IS THERE A FOLLOW-ON CONTRACT INVOLVED? Consultants are
prohibited from bidding on, or being awarded a contract that is required,
suggested, or otherwise deemed appropriate in the end product of a
previous consulting contract with them. See PCC § 10365.5 to determine
applicability.
B. RESOURCES
1. Fair Political Practices Commission: see Fair Political Practices Commission
Homepage
2. Examine your department’s Conflict of Interest Code to determine the
reporting requirements for covered consultants.
3. Ethics Training: On line training (DOJ), see:
www.caag.state.ca.us/consultants/index.htm and
www.caag.state.ca.us/ethics/index.htm.
4. Your departmental legal office.
C. AGENCY RESPONSIBILITY
1. Agencies/departments must indicate on the Std. 215 that they have
evaluated the proposed contract for any potential conflict of interest issues.
2. It will be presumed that an affirmative (“Yes”) indication means that the
department has made a determination that there are no facts known or
reasonably known that would disqualify the proposed contractor from legally
performing the contract.
3. DGS reserves the right to conduct an independent review for conflicts of
interest during the course of its standard contract review. However, this
does not relieve agencies from performing their review per B.2., above.
7.11 INTELLECTUAL PROPERTY
(New 04/22)
State agency services contracts may include Intellectual Property (IP) components, as
described below. By statute, DGS was designated as the agency responsible for
creating and implementing the state’s first IP program to help maximize the value of
state-owned IP while at the same time promoting the public benefit. (GC § 13988.)
When a contract implicates the state’s IP interests, the contract should be drafted to
State Contracting Manual – Volume I 103
include language that protects the state’s interests. Additional information about DGS’s
IP program can be found on DGS/OLS’s website.
A. Intellectual Property. “Intellectual property” (IP) means intangible assets that
are subject to statutory protection under applicable patent, copyright, and
trademark law. Intellectual property includes, but is not limited to, inventions,
industrial designs, identifying marks and symbols, electronic publications, trade
secrets, and literary, musical, artistic, photographic, and film works. (GC §
13988.1(d).)
B. DGS Intellectual Property Program. DGS’s IP program includes:
1. Intellectual Property Database. Developing a database of IP resources to
track state-owned IP. The law requires state agencies to cooperate by,
among other things, providing an agency list of IP resources to DGS by
November 30, 2016, with updates to be provided annually thereafter on a
form prescribed by DGS.
2. Intellectual Property Management Plan. DGS has created a sample
management plan for state-owned IP that includes factors state agencies
should consider when deciding whether to sell or license their IP and issues
related to placing state-funded IP into the public domain. It is recommended
state agencies adopt this plan to better protect IP assets.
3. IP Outreach Campaign. DGS is charged with developing an outreach
campaign informing state agencies of their rights concerning IP created by
their employees.
a. DGS has formed an IP Advisory Group consisting of
representatives of various state agencies to assist in the
development of IP policies, procedures, and contractual forms, and
to guide the direction of the state’s IP efforts.
b. DGS will also periodically reach out to state agencies and
departments about IP rights, abilities, and resources though a
variety of channels.
4. Contractual Provisions Regarding IP. DGS has developed recommended
forms and contractual provisions regarding IP ownership and related issues.
With respect to Contractor obligations, it is recommended that each agency
or department require the Contractor to represent that it is the owner or
authorized user of any third party IP used in a project, to warrant that it has
the legal right to use third party IP connected with a project, and to grant the
State of California a fully-paid license to use third party IP arising from or
included in a project.
5. DGS IP Web Portal. Further information and resources are located at the
DGS IP web portal at https://olsip.apps.dgs.ca.gov/.
State Contracting Manual – Volume I 104
7.15 REPORTING OF CONTRACTING PRACTICES
(Rev 04/22)
A. PCC § 10111 requires DGS to provide a report on contracting activity.
Accordingly, State agencies must report information about the following to DGS’s
Office of Small Business and Disabled Veteran Business Enterprise Services
(OSDS) annually by August 1 (using DGS PD 810 forms):
1. Consulting services contracts (PCC § 10111(a));
2. Noncompetitively bid consulting services contracts (PCC § 10111(a)(4));
3. Consultant contracts (PCC § 10111(b));
4. Disabled Veteran Business Enterprise (DVBE) participation in contracts
(PCC §§ 10111(d), 10111(e)(7));
5. Small business (SB) and microbusiness (MB) participation in contracts
(PCC § 10111(e)); and
6. Contractor participation by race, ethnicity, gender, and sexual orientation to
the extent these characteristics have been voluntarily reported (PCC §
10111(f)).
B. Annual reporting must include but is not limited to the SB/DVBE participation on
all state contracts, purchase orders and Cal-Card purchases, to ensure that
annual participation goals are met. This report is known as the Consolidated
Annual Report (CAR) and is filed using either FI$Cal or the DGS PD 810 forms.
When reporting these activities, state agencies must ensure the accuracy of this
data by implementing and conducting a thorough review of the proposed report
prior to submission to DGS. This review must also include a sampling of the
state agency’s highest dollar value contracts that included DVBE, MB, SB,
Nonprofit Veteran Service Agencies, Small Business for the purpose of public
works, and sub-contracting participation. This sampling must verify and
reconcile:
• The amounts awarded.
• The certification status at time of contract award.
State agencies must save and make available upon request to DGS a written
statement signed by the Procurement and Contracting Official confirming
completion of the review of the CAR, which shall include:
• An itemized list of the sampled contracts.
• A brief explanation of the review sampling methodology applied.
C. For those departments that are transacting business in FI$Cal, reports can be
compiled and transmitted through FI$Cal. For departments that are not
transacting business in FI$Cal, Volume 2 of the State Contracting Manual and
the Procurement Division’s web page
State Contracting Manual – Volume I 105
(https://www.dgs.ca.gov/PD/Services/Page-Content/Procurement-Division-
Services-List-Folder/File-a-Consolidated-Annual-Report) contain information and
instructions regarding forms to provide in connection with reporting requirements
and where to send the reports, as well as the dates by which reports must be
submitted.
D. In addition, State agencies are required to report information on the following:
1. Late payments to DGS/OSDS, on an annual basis, within 90 calendar days
following the end of each fiscal year (GC § 927.9);
2. Contract award STD 16 (to DFEH at CompliancePrograms@dfeh.ca.gov,
within 10 days of contract award (GC § 12990(b); 2 CCR 11114); and
3. Independent Contractors (to the Employment Development Department, on
Form DE 542, within 20 days of entering into a contract or contracts that in
the aggregate equal or exceed $600 in any year (Unemployment Insurance
Code § 1088.8(c)).
E. Post-evaluation of non-IT consulting contracts. (Also see SCM I, § 3.02.5.)
1. State agencies are required to prepare post evaluations on form STD 4 for
all completed consulting services contracts of more than $5,000 or more
(PCC §§ 10367, 10369).
2. Post-evaluation forms must be prepared within 60 days of completion of the
contract (PCC § 10369(d)).
3. Copies of all post-evaluations must be kept on file by the awarding State
agency for a period of 36 months (PCC § 10369(e)).
4. One copy of an unsatisfactory evaluation must be placed in the State
agency’s contract file, and another copy must be sent to DGS/OLS (PCC §
10369(e)). A State agency’s failure to send a negative (unsatisfactory) post-
evaluation to DGS may be grounds for rejection of future contracts or
modifications of that agency’s exemptions (PCC § 10370).
5. An unsatisfactory evaluation must be sent to the contractor within 15 days.
The contractor has the right, within 30 days of receipt of an unsatisfactory
evaluation, to submit a written response that shall be filed both with the
unsatisfactory evaluation in the State agency’s contract file and DGS (PCC
§ 10369(f)).
7.20 PROMPT PAYMENT
(Rev 04/22)
A. Prompt Payment Act and late payment penalty. Under GC § 927 et seq., State
agencies which acquire property or services pursuant to a contract with a
business must pay that business for each complete delivered item of property or
services within 45 days from the date set forth in the contract or, if no payment
State Contracting Manual – Volume I 106
date is specified in the contract, submit a correct claim schedule to the State
Controller’s Office (SCO) within 30 calendar days after receipt of the undisputed
invoice. The SCO must pay the business within 15 days of receipt of the invoice
from the State agency. The clock starts to run when an invoice is received by the
department, not when it is received by the accounting office. DGS/OLS will not
approve any contracts with payment periods longer than 45 days.
If payment is not made within the times specified above, an interest penalty fee
at a rate of 1% above the Pooled Money Investment Account earning rate for the
previous year must be paid. For non-small businesses, the penalty is waived if
the penalty is $100.00 or less. (See GC § 927.6 and SAM § 8474).
B. Small business prompt payment. Additional provisions apply for certified small
businesses (GC § 927.6(a) and SCM 1, chapter 8).
7.25 PAYEE DATA RECORD
(Rev 11/12)
A. Each contractor who enters into a contract with the State must provide a
taxpayer identification number; i.e., the Federal Employer Identification Number
or the Social Security Number that has been assigned to the contractor by the
Federal government. The taxpayer identification number is entered on the Payee
Data Record – STD 204, which is to be retained in the awarding agency’s
accounting or business services office. A Taxpayer ID number is not required for
a reimbursement contract.
B. The law requires that any agency requesting the disclosure of a social security
number must advise the provider as follows:
1. Whether disclosure is mandatory or voluntary
2. By what statutory authority the number is solicited
3. The intended use of the number
7.29 EQUIPMENT PURCHASES
(Rev 11/12)
A. When equipment is purchased or built with State funds as part of the contract the
contract must clearly state that title to any equipment purchased or built with
State funds will vest in the State. On termination of the contract, the State may:
1. Request such equipment be returned to the State, with costs incurred by the
contractor for such return being reimbursed by the State.
2. Authorize the continued use of such equipment for work to be performed
under a different agreement or contract.
B. The State may, at its option, repair any damage or replace any lost or stolen
items and deduct the cost thereof from the contractor’s invoice to the State, or
State Contracting Manual – Volume I 107
require the contractor to repair or replace any damaged, lost, or stolen equipment
to the satisfaction of the State with no expense to the State. In the event of theft,
a report must be filed immediately with the CHP (SAM § 8643).
C. The contractor should maintain an inventory record for each piece of non-
expendable equipment purchased or built with funds provided under the terms of
a contract. The inventory record of each piece of such equipment should include
the date acquired, total cost, serial number, model identification (on purchased
equipment), and any other information or description necessary to identify said
equipment. Non-expendable equipment so inventoried are those items of
equipment that have a normal life expectancy of one year or more and an
approximate unit price of $5,000 or more. In addition, theft-sensitive items of
equipment costing less than $5,000 should be inventoried. A copy of the
inventory record must be submitted to the State on request by the State (SAM §
8600).
D. Procedures for the handling and accounting of equipment through contracts are
the same as that for handling through regular State purchasing.
7.30 CONTRACT BUDGETS
(Rev 3/03)
A. The following items should be included and all unit rates must be extended and
totaled:
1. Personal service costs showing individual or position rates per unit of time;
2. Fringe benefits cost citing actual benefits or a percentage of personal
services cost;
3. Operating expenses including rent and supplies;
4. Equipment costs specifying equipment to be bought and the disposition of
equipment at the end of the contract;
5. Travel expenses and per diem rates set at the rate specified by CalHR for
similar employees or verification supplied that such rates are not available
to the contractor;
6. Overhead;
7. Other specific breakdown required.
B. A consultant services contract must contain the above items to meet
requirements of PCC § 10371(c).
State Contracting Manual – Volume I 108
7.31 AVAILABILITY OF FUNDS
(Rev 3/03)
A. If the contract funding spans more than one fiscal year’s appropriation, the
contractor must be advised in writing as follows:
This contract is valid and enforceable only if sufficient funds are made available
by the Budget Act of the appropriate fiscal year for the purposes of this program.
In addition, this contract is subject to any additional restriction, limitations or
conditions enacted by the Legislature, which may affect the provisions, terms, or
funding of this contract in any manner.
B. Services should be paid for out of the funding for the fiscal year during which
they are rendered.
7.32 ADVANCE PAYMENTS
(Rev 04/22)
Advance payments by the State are permitted only when specifically authorized by
statute and should be made only when necessary. Contracts or agreements containing
provisions for advance payments by the State should preferably provide for small
periodic payments rather than the total contract price or lump-sum advances (GC §§
11256 – 11263, 11019 and 12502).
7.33 PROGRESS PAYMENTS
(Rev 3/03)
A. A progress payment is a partial payment for a portion or segment of the work
needed to complete a task.
B. Not less than 10% of the contract amount shall be withheld pending final
completion of the contract. If a contract consists of the performance of separate
and distinct tasks, then any funds withheld for a particular task may be paid upon
completion of that task (PCC § 10346).
Note: Separate and distinct tasks do not usually occur when the contract
is for a finished project report or plan. To determine whether a particular
task is separate and distinct you must decide if later tasks build on it. For
example, if the contract requires the writing of a manual the completion of
each chapter is not a separate and distinct task. The 10% withhold should
not be paid until the manual is completed satisfactorily.
C. No State agency shall make progress payments on a contract unless it first has
established procedures approved by DGS/OLS, to ensure that the work or
services contracted are being delivered in accordance with the contract (PCC §
10346).
State Contracting Manual – Volume I 109
D. Recommended policy for State agencies:
1. Discourage progress payments whenever possible.
2. Do not allow progress payments on contracts of less than three (3) months.
3. If progress payments are to be made, they should be made not more
frequently than monthly in arrears or at clearly identifiable stages of
progress, based upon written progress reports submitted with the
contractor’s invoices.
4. Progress payments should be based on at least equivalent services
rendered. (Hours worked should not be the sole basis for progress
payments.)
5. Progress payments shall not be made in advance of services rendered.
6. Contracts shall require a withhold of 10% of each progress payment either
pending satisfactory completion of the contract or completion of a separate
and distinct task.
Note: If the contract is competitively bid this term should be
noted in the bid
7. Establish a procedure to indicate the amount to be withheld on invoices.
8. Establish a procedure to obtain the amounts withheld.
7.34 CONTRACT PAYMENT BY STATE PURCHASE CARD, CAL-
CARD
(Rev 6/17)
Cal-Card is a payment mechanism only. It shall not be used to circumvent service
contracting rules.
If you intend to use Cal-Card as a payment mechanism, place this information in your
solicitation document and contract.
CAL-Card Payment Provisions are required to follow this basic format:
“CAL-Card PAYMENT PROVISIONS”:
Upon receipt of an itemized invoice, in arrears, stating the goods/services
provided, time period covered, detailed costs and the contract number, the
Contract Manager will notify the Contractor of payment authorization. The
Contractor will provide the Contract Manager a copy of the itemized,
transaction receipt showing payment was received, the invoice, the
contract number and the CAL-Card card verification number charged.
State Contracting Manual – Volume I 110
Contractor to send invoices to:
Name, mailing address and phone number of the Contract
Manager/Cardholder.
Name, mailing address and phone number of Contractor payment
authorization contact.
Additional information regarding the CAL-Card Program is located on the
DGS/PD website.
Questions regarding the CAL-Card Program may be directed to the Statewide CAL-
Card Contract Administrator, Department of General Services, Procurement Division,
707 Third Street, 2nd Floor, West Sacramento, CA 95605,
http://www.dgs.ca.gov/pd/Programs/CALCard.aspx.
7.40 INSURANCE REQUIREMENTS
(Rev 11/12)
A. For most types of services contracts, departments retain responsibility for
assessing the need for and the amount of insurance, obtaining proof of
insurance, and including appropriate solicitation and contract language as
applicable.
B. Contracts for hazardous activities are required to have insurance (See SCM 1,
section 3.12). Insurance for hazardous activities shall meet the following
requirements:
1. The insurance must be issued by an insurance company acceptable to
DGS/ORIM or be provided through partial or total self-insurance acceptable
to DGS/ORIM.
2. The contractor must furnish to the State a certificate of insurance showing
that a limit of liability of not less than $1,000,000 per occurrence for bodily
injury and property damage liability combined, is presently in effect for the
contractor.
Note: $1,000,000 per occurrence is the minimum acceptable
limit of insurance; higher limits should be required in cases of
higher-than-usual.
3. At a minimum, the certificate of insurance shall show that the contractor is
protected through commercial general liability insurance. Additional
insurance may be required. Please refer to the following list of examples:
• Automobile Liability – if motor vehicles are used in the performance of
the work.
• Aircraft Liability – if an aircraft is used in the performance of the work.
• Crime Coverage – if work involves handling of State money or securities.
State Contracting Manual – Volume I 111
• Pollution Liability – if work involves the handling of hazardous waste or
the application of chemicals.
• Professional Liability – if work is of a professional nature such as
physicians, architects, engineers, accountants, or consultants.
• Watercraft Liability – if watercraft is used in the performance of the work.
• Workers’ Compensation – a statutory requirement for contractors with
employees.
4. Contractor is responsible to notify the State within 5 business days of any
cancellation, non-renewal or material change that affects required insurance
coverage.
5. The policy(ies) must provide additional insurance language as follows:
The State of California, its officers, agents and employees are included as
additional insured, but only with respect to work performed for the State of
California under the contract. The additional insured endorsement must
accompany the certificate of insurance.
6. The certificate of insurance shall meet such additional standards as may be
determined by the contracting State agency, either independently or in
consultation with DGS/ORIM, as necessary for protection of the State.
Note: DGS/ORIM is available to provide additional consultation on all
insurance and liability matters.
7.45 CONTRACTS WITH NO DOLLAR AMOUNT
In agreements in which only in-kind services are used and in which the performance is
other than monetary, the consideration must be valued on a monetary basis for the
purpose of determining whether DGS/OLS approval is required.
7.50 AUDITS
(Rev 04/22)
A. Audit Requirement: All contracts for expenditure of public funds in excess of
$10,000 must contain a clause stating that the contract is subject to audit by the
State Auditor (GC § 8546.7). Also, federally funded contracts are often subject to
audit in accordance with Federal regulations. In addition, the awarding agency
has the general responsibility for determining compliance with the terms and
conditions of its contracts and may have need of contractual audit authority.
B. Records Keeping and Retention: To facilitate being able to conduct an audit, if
needed, the contractor must agree to maintain the records involved with the
performance of the contract and to make those records reasonably available for
audit. The minimum period of time for retention of contract records is three years
after final payment of the contract (GC § 8546.7). In the event of a contract
performance or payment dispute, this minimum is extended until the dispute is
State Contracting Manual – Volume I 112
resolved. The awarding agency should not impose a longer records retention
requirement or more detailed record keeping requirements unless there is a
specific need to do so. If there is a need for longer retention or more detailed
records, a clause covering these subjects should be tailored for the contract in a
fashion that does not conflict with the clauses below. The Attorney General
recommends a record retention of seven (7) years.
C. Contract Audit and General Records Keeping Clause: The following clause
meets the above requirements and must be included in all contracts of $10,000
or more regardless of the form of contract used. This clause should be sufficient
to meet most State and Federal needs. If your agency has a need for a different
standard audit clause, the clause should be submitted to DGS/OLS for review
with an explanation as to the necessity of the differences.
“Contractor agrees that the awarding department, the Department of
General Services, the Bureau of State Audits, or their designated
representative shall have the right to review and to copy any records and
supporting documentation pertaining to the performance of this
Agreement. Contractor agrees to maintain such records for possible audit
for a minimum of three (3) years after final payment, unless a longer
period of records retention is stipulated. Contractor agrees to allow the
auditor(s) access to such records during normal business hours and to
allow interviews of any employees who might reasonably have information
related to such records. Further, Contractor agrees to include a similar
right of the State to audit records and interview staff in any subcontract
related to performance of this Agreement (GC § 8546.7, PCC § 10115 et
seq., CCR Title 2, §1896). Contractor shall comply with the above and be
aware of the penalties for violations of fraud and for obstruction of
investigation as set forth in PCC § 10115.10.”
D. All contracts containing DVBE participation goals as discussed in SCM 1, chapter
8 must contain an audit clause (CCR § 1896.77.) The minimum period of time
for retention of DVBE records provided by a contractor pursuant to Military and
Veterans Code section 999.5 is six years after collection. (Mil. & Vets. Code §
999.55.) Contracts involving DVBE participation should include a provision with
this retention requirement.
7.55 DRUG-FREE WORKPLACE ACT OF 1990
(Rev 6/17)
The Drug-Free Workplace Act of 1990 (GC § 8350, et seq.) requires State contractors
and grantees to certify that they will provide a drug-free workplace.
The certification language is set forth in State standard form STD 21.
Alternatively, the required certification appears in the State’s standardized Contractor
Certification Clauses (CCCs) which are incorporated by reference in the State’s
standard General Terms and Conditions (GTCs).
State Contracting Manual – Volume I 113
7.60 EQUIPMENT RENTAL AGREEMENTS
A. Unless it has specific statutory authority, a State agency cannot agree to:
1. Indemnify a contractor;
2. Assume responsibility for matters beyond its control;
3. Agree to make payments in advance;
4. Accept any other provision creating a contingent liability against the State;
or
5. Agree to obtain insurance to protect the contractor.
B. The contract must clearly provide that the State does not have responsibility for
loss or damage to the rented equipment arising from causes beyond the control
of the State. Any provision obligating the State to return the equipment in good
condition, subject to reasonable wear and tear, also must except or exclude loss
or damage arising from causes beyond the control of the State. The contract
must clearly restrict the State’s responsibility for repairs and liability for damage
or loss to that made necessary by or resulting from the negligent act or omission
of the State or its officers, employees, or agents.
C. If the State does not elect to maintain the equipment, the contract will place the
obligation on the contractor, as lessor, to keep the equipment in good working
order and to make all necessary repairs and adjustments without qualification,
with a clear right in the State to terminate or cease paying rent should the
contractor fail to maintain the equipment properly. For this purpose, the
contractor’s representatives shall be given full and adequate access to the
equipment at reasonable times.
D. Personal property taxes are not generally reimbursed when leasing equipment
(See SAM § 8736).
E. For the purpose of determining whether contracts containing renewal options are
subject to the approval of DGS, the total cost and term of the rental shall be
computed by including the cost and term of all renewal options included in the
contract.
7.61 PURCHASE OPTIONS
(Rev 10/98)
A. To avoid paying hidden interest and carrying charges, the State agency should
consider purchasing the equipment outright rather than entering into an
“installment purchase” or “rental agreement with option to purchase.” Funding
problems should be discussed with DOF budget staff.
State Contracting Manual – Volume I 114
B. Approval by DGS of the rental agreement does not include approval for the
exercise of the option to purchase. Any exercise of the option and purchase of
the equipment must be processed through DGS, Procurement Division, in
accordance with the procedures set forth in SAM § 3500, et seq.
C. Agencies shall not circumvent State purchasing policies through use of contracts
containing options to purchase.
D. Whether an equipment rental transaction, which includes an option to purchase,
should be processed in accordance with the SCM 1 or should be processed in
accordance with the “Purchases” chapter of SAM § 3500 et seq., is dependent
upon the acquisition of title to the equipment.
1. If the contract provides for automatic transfer of title to the State upon
completion of the so-called “rental” payments, or upon payment of a nominal
consideration after completion of such “rental” payment, the transaction
would be more in the nature of a “conditional sale” or “installment purchase”
rather than a “rental of equipment” and should be processed in accordance
with SAM § 3500 et seq.
2. If the rental payments will be the same whether or not the lessor’s offered
option to purchase is included in the rental agreement, and the State
agency includes the option as an unobjectionable and possibly desirable
feature, the contract may be processed in accordance with the SCM.
7.62 LEASE/PURCHASE ANALYSIS FOR EQUIPMENT
A. A lease/purchase analysis shall be prepared (See SAM § 3700) for each contract
to lease equipment where the contract exceeds $1,000 or the duration of the
lease exceeds three (3) months. This requirement does not apply to contracts for
equipment rented in accordance with PCC § 10108, from other State agencies,
or equipment obtained under a Master Rental Agreement.
B. A Lease/Purchase Analysis is required as follows:
1. Dollar amount exceeds $1,000 or the duration of the lease exceeds three
(3) months. A copy of the analysis and the contract or amendment shall be
retained by the agency.
2. Submit a copy of the analysis with the contract or amendment to DGS/OLS
for approval when approval is required based on the agency’s delegated
approval amount.
C. If the lease/purchase analysis indicates that it is more economical to purchase, it
will be necessary to include a justification explaining how it is in the State’s best
interest that the equipment be leased. A lease/purchase analysis based on a
“zero” salvage value of the equipment will normally be acceptable only when
mechanical useful life and program useful life are the same. When bids are
obtained, prices for both leasing and purchasing will be secured to facilitate the
making of the analysis.
State Contracting Manual – Volume I 115
D. The director of the requesting department should give prior concurrence to
proposals in which the lease/purchase analysis indicates purchase but the
requesting unit proposes to lease.
7.65 NONDISCRIMINATION PROGRAM
(Rev 6/17)
A. All employers who are, or wish to become, contractors with the State must
develop and implement a nondiscrimination program as defined in Title 2, CCR §
11103; unless specifically exempted pursuant to Title 2, CCR § 11111, which
includes contracts under $5,000 and contracts with licensed Community Based
Rehabilitation Program (CRP) (See GC §§ 12935(a) and 12990(d); and Title 2,
CCR § 11102).
B. A contractor shall include the nondiscrimination clause in its contracts and with
all subcontracts to perform work under the contract, either directly or by
incorporation by reference. Any such incorporation by reference shall be specific
and prominent (See Title 2, CCR § 11102; and GC §§ 12935(a) and 12990(d)).
Applicable contract language appears in the State’s standard General Terms and
Conditions (GTCs).
C. Any bid, proposal, or offer for a contract which is submitted by a contractor who
has been decertified from contracting with the State by DFEH, shall be deemed
to be nonresponsive and shall be rejected. Refer to the California Notice Register
published by the Office of Administrative Law for a list of decertified contractors.
(Tit. 2 CCR § 11110.)
D. Any person who submits a bid or proposal or otherwise proposes to enter into or
renew a contract with the State valued at $100,000 or more must certify their
compliance with the Unruh Civil Rights Act (CC § 51 et seq.) and the California
Fair Employment and Housing Act (“FEHA”) (commencing with Government
Code section 12960), as required by PCC section 2010. If a contractor has an
internal policy against a sovereign nation or peoples recognized by the United
States government, the Contractor shall certify that such policies are not used in
violation of the Unruh Civil Rights Act or FEHA.
1. These certifications must be made at the time a bid or proposal is
submitted, or a contract renewal is executed.
2. These certifications are required regardless of the award method or
solicitation format used, including but not limited to: RFPs, IFBs, NCBs and
other non-competitive awards, and the SB/DVBE option.
3. These certifications are required when using a DGS LPA, unless the User
Instructions for a particular LPA indicate otherwise.
4. For purposes of these required certifications, “renewal” shall mean the
exercise of any option to extend an existing contract or an amendment to
add time to an existing contract.
State Contracting Manual – Volume I 116
7.70 RECYCLED PRODUCT CONTENT
(Rev 11/12)
A. Effective September 1, 1999, per administrative policy, the following service
contracts must contain language requiring the use of post-consumer recycled
content products:
1. Janitorial contracts must contain terms requiring the use of janitorial
supplies containing post-consumer recycled paper products only;
2. Printing contracts must contain terms requiring post-consumer recycled
paper only, unless the proposed printing job cannot be done on recycled
paper;
Contracts included in the above categories, subject to DGS/OLS approval, must
contain the required terms or they will not be approved.
B. Contractors must certify in writing under penalty of perjury the minimum
percentage, or the exact percentage, of post-consumer material in the product,
materials, goods, or supplies provided under the agreement (PCC § 12205(a)-
(b)) regardless of whether the product meets the requirements of PCC section
12209. Applicable certification language appears in the State’s General Terms
and Conditions (GTCs).
7.80 MULTIPLE YEAR CONTRACTS
(Rev 6/17)
A. Contracts for services should generally not exceed three (3) years, absent a
substantial written justification for a longer term, based on business reasons. The
written justification should be stated on the STD 215 #25 (or on an attachment
thereto).
B. Approval by DGS/OLS must be obtained prior to releasing any RFP or IFB for a
contract term beyond three (3) years. A justifiable business reason must support
such a request for approval. Prior approval for multiple year contracts is not
required for contracts not subject to DGS/OLS review. Prior approval is not
required on a 5-year term for elevator maintenance contracts (see SCM volume
1, section 3.26).
Agencies who wish to get prior approval from DGS/OLS should contact the
attorney assigned to their department on how to proceed. Failure to obtain prior
approval from DGS/OLS may be cause for non-approval of the contract.
Approval of a multiyear term request does not constitute DGS/OLS approval of
the actual contract or amendment document, it is merely approval to use a
multiyear term.
C. If the additional option years are considered in the method for selecting the
contractor, an agency will not need to get an NCB exemption when amending the
contract to exercise the option years so long as all terms, conditions, and costs
State Contracting Manual – Volume I 117
are those evaluated in the bidding procedure. Contracts with option years are
multiyear contracts, therefore advance approval is required for the multiyear term
length (e.g. 3+1 = 4-year term, so preapproval is required for the 3+1) prior to
going out to bid.
D. For services such as fiscal audit or quality audit, it is desirable to obtain a
different contractor after three (3) years.
7.85 CONTRACT TERMINATION CLAUSES
(Rev 11/12)
A. Agencies should carefully consider the types of termination clauses to be used in
each contract.
1. TERMINATION FOR CAUSE. The standard language in the GTCs available
on the DGS/OLS webpage is satisfactory for a termination for cause.
Agencies should not change or modify this language due to the possibility of
accidentally changing a legal requirement. If agencies wish to supplement
for cause termination language by adding their own provisions, they should
consult their own counsel and their DGS/OLS attorney in advance.
2. TERMINATION WITHOUT CAUSE. It is recommended that contracts
contain a termination clause to allow the State to terminate the contract,
without cause, with advance written notice provided to the contractor.
7.86 INDEMNIFICATION
(New 11/12)
A. State agencies cannot indemnify another party unless there is express statutory
authority to do so and only to the extent necessary to obtain the services. Any
such code authority must be identified in the contract file along with a written
justification of the legal and business analysis supporting use of the provision
under the circumstances. Agencies are advised to obtain preapproval of such
clauses from DGS/OLS, rather than risk nonapproval of contracts.
7.90 BREACH OF CONFIDENTIALITY BY CONTRACTOR
(New 3/03)
Per PCC § 10426, State agencies shall specifically identify in a consulting contract, or in
an IT contract, any information that is considered to be proprietary. During performance
of the agreement, the contracting State agency shall provide written notification of
information identified as proprietary subsequent to execution of the contract.
Intentional disclosure of information designated by the State as proprietary during
negotiation, execution or performance of a consulting services contract, is unlawful and
punishable as a misdemeanor.
State Contracting Manual – Volume I 118
8. BUSINESS PARTICIPATION PROGRAM
REQUIREMENTS
8.00 INTRODUCTION
(Rev 04/22)
This chapter discusses programs established to encourage participation in State
contracting by various segments of the business community. One or more of these
programs may be involved in a specific contracting opportunity. Agency staff involved
with contract preparation should be familiar with these programs such that they can
explain the program and contracting agency discretion decisions to bidders. Questions
about these programs should be addressed to:
The Department of General Services, Procurement Division (See Table 8.1) Internet
Address: www.dgs.ca.gov/pd
Offices listed in Table 8.1 can be contacted through the Procurement Division web site.
8.01 TABLE OF CONTENTS
(Rev 1/14)
DESCRIPTION SECTION
Introduction 8.00
Table of Contents 8.01
Procurement Division Responsibility and Legal References 8.02
Introduction to Disabled Veteran Business Enterprise (DVBE)
Participation Program
8.10
DVBE Regulations 8.11
When to Apply the DVBE Goal to a Contract 8.12
Bidders’ Response to DVBE Requirements in a Solicitation 8.13
Qualifying as a DVBE 8.14
DVBE Bid Information 8.15
Management of DVBE Contract Requirements 8.16
DVBE Incentive Program 8.17
Annual Report of DVBE Participation 8.18
Certified Small and Microbusiness Program 8.20
State Contracting Manual – Volume I 119
Small Business Preference Program 8.21
Non-Small Business Preference Program 8.22
Prompt Payment of Small Businesses 8.23
Target Area Contract Preference Act (TACPA) 8.30
8.02 PROCUREMENT DIVISION RESPONSIBILITY AND LEGAL
REFERENCES
(Rev 04/22)
Table 8.1
Small Business and DVBE Participation Program
Function or Service Office/Unit Authority
Act as a resource.
Disseminate policies
and procedures.
Office of Small Business & DVBE
Services (DGS/OSDS)
(916) 375-4940
Email: OSDShelp@dgs.ca.gov
Mil. & Vet. Code
§§ 999.5, 999.6;
Govt. Code §
14839
Coordinate
Reporting
DGS/OSDS (see above) PCC 10111
Address Compliance
Violations
DGS/OSDS (see above) Mil. & Vet Code
§§ 999.2(g),
999.9; PCC §
10115.10(c);
Govt. Code §
14842 et seq.
Certification DGS/OSDS (see above) Mil. & Vet. Code §
999 et. seq.; PCC
§ 10115.9; Govt.
Code § 14839.1
Review, approve,
audit DVBE
Utilization Plans
DGS/OSDS (see above) PCC § 10115.15
Administer DVBE
Program
participation goal
and incentive
DGS/OSDS (see above) Mil. & Vet. §§ 999,
999.5
State Contracting Manual – Volume I 120
Administer the 5 %
Small Business
Preference, Small
Business issues and
questions
DGS/OSDS (see above) GC § 14835 et
seq.;
Outreach Program
Small Business
Advocate Program
DGS/OSDS
Email:
BusinessOutreach@dgs.ca.gov
GC §§ 14845 et
seq.
Ensure Prompt
Payment to Small
Businesses
Purchasing Authority Management
Section
(916) 375-4351
DGS/OSDS
BusinessOutreach@dgs.ca.gov
GC § 927 et seq.
Target Area Contract Preference Act (TACPA)
Administer the
program and serve
as a
Dispute Resolution & Preference
Program Section
(916) 375-4609
GC § 4530 et
seq.; 2 CCR §§
1896.30 et seq.
8.10 INTRODUCTION TO DISABLED VETERAN BUSINESS
ENTERPRISE (DVBE) PARTICIPATION PROGRAM
(Rev 04/22)
The California Disabled Veteran Business Enterprise Program requires that agencies
take all practical actions necessary to meet or exceed a Disabled Veteran Business
Enterprise (DVBE) participation goal of 3% of the agency’s overall contract dollars. (See
Mil & Vet Code § 999, et seq.; PCC § 10115; Tit. 2 CCR § 1896.60, et seq.)
An agency has the discretion to apply this goal to a specific contract, but is expected to
meet the goal for the total of its contracting each year. State agencies must report
annually the level of participation achieved. Should full participation not be attained,
agencies must develop an improvement plan to identify the problem and achieve the
goal in the future.
8.11 DVBE REGULATIONS
(Rev 6/17)
The law requires each agency to adopt regulations to implement the program. However,
to avoid duplication of effort, agencies have the option to adopt the regulations
developed by DGS. (See Tit. 2 CCR § 1896.60, et seq.) The summarized policies and
procedures presented in this chapter are based on those regulations. If agency
State Contracting Manual – Volume I 121
personnel have questions or issues to be resolved, they should refer to their agency’s
regulations or to the DGS regulations as applicable.
8.12 WHEN TO APPLY THE DVBE GOAL TO A CONTRACT
(Rev 04/22)
A. Agencies should develop a plan or strategy to ensure goal achievement for their
overall departmental contract program.
B. Unless statutorily exempt, all contracts, regardless of amount, are subject to the
DVBE requirement. Agencies may exempt individual contracts from the
requirement with the approval of a highest ranking executive officer or their
designee; however agencies are still expected to meet the overall DVBE goal
attainment at the end of each year. When an awarding agency decides to waive
the DVBE requirement, this must be noted in the solicitation.
C. Awarding agencies have sole discretion to exempt contracts from the DVBE
participation requirements. In reviewing contracts, DGS services will rely on the
awarding agency’s decision to exempt contracts.
D. Contracts with government agencies, including public colleges and universities,
and joint power authorities, are exempt from the DVBE participation
requirements.
E. Additional information regarding DVBE participation requirements can be found
in SCM volume 2.
8.13 BIDDERS’ RESPONSE TO DVBE REQUIREMENTS IN A
SOLICITATION
(Rev 6/17)
A. When the DVBE participation requirements have been included in the solicitation,
bidders must commit to meeting or exceeding the minimum DVBE participation
goal.
B. Meeting the minimum participation goal
There are two (2) methods of meeting the goal. If a bidder is a:
1. Non-DVBE: Commit to use DVBEs for the amount stated in the bid
document; or
2. DVBE: Commit to perform not less than the amount stated in the bid
document with its own forces or in combination with other DVBEs.
State Contracting Manual – Volume I 122
8.14 QUALIFYING AS A DVBE
(Rev 04/22)
A. Disabled Veteran Business Enterprise
1. Disabled Veteran: A veteran of the U.S. military, naval, or air service, with
a service-connected disability of 10% or more, and is a resident of
California.
2. Disabled Veteran Business Enterprise: A business concern certified by
DGS/OSDS as meeting all of the following requirements:
a. It is a sole proprietorship at least 51% owned by one or more disabled
veterans or, in the case of a publicly owned business, at least 51% of
its stock is unconditionally owned by one or more disabled veterans; a
subsidiary which is wholly owned by a parent corporation, but only if at
least 51% of the voting stock of the parent corporation is
unconditionally owned by one or more disabled veterans; or a joint
venture in which at least 51% of the joint venture’s management and
control and earnings are held by one or more disabled veterans. (Mil.
& Vet. Code § 999(b)(7)(A)(i).)
b. The management and control of the daily business operations are by
one or more disabled veterans. The disabled veterans who exercise
management and control are not required to be the same disabled
veterans as the owners of the business concern.
c. It is a sole proprietorship, corporation, or partnership with its home
office located in the United States, which is not a branch or subsidiary
of a foreign corporation, foreign firm, or other foreign-based business.
d. It is a contractor, subcontractor or supplier that performs a
“Commercially Useful Function” in providing services or goods that
contribute to the fulfillment of the contract requirements.
i)
“Commercially Useful Function” is defined as a person or entity
doing all of the following: 1) Is responsible for the execution of a
distinct element of the work of the contract (including the
supplying of services and goods); 2) Carries out its obligation by
actually performing, managing or supervising the work involved;
3) Performs work that is normal for its business services and
functions; 4) 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; and 5) Is not further
subcontracting a portion of the work that is greater than that
expected to be subcontracted by normal industry practices. (Tit. 2
CCR § 1896.71(b).)
State Contracting Manual – Volume I 123
ii)
It is not a “Commercially Useful Function” if the DVBEs role 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 DVBE participation. (Mil. & Vet. Code §
999(b)(5)(B); Tit. 2 CCR § 1896.71(c).)
Note: The State Treasurer’s Office certifies DVBEs for contracts
for professional bond services.
B. Control
As applied to “ownership (or management) and control” of DVBE means the
DVBE owner(s) and or DVBE manager(s) must demonstrate expertise
specifically in the firm’s field of operation in controlling the overall destiny and the
day-to-day operations of the firm. Office management, clerical, or other
experience unrelated to the firm’s field of operations is not sufficient to establish
control. The control is comprised of two parts: Managerial and Operational. (For
more detail see 2 CCR § 1896.81(c-i).)
C. Certification
DVBEs must be certified by DGS/OSDS. DVBE status can be verified by
accessing the DGS/OSDS web page
https://caleprocure.ca.gov/pages/PublicSearch/supplier-search.aspx).
Note: By regulation, DVBEs have until 5:00 p.m. (PST) on the bid due
date to submit a complete paper certification application. Online
applications may be submitted up until 11:59 pm (PST) on the bid due
date. If certified they have eligibility. However, the firm may not have a
copy of their DGS/OSDS certification approval and should state that their
certification is pending. Verification can then be made by the agency with
DGS/OSDS.
8.15 DVBE BID INFORMATION
(Rev 04/22)
A. Once the decision has been made to include the DVBE participation
requirements in the contract, detailed DVBE specifications must be included in
the IFB/RFP. Most agencies have developed standard DVBE specifications.
Specifications should include a provision requiring the bidder to comply with
rules, regulations, ordinances, and statutes that apply to the DVBE program as
defined in Military & Veterans Code sections 999 and 999.5(d). If an agency
does not have such specifications or if there is any question about the sufficiency
of the specifications used by the agency, the agency should consult with DGS
PD.
B. In evaluating program compliance by the bidder, the awarding agency must
review the activities to be performed by any DVBEs proposed to participate in the
contract to assure that the DVBE performs a “Commercially Useful Function” as
State Contracting Manual – Volume I 124
defined in SCM 1, section 8.14 A. 2. (d)(e). For equipment rental bids, special
rules apply to DVBEs which rent equipment or DVBEs which are found to be
“equipment brokers” within the meaning of Mil. & Vet. Code § 999.2(b)(3).
C. Based on the evaluation, the awarding agency will determine whether the bidder
has complied with the DVBE participation program requirements. If a bidder fails
to meet the participation program requirements, the bidder must be deemed non-
responsive and is not eligible for the contract award.
Note: A common mistake bidders make is to state that no subcontractors
are needed and that goals are not applicable, offering that all the work can
be done by the bidder with its own resources. Bidders should be warned
that this type of response will render their bid non–responsive if the
solicitation has a DVBE requirement.
8.16 MANAGEMENT OF DVBE CONTRACT REQUIREMENTS
(Rev 04/22)
A. Compliance
1. The awarding agency shall establish a method of monitoring adherence to
the goals. Examples of monitoring methods include:
a. Random verification of contacts made to solicit certified DVBE’s.
b. Review of job related bid evaluation criteria and how it was applied to
subcontractor/supplier bids.
c. Contacting DVBEs listed for participation upon award of contract and
during performance to ensure their participation.
d. Evaluate Commercially Useful Function performance of DVBE(s)
participating on the contract.
e. Ensure the DVBE substitution request process is followed when
applicable per CCR section 1896.73.
f. Post award audits.
2. Awarding agencies must investigate and report the following program
violations to the DGS-OSDS. The DGS/OSDS may suspend the violator
from doing business with the state and may forward the investigative report
to the Attorney General for possible action. It is unlawful for a person or firm
to:
a. Knowingly and with intent to defraud, fraudulently obtain or retain
certification as a DVBE.
b. Willfully and knowingly make a false statement with the intent to
defraud, to influence certification of any entity as a DVBE.
State Contracting Manual – Volume I 125
c. Willfully and knowingly obstruct an investigation regarding DVBE
certification.
d. Knowingly and with intent to defraud, obtaining or attempting to obtain
public moneys to which the person is not entitled under the DVBE
Participation Program.
e. Knowingly and with intent to defraud, fraudulently represent DVBE
participation in order to obtain or retain a bid preference or State
contract.
f. Knowingly and with intent to defraud, represents that a Commercially
Useful Function is being performed by a DVBE in order to obtain or
retain a bid preference. (Mil. & Vets. Code § 999.9(a)(6).)
g. Willfully and knowingly make a statement, declaration or other
document, which is false as to any material matter.
h. Willfully and knowingly aid or assist in the preparation or presentation
of a false document.
i. Willfully and knowingly fail to file any declaration or notice required by
Mil. & Vet. Code § 999.2.
j. Establish or cooperate in the establishment of, or exercise control over,
a firm found to have violated the above.
3. Violators are guilty of a misdemeanor and may also be liable for a civil
penalty, including attorney’s fees and costs incurred by the awarding
agency or DGS. Additionally, violators shall be suspended from bidding on,
or participating as a contractor, subcontractor, or supplier in any State
contract or project. And furthermore, the awarding agency at its discretion
may terminate existing contracts with the violator.
4. Prior to reporting an alleged violation of Military & Veterans Code section
999 or PCC § 10115.10 to the DGS/OSDS awarding agencies must
investigate the alleged violation and must prepare a written report of their
findings. The written report must also include a recommendation for action
to be taken commensurate with the awarding agency’s findings and must be
submitted to the DGS/OSDS within 60 days of notification to the awarding
agency of the alleged violation.
5. For contracts with DVBE goals, agencies should include language such as
the following to assist in verifying compliance:
“Contractor agrees to certify on Prime Contractor’s Certification
DVBE Subcontractor Report (Form STD 817) that DVBE
subcontractor participation under this agreement is in compliance
with the goals specified at the time of award of contract or with any
subsequent amendment. If for this Contract the Contractor made a
State Contracting Manual – Volume I 126
commitment to achieve the DVBE participation goal, the Department
will withhold $10,000 from the final payment, or the full final payment
if less than $10,000, until the Contractor complies with the
certification requirements of Military and Veterans Code Section
999.5. A Contractor that fails to comply with the certification
requirement shall, after notice, be allowed to cure the defect.
Notwithstanding any other law, if, after at least 15 calendar days but
not more than 30 calendar days from the date of 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. The Contractor
shall provide proof of payment for the work performed by the DVBE
subcontractor(s) upon Department’s request.”
B. Substitution of DVBE Subcontractors (Mil. & Vet’s § 999.5(e))
1. After award of a contract, the successful bidder/contractor must use the
DVBE subcontractors and/or suppliers proposed in the bid or proposal to
the State unless a substitution is requested and approved. The
bidder/contractor must request the substitution in writing to the awarding
agency and both the awarding agency and DGS/OSDS must approve the
substitution in writing prior to commencement of any work by the proposed
subcontractor/supplier. The substitution request must comply with
applicable regulations (see Tit. 2 § 1896.73(b)), including:
a. A written explanation of the reason for the substitution.
b. The name and certification number of the business being substituted
and name and certification number of the proposed replacement.
c. A copy of the written notice issued to the DVBE with proof of delivery.
d. A copy of the DVBE’s consent or opposition to the substitution, and
any hearing decision if applicable.
e. A written notice detailing a clearly defined portion of the work identified
both as a task and as a percentage share/dollar amount of the overall
contract that the substitution business will perform.
f. Completed substitution request form and supporting documentation will
be submitted by the awarding department’s Disabled Veteran Business
Enterprise Advocate to DGS/OSDS for approval.
2. The California Code of Regulations (CCR), Title 2, section 1896.73 and
Public Contract Code section 4107 (for public works) provide the current
requirements for awarding departments to approve the substitution of a
DVBE subcontractor. Departments shall follow the processes set forth in 2
CCR § 1896.73 and PCC § 4107 (for public works) when a prime contractor
requests the substitution of a DVBE subcontractor with the added provisions
that:
State Contracting Manual – Volume I 127
a. Only another DVBE subcontractor shall be considered to replace a
DVBE subcontractor; and
b. The awarding department shall obtain final approval to replace a DVBE
subcontractor from DGS/OSDS.
3. The request for substitution of DVBE and the awarding agency’s approval or
disapproval cannot be used as an excuse for noncompliance with any other
provision of law, including, but not limited to, the Subletting and
Subcontracting Fair Practices Act (PCC §§ 4100, et seq.) or any other
contract requirements relating to substitution of subcontractors.
4. Prior to the approval of the prime contractor’s request for substitution, the
awarding agency, or its duly authorized officer, must give notice in writing to
the listed subcontractor of the prime contractor’s request to substitute and
the reasons for the request. The notice shall be served by certified or
registered mail to the last known address of the subcontractor.
5. The listed subcontractor who has been so notified will have five (5) working
days within which to submit written objections to the substitution of the
awarding authority. Failure to file these written objections will constitute the
listed subcontractor’s consent to the substitution.
6. If written objections are filed, the awarding authority shall give at least five
(5) working days’ notice in writing to the listed subcontractor of a hearing by
the awarding agency on the prime contractor’s request for substitution.
C. Contract Completion Report – Prime Contractor’s Certification of Payments to
DVBE Subcontractor(s)
1. Upon completion of an awarded contract for which a commitment to achieve
DVBE participation was made, an awarding department shall require the
prime contractor that entered into a subcontract with a DVBE to certify to the
awarding department on the Prime Contractor’s Certification DVBE
Subcontractor Report Form STD 817 all of the following:
a. The total amount the prime contract received under the contract;
b. The name and address of the DVBE that participated in the
performance of the contract and contract number;
c. The amount and percentage of work the prime contractor committed to
provide to one or more DVBEs under the requirements of the contract
and the amount each DVBE received from the prime contractor;
d. That all payments under the contract have been made to the DVBE.
(See Mil. & Vets Code §999.5(d).) Upon request by the awarding
department, the prime contractor shall provide proof of payment for the
work.
State Contracting Manual – Volume I 128
2. A person or entity that knowingly provides false information shall be subject
to a civil penalty for each violation in the minimum amount of $2,500 and the
maximum amount of $25,000. An action for a civil penalty may be brought
by any public prosecutor in the name of the people of the State of California
and the penalty imposed shall be enforceable as a civil judgment. (Mil. &
Vets § 999.5(e).)
3. The awarding department shall keep the certification on file. (Mil. & Vets §
999.5(e).) The awarding department shall maintain all records of
information provided by the prime contractor pursuant to Section 999.5 and
shall establish appropriate review procedures for those records to ensure
the accuracy and completeness of the award amounts and paid amounts
reported. The records shall be maintained in a manner that facilitates
access and review by external auditors. Records collected shall be retained
for a minimum of six years after collection.
4. The awarding department shall withhold $10,000 from the final payment, or
the full final payment if less than $10,000, until the prime contractor
complies with the certification requirements above. A prime contractor that
fails to comply with the certification requirement shall, after notice, be
allowed to cure the defect. Notwithstanding any other law, if, after at least
15 calendar days but not more than 30 calendar days from the date of
notice, the prime contractor refuses to comply with the certification
requirements, the awarding department shall permanently deduct $10,000
from the final payment, or the full payment if less than $10,000.
Notwithstanding any other law, an awarding department shall not withhold
more than the amount specified on the final payment of any DVBE for the
purposes of ensuring compliance with the certification requirements of MVC
999.5.
D. Audit
The DVBE regulations require inclusion of an audit clause in the contracts sufficient to
permit audit for compliance with DVBE requirements. The audit clause contained in
SCM 1, section 7.50 meets this requirement.
8.17 DVBE INCENTIVE PROGRAM
(Rev 04/22)
A. All competitive solicitations must contain a DVBE incentive if the solicitation
includes the DVBE program requirement, unless an exemption for the incentive
is approved. Competitive solicitations exempted from the DVBE program
requirement may include the DVBE incentive.
B. The DVBE incentive is an incentive between 1% and 5%.
1. The incentive is applied during the evaluation process for responsive bids
from responsible bidders proposing the percentage(s) of DVBE participation
for the incentive(s) specified in the solicitation.
State Contracting Manual – Volume I 129
2. The solicitation document may provide an incentive scale providing a range
of incentive(s) (1% to 5%) for bidders offering a specified participation
level(s).
3. A department’s highest ranking executive officer or his/her designee may
exempt a solicitation from the incentive using the DVBE Exemption Request
Form STD 816 with a full and complete written justification as long as such
exemption does not prevent achievement of a department’s DVBE
participation goal. A copy of the written exemption should be included with
the contract documents when submitted for approval by DGS/OLS.
4. Departments must use the STD 816 unless they obtain approval form
DGS/OSDS to use an alternative form. A request for exemption must
explain the necessity for use of an alternative form and demonstrate the
alternative form meets all STD 816 requirements and complies with DVBE
regulations.
C. Low price awards:
1. The minimum incentive is 1% with or without a cap.
2. Use of a higher incentive percentage not to exceed 5% is allowed for a
solicitation based upon the agency’s need to meet its DVBE program goal.
3. The incentive is applied by reducing the bid price by the amount of incentive
as computed from the lowest responsive bid price submitted by a
responsible bidder.
4. This incentive is for evaluation purposes only.
5. Application of the incentive shall not displace an award to a small business
with a non-small business.
6. A department’s highest ranking executive officer or his/her designee may
place a cap on identified solicitations of not less than $100,000 for the
incentive and/or $100,000 for all combined incentives and preferences.
Reference to the cap must be included in the solicitation document and
documentation of the executive officer/designee’s written approval of the
cap should be included with the contract documents when submitted for
approval by DGS/OLS.
D. High score awards:
1. The incentive shall be between 1% and 5% of the total possible available
points, not including points for socioeconomic incentives or preferences.
2. The incentive points are included in the sum of non-cost points.
3. The incentive points cannot be used to achieve any applicable minimum
point requirements.
State Contracting Manual – Volume I 130
E. DGS regulations are located at 2 CCR §1896.99.100 et seq.
8.18 ANNUAL REPORT OF DVBE PARTICIPATION
(Rev 04/22)
A. Due Date and General Content
Public Contract Code section 10111 requires that DGS publish an annual statewide
contracting activity report that consolidates information for various categories, including
DVBE usage. To assist in this effort, all agencies must provide their Consolidated
Annual Report for State Contracting report (Forms DGS PD 810) to the DGS/OSDS
Reports Coordinator no later than close of business on August 1 of each year.
Additional information regarding annual reporting can be found on the DGSPD website
(https://www.dgs.ca.gov/PD/services).
8.20 CERTIFIED SMALL AND MICROBUSINESS PROGRAM
(Rev 04/22)
A. Definition
Small business means a business certified by DGS/OSDS in accordance with
GC § 14837 (d)(1) and 2 CCR 1896.12(a).
B. Small business for the purpose of public works means a business that met the
qualifying criteria for small business pursuant to 2 CCR section 1896.12(a)(1)-(4)
and, in addition, is a business that together with affiliates does not exceed 200
employees and an average gross receipts of $36 million. (GC § 14837(d)(1)(B);
2 CCR 1896.13.)
C. Microbusiness means a small business certified by DGS/OSDS in accordance
with GC § 14837 (d)(2) and 2 CCR 1896.12(b).
D. A certified small business, a small business for the purpose of public works, or
microbusiness shall provide goods or services that contribute to the fulfillment of
the contract requirements by performing a “Commercially Useful Function.”
Commercially Useful Function is defined as: 1) Is responsible for the execution of
a distinct element of the work of the contract (including the supplying of service
and goods); 2) Carries out its obligation by actually performing, managing or
supervising the work involved; 3) Performs work that is normal for its business
services and functions; 4) 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; and
5) Is not further subcontracting a portion of the work that is greater than that
expected to be subcontracted by normal industry practices.
A small or microbusiness contractor, subcontractor or supplier is not performing a
“Commercially Useful Function” if its role is limited to that of an extra participant
in a transaction, contract or project through which funds are passed in order to
State Contracting Manual – Volume I 131
obtain the appearance of small business or microbusiness participation. (GC §
14837(d)(4); Tit. 2 CCR § 1896.15.)
E. Eligibility
A business must be formally certified by DGS/OSDS to be considered for the
small business, a small business for the purpose of public works, or
microbusiness preference.
F. Benefits of Certification
A certified small business or microbusiness is entitled to claim a 5% preference
in bidding on State contracts as explained in SCM 1, section 8.21. Small
business for the purpose of public works can claim a 5% preference only when
bidding on State public works contracts. Certified small business, small business
for the purpose of public works, or microbusinesses are also entitled to interest
penalties paid by the State for late payment of invoices. The penalties are greater
for certified small business or microbusinesses than for non-certified businesses.
G. Nonprofit Veteran Service Agency Certification
Nonprofit Veteran Service Agencies (NVSA) can qualify for a small business
preference if DGS/OSDS certifies that the NVSA meets the requirements of Mil.
& Vet. Code § 999.50, et seq. Upon certification, an NVSA participating as a
prime bidder is eligible for the 5% small business bidding preference if they have
submitted a timely, responsive bid and have been determined to be a responsible
bidder. An NVSA is not subject to the same standards as other certified small
businesses. NVSA standards are identified in Mil. & Vet. Code § 999.51(a)(3).
H. Each State agency, with an annual contracting program of $100,000 or more,
must appoint a State Contracting Small Business Advocate to act as a liaison for
small business (GC §14846).
I. Upon completion of a contract for which a commitment to achieve SB or DVBE
participation was made, the contractor shall report to the awarding department
the actual percentage of SB and DVBE participation that was achieved. (GC §
14841; GTCs.)
8.21 SMALL BUSINESS PREFERENCE PROGRAM
(Rev 04/22)
A. How the Preference Works (see 2 CCR §1896.8)
1. Certified small businesses or microbusinesses can claim the 5% preference
when submitting a bid on a State contract. A non-small business may
receive a preference of 5% if the business commits to subcontract at least
25% of its net bid price with one or more small businesses or
microbusinesses. The 5% preference is used only for computation
purposes, to determine the winning bidder and does not alter the amounts
of the resulting contract. The value of the preference is limited to $50,000
State Contracting Manual – Volume I 132
when a contract award is based upon award to the lowest compliant bid. A
contract awarded on the basis of the 5% preference is awarded to the small
business, microbusiness or non-small business for the actual amount of its
bid.
2. An example of the method used in determining the successful bidder for an
IFB, or the cost component of an RFP Primary follows:
Bidder Bid
Amount
Bid after
preference
One $30,750 $30,750 Claims small business or
microbusiness status but is
not a certified small business
or microbusiness; does not
claim small business
subcontractor participation
Two $28,975 $28,975 Does not claim to be a small
business or microbusiness,
and does not claim
subcontractor participation
Three $29,520 $28,071.25 Claims non-small business
subcontractor preference and
does commit to 25% certified
small business or
microbusiness participation
Four $29,870 $28,421.25 Claims small business or
microbusiness status and is a
certified small business or
micro-business
For evaluation purposes, 5% of the low responsible bid of $28,975 would be $1,448.75
($28,975 x .05); that amount would be subtracted from the bids of Three (for a bid after
preference total of $28,071.25) and Four (for a bid after preference total of $28,421.25).
The contract would be awarded to bidder Four for $29,870, as the non-small business
subcontractor preference cannot remove an award from a certified small business or
microbusiness.
3. The method used in determining the successful bidder for an RFP
Secondary follows:
a. Calculate the “earned” score for all bidders.
b. If the highest scored proposal is from a non-certified small business or
microbusiness, then:
State Contracting Manual – Volume I 133
i. Calculate 5% of the highest responsible bidder’s total score.
ii. Add the amount calculated above to the score of each of the
certified small business or microbusinesses. This new amount is
the total score.
iii. Award of the contract must go to the bidder with the highest
point count.
4. An example of applying the small business preference to an RFP
Secondary follows:
Bidders (*Indicates certified small
business)
A* B C* D
Criterion 1(15 Max. points) 11 14 13 12
Criterion 2 (25 Max. points) 21 21 14 19
Criterion 3 (30 Max. points) 18 15 15 18
Cost (30 Max. points) 29.1 30.0 28.3 29.7
(cost points awarded are based on
these bid amounts)
($103) ($100) ($106) ($101)
Total “earned” points for each
bidder
79.1 80.0 70.3 78.7
Bidder B’s was the highest scored proposal, a non-certified small business
or microbusiness. Therefore points must be re-apportioned after application
of the 5% calculation of B’s point score. B’s bid received 80.0 points. 5% of
80 is 4. All bids from certified small business or microbusinesses will receive
4 additional points. All bids from eligible non-small businesses will receive 4
additional points.
Point awards prior to preference
points
79.1 80.0 70.3 78.7
Preference points 4.0 4.0
Total final points for each bidder 83.1 80.0 74.3 78.7
The highest scored proposal is now the proposal received from A, a certified
small business. The contract award amount will be A’s original bid amount.
State Contracting Manual – Volume I 134
B. Small Business Preference Procedures
1. Notice of availability of the Small Business Preference Program must be
included in all IFBs and RFPs. Agency staff should be familiar with the
program in order to clearly explain it to bidders. Firms needing more
information should be referred to the DGS/OSDS website.
2. Bidders claiming the small business preference may be requested, but not
required, to submit a copy of their certification approval from DGS/OSDS
with the bid or proposal. Failure to provide a copy of their certification
approval in their response is not a material deviation. A bidder may claim
the preference if the bidder submits a complete application for certification
to the DGS/OSDS by 5:00 p.m. PST on the bid due date; online applications
may be submitted up until 11:59pm (PST) on the bid due date. Therefore,
the awarding agency should check the status of the application with
DGS/OSDS before awarding the contract. An awarding agency shall
evaluate the activities to be performed by any certified small or
microbusiness on the proposed contract to assure that the certified small or
microbusiness is performing a “commercially useful function” as defined in
SCM 1, section 8.20 C.
C. Procedures for Tie Bids Between a Small Business and DVBE Small Business
In the event of a precise tie between the low responsible bid of a certified small
business and the low responsible bid of a certified disabled veteran owned
business that is also a small business, the contract must be awarded to the
disabled veteran owned small business. (GC § 14838 (f); 2 CCR 1896.8(f)).
8.22 NON-SMALL BUSINESS PREFERENCE PROGRAM
(Rev 11/04)
GC § 14838(b)(1)(2) provides for a non-small business preference, as defined.
The preference to a non-small business bidder that commits to small business or
microbusiness subcontractor participation of 25% of its bid price shall be 5% of either
the lowest, responsive, responsible bidder’s price (IFB) or the highest responsive,
responsible bidder’s total score (RFP secondary). A non-small business, which qualifies
for this preference, may not take an award away from a certified small business. The
small business regulations are located at 2 CCR 1896. (See example in 8.21.)
8.23 PROMPT PAYMENT OF SMALL BUSINESSES
(Rev 04/22)
A. Reason for the Program
To encourage expeditious invoice payment, the law provides for assessment of a
penalty for late payments of invoices from contractors, including certified small
businesses on all contracts and nonprofit organizations registered with
DGS/OSDS (contracts less than $500,000) (GC § 927.6). As part of the
State Contracting Manual – Volume I 135
implementation of this law, every solicitation should alert the bidder about this
program
B. Description of the Program
The Prompt Payment Act (GC § 927, et seq.) applies to both small and non-small
businesses. However, the penalty calculation differs for small businesses as
follows. The penalty is calculated, for certified small businesses and non-profit
organizations, at a rate of 10 percent above the U.S. Prime Rate on June 30 of
the prior fiscal year of the amount outstanding per calendar day from the required
payment date.
Agencies must automatically calculate and pay the penalties, without requiring
the contractor to submit an invoice for these penalty amounts (GC § 927.6).
Note: The time starts to run when the invoice is first received
by the agency, not when it is received by your business or
accounting office.
C. Involvement of DGS Office of Small Business and DVBE Services (DGS/OSDS)
DGS/OSDS serves as a resource for State agencies and businesses in the
implementation of the prompt payment program. State agencies must be sure
that a small business is certified before paying the higher interest penalty and
that may require contacting DGS/OSDS. The DGS/OSDS does not investigate,
arbitrate, or advocate for business firms or State agencies in the resolution of
payment disputes.
DGS/OSDS works with agency Small Business Advocates to provide information
about the Act and assistance to contractors who have difficulty resolving
payment problems.
D. Contracting Consideration
The subject of prompt payment should be considered during the contracting
process to ensure that the contract gives clear and accurate instructions directing
where invoices are to be sent. Those employees who will be involved in the
receipt and approval of the invoices need to be familiar with the program. In
addition, when an award is made to a certified small business or microbusiness,
the contract office should appropriately flag the copy of the contract sent to the
accounting office.
8.30 TARGET AREA CONTRACT PREFERENCE ACT (TACPA)
(Rev 1/14) [** Pending Update to be Released Soon **]
A. Introduction
The Target Area Contract Preference Act (TACPA) is a preference program
designed to stimulate business in geographic areas determined to be
economically distressed. The Procurement Division, Dispute Resolution and
Preference Programs Section administers this program.
State Contracting Manual – Volume I 136
B. Applicability to contracts
The TACPA preference applies to service contracts that meet specific criteria.
The criteria are described in Table 8.2.
Table 8.2
Criterion TACPA
GC § 4530, et seq.
Estimated Contract Amount: The
dollar threshold or applicability
More than $100,000 GC §§ 4531 and
4534; 2 CCR § 1896.34,
All responsive bids or proposals must
be in excess of $100,000 for the
TACPA preferences and incentives to
apply.
2 CCR § 1896.37
Excluded Contracts: Contracts not
covered by the program
Contracts with a designated worksite
GC § 4534
Geographic Areas: The worksite to
be used by the contractor to qualify
for the preference must be located
within a designated area
Distressed areas as identified by the
Office of Planning and Research and
further defined in GC § 4532(d).
GC § 4534
Company Base California
GC §§ 4531, 4532(h) and 4534; 2
CCR § 1896.30(f)
Percent of Work: The percentage
of the contracted work that the
contractor must perform at the
qualifying worksite
Not less than 90% of the total labor
hours required to perform the contract.
GC § 4534
Worksite Preference: The
percentage of preference
associated with the worksite
5% preference on the price submitted
GC § 4534;
2 CCR 1896.34
State Contracting Manual – Volume I 137
Work Force Preference: An
additional preference of 1% to 4%
available if the contractor agrees to
hire certain identified persons
equal to a percentage of its work
force during the period of contract
performance
Percentage of persons with high risk
of unemployment hired in relation to
work force*, and corresponding
preference percentage of the price
offered by the lowest responsible bid
or the lowest responsible proposal:
5 to 9* 1% 10 to 14* 2%
15 to 19* 3% 20 or more* 4%
GC § 4534.1
Preference Limits: The highest
preference that can be given
9% (combination of the 5% Worksite
Preference with the maximum 4%
Work Force Preference) up to $50,000
GC §§ 4534, 4534.1 and 4535.2(a)
Maximum Combined Preferences
and Incentives offered under all
provisions of law
15% (combined cost of all preferences
and incentives) up to $100,000
GC § 4535.2(a)
C. Preference Procedures
The TACPA preference notice and request form STD 830 and the DGS/PD 526
must be included in all IFBs and RFPs when the estimated cost exceeds
$100,000, unless the worksite is specified in the contract. To receive the
preference, the bidder must complete the forms and certify to perform the
contract work as specified. This commitment must be enforced through
conditions contained in the contract (GC § 4535).
Agencies should contact the DGS/PD Dispute Resolution and Preference
Program Section for assistance in evaluating these preference applications.
Standard contract language for TACPA can be found at the Procurement website of
http://www.pd.dgs.ca.gov/edip.
State Contracting Manual – Volume I 138
9. CONTRACT MANAGEMENT
9.00 INTRODUCTION
(Rev 3/03)
The contract manager is the authorized representative of the State of California
responsible for administering a contract and monitoring the contractor’s performance.
The contract manager serves as a liaison with the contractor and may perform
administrative tasks ranging from the request of contract services through the
performance and final payment for completed services.
9.01 TABLE OF CONTENTS
DESCRIPTION SECTION
Introduction 9.00
Table of Contents 9.01
Responsibilities of a Contract Manager 9.04
Contract Manager “Don’ts” 9.05
Ethics 9.07
Record Keeping 9.09
Performance of the Contractor 9.11
Termination of the Contract 9.12
Closing of Service Contracts 9.14
Retention of Contract Records 9.16
9.04 RESPONSIBILITIES OF A CONTRACT MANAGER
(Rev 04/22
A. Typical responsibilities of the contract manager are as follows:
1.
Develop and write a clear, concise, detailed description of the work to be
performed.
2.
Review the draft contract for contract provisions, scope of work, technical
requirements, completion dates, benchmarks, timelines, estimated
quantities, dollar amounts, and final product.
State Contracting Manual – Volume I 139
3.
Ensure compliance with all applicable state and federal laws and
regulations.
4.
Ensure that funding is available and the contract is encumbered in
conformance with the agency’s policy.
5.
Notify the contractor to begin work.
6.
Maintain contract documentation
7.
Monitor the contract to ensure compliance with all contract provisions:
a. Monitor progress of work to ensure that services are performed
according to the quality, quantity, objectives, timeframes, and manner
specified in the contract; e.g., review progress reports and interim
products.
b. Ensure that all work is completed and accepted by the agency before
the contract expires.
8.
Assess and request amendments, renewals or new contracts as required
allowing sufficient time to process and execute such changes before the
contract expires or funds are depleted in order to prevent a lapse in service.
Often, two months are required for amendments and renewals, and four (4)
to six (6) months for new contracts.
9.
Review invoices to verify work performed and costs claimed in accordance
with the contract.
10.
Timely dispute or approve invoices for payment to avoid penalties under GC
§ 927, et seq.
11.
Monitor contract expenditures to:
a. Ensure there are sufficient funds to pay for all services rendered as
required by contract.
b. Identify low spending levels and consider partial dis-encumbrance and
reassignment of funds.
12.
Notify appropriate personnel of equipment purchase, if applicable, and
ensure property is tagged and inventoried before approving cost
reimbursement.
13.
Monitor use of DVBE subcontractors and suppliers to ensure attainment of
applicable contract participation goal, and when applicable ensure the
DVBE substitution process requirements are followed. Contract managers
should ensure that language for verification of DVBE participation is
included in the contract and that the statutorily required amount is
State Contracting Manual – Volume I 140
withheld from final payment until certification of DVBE use is received. (See
SCM 1, chapter 8).
14.
Contact the Contracts Office (if applicable) for assistance with contract
problems.
15.
Verify that the contractor has fulfilled all requirements of the contract before
approving the final invoice.
16.
Identify and approve the final invoice, as appropriate, and forward it to
accounts payable for payment.
17.
Complete the Contractor Evaluation form – STD 4, for consultant services
contracts of $5,000 or more. Negative evaluations must be sent to
DGS/OLS (See SCM 1, section 3.02).
18.
Approve the final products or service.
19.
Report SB/DVBE program violations to their department SB advocate and
DGS/OSDS.
B. Each agency must prepare the following reports required by legislation:
1. Fair Employment and Housing (Contract Award Report – STD 16, due
within ten (10) working days of the award date) where applicable.
2. Consolidated Annual Reporting information – To assist DGS in its annual
statewide contracting activity reporting, agencies must submit information,
including but not necessarily limited to SB and DVBE usage, consulting
services, SB/DVBE option and DVBE incentive, due to the DGS Contract
Reports Coordinator no later than close of business August 1 annually.
(PCC § 10111.) Additional information regarding required reporting can be
found on the DGS/OSDS website and SCM volume 1, section 7.15, and
SCM volume 2.
9.05 CONTRACT MANAGER “DON’TS”
(Rev 04/22)
A. The contract manager is not authorized to take the following actions:
1. Instruct the contractor to start work before the contract is executed and
approved.
2. Change any term or condition of the contract.
3. Direct the contractor to do work that is not specifically described in the
contract.
4. Sign the contract as the agency’s authorized signatory unless authorized in
writing.
State Contracting Manual – Volume I 141
5. Sign any contractor’s contract form.
6. Approve a DVBE substitution without prior DGS/OSDS approval.
B. The contract manager shall not authorize payment to the contractor for any work
not performed satisfactorily.
C. In addition, the contract manager is not authorized to do the following without an
executed and approved contract amendment in place:
1. Extend the time period of the contract.
2. Allow the contractor to incur costs over the original limit set in the contract.
9.07 ETHICS
(Rev 11/12)
A. A state officer or employee shall not engage in any activity or enterprise which is
clearly inconsistent, incompatible, in conflict with, or inimical to his or her duties
as a state officer or employee. Such activities or enterprises include:
1. Using the prestige or influence of the state or the appointing authority for the
officer’s or employee’s private gain or advantage or the private gain of
another.
2. Receiving or accepting, directly or indirectly, any gift, including money, or
any service, gratuity, favor, entertainment, hospitality, loan, or any other
thing of value from anyone who is doing or is seeking to do business of any
kind with the officer’s or employee’s appointing authority or whose activities
are regulated or controlled by the appointing authority under circumstances
from which it reasonably could be substantiated that the gift was intended to
influence the officer or employee in his or her official duties or was intended
as a reward for any official actions performed by the officer or employee.
(GC § 19990.)
B. Public officials, whether elected or appointed, should perform their duties in an
impartial manner, free from bias caused by their own financial interest of the
financial interests of persons who have supported them. (GC § 81001; see GC §
81000 et seq. (Political Reform Act of 1974).)
C. Courts have long held that a public officer is impliedly bound to exercise his or
her powers with disinterested skill, zeal, and diligence and primarily for the
benefit of the public. (See Noble v. City of Palo Alto (1928) 89 Cal.App.47.) A
personal interest, whether financial or non-financial, that interferes with an
official’s ability to act in such a manner could potentially violated this common law
doctrine.
D. Even the appearance of questionable or unethical practices is detrimental to both
employees and their department.
State Contracting Manual – Volume I 142
E. Each department creates rules proscribing activities and enterprises, which may
be set forth in policy and an incompatible activity statement. Each department
also adopts its own conflict of interest code, in which it designates officers and
employees that are subject to the department’s conflicts of interest rules.
Departments may impose additional requirements that are stricter than those
required by law.
F. The Fair Political Practices Commission (FPPC) promulgates regulations to carry
out the intent of the Political Reform Act of 1974. See, e.g., FPPC regulations, 2
CCR §§ 18703.4, 18704.1, 18705.4, 18728, 18940 through 18946.5, and
18950.1 regarding gifts, and relevant FPPC regulations as hereinafter
promulgated and/or amended.
G. Public officials, state officers and employees are urged to review applicable
statutes, FPPC regulations, and their department’s policy, conflict of interest
code and incompatible activity statement for guidance regarding ethical issues.
Officers and employees should also be aware of Form 700 filing requirements.
Questions regarding your obligations and resolution of any questionable
relationships or practices should be referred to your supervisor.
9.09 RECORD KEEPING
(Rev 04/22)
Each agency is responsible for maintaining all invoices, records, and relevant
documentation consistent with the agency’s record retention schedule for at least three
years after the final payment under the contract (GC § 8546.7). (See also SCM 1,
section 7.50.)
Agencies should also be mindful of their obligations under the California Public Records
Act (Govt. Code § 6250 et seq.).
The following format is recommended for the maintenance of contract records:
1. Label a file folder for each contract administered. In each file folder include:
a. A log sheet for a diary of activities related to the contract. Each time
you speak with anyone about the contract, make a note of the date of
the discussion, and the subject matter discussed;
b. A file guide labeled “Invoices.” Retain a copy of all invoices in this file
guide;
c. A copy of the executed contract and other pertinent documentation,
such as a copy of the original contract request and any
correspondence related to the contract or contractor.
2. Prepare a computer file of all contracts administered. This practice allows
easy access to management information, such as expenditures, contract
expirations, and contract renewals.
State Contracting Manual – Volume I 143
3. Prepare a spreadsheet of expenditures. This practice is especially
necessary if electronic tracking is not used. The spreadsheet can be a
simple document showing the contract amount encumbered and the
deduction for each invoice as it is approved for payment.
4. Document the notification to the contractor of the start date. Work cannot
begin before contract execution and the effective date of the contract.
Although initial notification to start work may be verbal, it should also be
documented in writing and a copy of the notification retained in the contract
file.
5. Keep copies of the correspondence with the contractor. All communications
about the contract and/or the contractor should be in writing or followed up
in writing and a copy placed in the contract file. This practice protects the
agency and the contract manager in the event of a contract dispute or an
audit.
6. Monitor and document the performance of contract services. Contract
managers must monitor the contractor’s performance and document it
accordingly.
7. Document the nonperformance of contract services. If problems are
encountered during the term of the contract, they should be fully
documented. Letters to contractors should outline any problems related to
substandard or non-performance. Cite contract specifications verbatim in
letters so that there is no uncertainty about the services covered in the
contract. All letters about nonperformance should be sent by certified mail
with copies to all relevant parties. A copy of the letter should be sent to the
appropriate payment unit to eliminate the possibility of erroneous invoice
payment. (See SCM 1, section 9.11.)
8. Oversee the completion of the contract. To finalize or complete the contract
process, contact the contractor to determine whether all invoices have been
received. Disencumber any remaining funds by notifying the appropriate
payment unit by memo of the amount to be disencumbered. A copy should
be retained in the contract file folder. If a computer file was used, close that
file. Disencumbrance should be completed in a timely manner to release
unspent funds for other purposes within the current fiscal year.
9. Evaluate the contractor. Any consultant services contract of $5,000 or more
requires completion of a Contract/Contractor Evaluation – STD 4, within 60
days after completion of the contract (PCC § 10369). When a negative
finding is made, the Contractor Evaluation – STD 4, shall be forwarded to
DGS/OLS within five (5) days of completion of the evaluation.
Contract/Contractor Evaluation forms are not public documents and should
not be kept in the contract file. (See PCC § 10370.)
State Contracting Manual – Volume I 144
9.11 PERFORMANCE OF THE CONTRACTOR
Problems concerning the contractor’s performance must be fully documented in writing
and made a part of the contract manager’s contract file.
1. When work under a contract is unsatisfactory, a contract manager should:
a. Notify the contractor in writing by certified mail;
b. Explain why the work is not satisfactory and what corrective action is
expected; and
c. Give a specified period of time in which to satisfactorily perform the
work.
2. In addition, the letter should inform the contractor that if the problems are
not corrected, or if performance does not satisfactorily improve, the agency
will terminate the contract; have the work finished by another contractor;
and hold the original contractor liable for any additional costs, including the
costs of administration and rebidding of the work.
3. If the contract manager and the contract officer are uncertain of sufficient
cause to terminate the contract and assess damages, they may request a
legal opinion from the agency’s legal counsel.
4. After reviewing the case, legal counsel may make recommendations for an
appropriate settlement of the subject contract and outline the necessary
steps to be taken.
9.12 TERMINATION OF THE CONTRACT
(Rev 04/22)
A. Contracts should typically include how notifications, including termination, should
be given to the contractor. If not, verifiable methods such as certified mail or
personal service may be used. The notification should also clearly set forth any
task(s) required by the contractor such as return of State equipment, submittal of
final invoice for work completed, etc.
B. The contractor may be reimbursed for reasonable expenses authorized and
incurred up to the date of termination, including any costs associated with
termination, pursuant to the terms of the contract. However, the State is only
obligated to pay for goods or services that meet the performance standards
under the contract.
C. Agencies should consult their legal counsel for assistance.
State Contracting Manual – Volume I 145
9.14 CLOSING OF SERVICE CONTRACTS
(Rev 04/22)
It is the contract manager’s responsibility to close the contract file. This action may
consist of, but is not limited to, confirming the contractor has submitted any required
certifications, authorization of final payment including whether there should be any
applicable withholds, and evaluation of the contractor.
9.16 RETENTION OF CONTRACT RECORDS
(Rev 11/12)
All contracts involving expenditures of public funds in excess of $10,000 must contain a
provision that the contract is subject to the examination and audit of the awarding
department or its delegate or the State Auditor for a period of three (3) years after final
payment under the agreement. The contractor must agree that the awarding department
shall have access to premises, on reasonable notice, during normal business hours for
interviewing employees and inspecting and copying such books, records, accounts, and
other material that may be relevant to a matter under investigation for the purpose of
determining compliance (GC § 8546.7, PCC § 10115 et seq.; 2 CCR §§ 1896.60 et seq.
and 1896.75).
In view of the need for contract records for present and possible future antitrust
litigation, the Attorney General’s office has requested that contract records be retained
for a period of seven (7) years from either the closeout date or the payment date on the
last invoice, whichever is earlier.
State Contracting Manual – Volume I 146
10. PUBLIC WORKS CONTRACTS
10.00 INTRODUCTION
(Rev 04/22)
This chapter is intended to provide guidance in the preparation, administration, and
execution of small or minor public works contracts
A “*” as used in this chapter indicates the amount currently in effect as of the date of
SCM I publication, but is subject to change in accordance with applicable laws and
Budget Letters issued by the Department of Finance (DOF). This chapter applies to
public works contracts delegated to State agencies by DGS under PCC §§ 10108 and
10108.5, as well as public works contracts less than the dollar amounts established by
DOF.
This chapter does not apply to public works contracts which are defined as projects
under PCC § 10105 by agencies listed in PCC § 10106. Currently, in addition to DGS,
those agencies are: the Department of Transportation (DOT), Department of Water
Resources (DWR), Department of Parks and Recreation (Parks), the Department of
Corrections and Rehabilitation (CDCR), the Military Department, and the California High
Speed Rail Authority (CalHSRA). These agencies may execute public works contracts
within their authority for any amount and are not subject to the review and approval of
the DGS (PCC § 10100 et seq.). Public works contracts that are not within these
agencies’ jurisdiction are subject to the same requirements as any other agency.
Public works contracts have significant requirements for both contractors and agencies,
including, but not limited to, the requirement that agencies notify the Department of
Industrial Relations (DIR) when awarding a contract for a public works project using the
online PWC-100 and the requirement that all contractors and subcontractors who bid or
work on a public works project must register with DIR. (See LC §§ 1771 et seq., and
related regulations.)
10.01 TABLE OF CONTENTS
(Rev 04/22)
DESCRIPTION SECTION
Introduction 10.00
Table of Contents 10.01
Definitions 10.05
Authorization of Public Works Contracts 10.10
Public Works Contracts Between $1,000 and
$388,000*
10.15
State Contracting Manual – Volume I 147
Public Works Contracts Greater Than $388,000* and No More
Than
$929,000*
10.20
Requirements in Public Works Contracts 10.25
Public Works Contracts Required Language 10.30
Non-collusion Declaration Appendix
10.05 DEFINITIONS
(Rev 04/22)
A. A public works contract is defined as “an agreement for the erection,
construction, alteration, repair, or improvement of any public structure, building,
road, or other public improvement of any kind,” (PCC § 1101).
B. A project, for purposes of the State Contract Act (PCC § 10100 et seq.), is
defined as the “erection, construction, alteration, repair, or improvement of any
State-owned structure, building, road, or other State improvement of any kind
with a total cost exceeding an amount periodically adjusted by the Director of
Finance (PCC § 10105). The current amount is $388,000*.
Note: Some contracts meet the definition of “public works” under Labor Code
section 1720, thereby requiring prevailing wages, but may not meet the definition
of public works under Public Contract Code § 1101 and/or the State Contract Act
and, therefore, may not be subject to other provisions of the Public Contract
Code and this Chapter 10. (See 95 Ops. Cal. Atty. Gen. 102 (2012).)
10.10 AUTHORIZATION AND APPROVAL OF PUBLIC WORKS
CONTRACTS
(Rev 04/22)
NOTE: There is no NCB process available for Public Works Contracts.
Table 10.1
Type of Contract Authorization and Approvals
Required
Legal Reference
Between $50,000
and $388,000*
DGS/OLS
(DGS/RESD approval may be
required depending on the nature of
the work to be performed)
PCC § 10295, GC §
14616
State Contracting Manual – Volume I 148
Greater than
$388,000* and no
more than
$929,000*
DGS/RESD
(Form 23) and DGS/OLS
PCC § 10108
Greater than
$388,000* and no
more than
$1,205,000*
(Resources Agency
departments)
DGS/RESD (Form 23) and
DGS/OLS
PCC § 10108.5
Agencies awarding public works contracts must consult with DGS/RESD to determine
whether DGS/RESD approval is required prior to bidding any time they are carrying out
a public work of improvement, regardless of amount. This obligation is the sole
responsibility of the contracting agency. For public works contracts in the amount of
$388,000 or less, approval by DGS/OLS will be premised on the assumption that the
agency has properly consulted with DGS/RESD prior to soliciting bids. Packets
submitted for public works contracts greater than $388,000 and no more than $929,000
($1,205,000 for Resources departments) must include an approved DGS/RESD
Request for Project Undertaking by State Agency RESD Form 23 in order to obtain OLS
approval.
10.15 PUBLIC WORKS CONTRACTS BETWEEN $1,000 AND
$388,000*
(Rev 04/22)
A. Prepare the bid package as follows:
1. Prepare detailed plans and specifications.
a. Work specifications
Prepare clear and complete written specifications for the work. The
specifications must be adequate in detail to apprise the prospective
bidder of the character and extent of the work to be done and to
ensure that the bids will be comparable and competitive. Room for
speculation and conjecture must be reduced to a minimum.
b. Product specifications
Specifications may not be drafted in a manner that limits the bidding,
directly or indirectly, to any one specific concern, or calling for a
designated material, product, item, or service by a specific brand or
trade name unless the specification is followed by the words “or equal.”
If the agency is aware of an equal product manufactured in California,
it must name such product in the specifications (PCC § 3400). Special
State Contracting Manual – Volume I 149
rules applicable to roofing contracts are also contained in PCC
sections 3002 and 3004.
c. The specifications shall provide for a period of at least thirty-five (35)
days after the award of the contract for submission of data
substantiating a request of an “or equal” item. PCC § 3400(b) provides
an exception if the agency makes a finding, included in the
specifications, that a particular material, product, item, or service is
designated by specific brand or trade name for any of the following
purposes: 1) so that a field test or experiment may be made to
determine the product’s suitability for future use; 2) in order to match
other products in use on a particular public improvement either
completed or in the course of completion; 3) in order to obtain
necessary item that is only available from one source; or 4) in order to
respond to a declared emergency.
2. Obtain approval from:
a. The State Fire Marshall (SFM):
SFM approval is required for changes in occupancy or use; remodels
and modifications; and anytime flammable, combustible or hazardous
materials will be stored or planned for the site.
b. The Department of General Services, Division of the State Architect,
Access Compliance (DSA/AC):
DSA/AC review and approval is required for work involving
construction of new, permanent or temporary buildings and facilities; or
for renovation, structural repair, alteration, or additions to existing
buildings and facilities including those identified as historic buildings.
3. Prepare the Notice to Contractors, including the following notifications:
a. A statement that the 5% small business preference, not to exceed
$50,000, will be granted (i) to a certified small businesses [or, as
applicable, a certified small business for the purpose of public works],
or (ii) to a non-small business if 25% of their bid is to a certified small
business (a completed form STD 811 must be submitted with the bid
proposal to request this preference).
b. The Contractors State License Board license classification necessary
to bid on the contract (PCC § 3300).
c. Where to obtain bid packages.
d. Date, time, and place that bids must be received to be considered.
e. Notice that the successful bidder must enter into a contractual
agreement in the form of a Standard Agreement STD 213.
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f. Prevailing Wages:
• The prevailing wage rates for each of the crafts or trade
classifications involved in the proposed work to be contracted for
must be set forth in the invitation for Bids (IFB) and in the contract
itself.
Note: In lieu of specifying the rate of wages in the IFB
and in the contract, the agency may include a
statement that copies of the prevailing rate of per
diem wages are on file at its principal office and shall
be made available to any interested party upon
request.
• Obtain from the Department of Industrial Relations
(www.dir.ca.gov) or any source authorized by the Department of
Industrial Relations, the prevailing wage rates before requesting
bids. (LC §§ 1770 and 1773).
g. Date, time, and place of a pre-bid meeting and/or site inspection.
Mandatory pre-bid meetings shall not occur fewer than five (5)
calendar days after the first publication of the initial Notice to Bidders
(PCC § 6610).
h. If the contract is estimated to exceed $ 5,000:
• Statement that the contract is subject to State contractor
nondiscrimination and compliance requirements (2 CCR Div. 4.1,
Ch. 5, Art. 2).
i. If the contract involves an expenditure in excess of $25,000:
• Necessity of providing a payment bond (STD 807) equal to 100% of
the total amount payable under the contract per PCC § 7103.
4. Prepare instructions to bidders on the following:
a. Examination of bid documents and site.
b. Bids and bidders to comply with:
• Sealed bids.
• Bid form required to be used.
• Responsibility for ensuring that their sealed bid is received at the
proper time and at the proper place as shown in the Notice to
Contractors or addenda. Any bid received after the scheduled
closing time for the receipt of bids will be returned unopened.
• DVBE participation requirements and incentive information.
• Drug-free workplace certification.
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• Restrictions applying to State employees (PCC §§ 10410- 10411;
GC § 87401, et seq.; GC § 87450).
• Restrictions on employment of undocumented aliens (PCC § 6101).
• Antitrust claims.
• Corporate qualification to do business in California.
• Expatriate corporation certification.
• Review of Commercially Useful Function being performed by a
certified small business or small business for the purpose of public
works, or by a DVBE.
• Any other information regarding the bid.
5. Prepare the bid proposal form, allowing for:
a. Bid amount.
b. Small business preference request.
c. Place for listing of subcontractors’ names, business addresses, and
contractor’s license numbers of all subcontractors who will perform
work, labor, or render services in an amount in excess of one-half of
1% of the prime contractor’s total bid; and the portion of the work that
each will perform. (PCC § 4101.)
d. Place for listing of DVBEs’ names, business addresses, license
numbers, and percentages of all DVBEs who will perform work, labor,
or render services who will be used by the prime contractor to fulfill
disabled veteran business enterprise participation goals.
Note: A prime contractor whose bid is accepted may not
substitute a subcontractor listed in the original bid unless
the provisions of PCC §§ 4107 or 4107.5 apply and a
hearing is held, if required. If the subcontractor is a DVBE
the provisions of Mil. & Vets Code § 999.10 also apply.
e. General contractor’s name, business address, Federal employer
identification number, and contractor’s license number, classification,
and expiration date.
f. Statement of Compliance, which may be printed on the bid proposal
form in lieu of using a STD 19.
g. Signature block, including the printed name of the authorized individual
signing the bid, the authorized individual’s title and telephone number,
and the date.
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h. Whenever additive and deductive items are included in a bid, the bid
document should specify the method to determine lowest bid.
6. Include all forms required to be submitted with the bid proposal:
a. Drug-free Workplace Certification – STD 21;
b. DVBE participation certifications;
c. Labor Code Certification (see 10.30.C.3);
d. Statement of Compliance – STD 19, if not included on the bid proposal
form;
e. Non-collusion Declaration, see Appendix (PCC § 7106);
f. Small Business Preference and Certification Request (STD 811);
g. Form of Guarantee if a guarantee provision is not included in the
General Conditions; and
h. Expatriate Corporation certification.
7. Prepare General Conditions, including:
a. Insurance requirements; liability, workers’ compensation, builders’ risk,
or other appropriate insurance;
b. Bond requirements
• Payment Bond (Std 807) in a sum not less than 100% of the total
amount payable if the contract involves an expenditure in excess of
$25,000. (PCC § 7103.)
• Performance Bond if contract exceeds $10,000 and progress
payments will be made – 100% of contract amount.
Note: Bonds must be issued by a California-admitted
surety. (CCP § 995.311.)
c. Prevailing wage rates (LC § 1770, et seq.).
d. National Labor Relations Certification.
e. Standard California Nondiscrimination Construction Contract
Specifications (2 CCR § 11122.)
f. Use of apprentices.
g. Guarantee, if a Form of Guarantee is not included.
h. “As Built” plans requirement.
State Contracting Manual – Volume I 153
i. Final inspection and acceptance.
j. Other conditions as required.
8. Include special provisions:
a. Contractor’s license classification required (PCC § 3300).
b. Number of working days allowed.
c. Liquidated damages (if included, must provide that the contractor shall
not be assessed liquidated damages when the delay in completing the
project is caused by the failure of the State or the owner of a utility to
provide for removal or relocation of the existing utility facilities.)
d. Progress payments.
e. Progress schedule.
f. Other conditions as required.
9. Prepare detailed specifications.
10. Prepare drawings (if necessary).
11. Prepare bid refusal form.
12. Prepare other provisions as required.
B. Advertise in the California State Contracts Register including:
1. Description of work to be done.
2. Bid opening date and time.
3. Contract duration.
4. Type of contractor’s license required.
5. City and county in which work is to be done.
6. Contact name and phone number to obtain bid package.
C. Distribute bid packages to:
1. Prospective bidders.
2. DVBE assistance organizations.
3. Builders exchange nearest the work to be performed if contract is estimated
to be more than $5,000.
State Contracting Manual – Volume I 154
D. Hold a pre-bid meeting and site inspection:
1. Hold a pre-bid meeting to explain all required forms, including the Drug-free
Workplace Certification, DVBE participation and documentation, Labor
Code Certification, and Non-collusion Declaration.
2. Hold a site inspection to allow all prospective contractors to see where the
work is to be done.
E. Conduct the bid opening:
1. Verify that all required forms are completed and signed including:
a. Bid proposal form.
b. Drug-free Workplace Certification.
c. DVBE participation (evaluate for compliance).
d. Labor Code Certification.
e. Non-collusion Declaration.
f. Small Business Preference and Certification Request – STD 811.
g. Expatriate Corporation certification.
2. Verify the status of the business as follows:
a. Contractor’s license and classification with the Contractor’s License
Board (PCC § 6100).
b. Corporation status with the Secretary of State.
c. Small business/DVBE status with the DGS/OSDS; evaluate
Commercially Useful Function (CUF) compliance for SBs and DVBEs.
3. Return unopened any bids received after the due date.
4. Award the contract to the lowest responsible and responsive bidder.
5. Transmit reports:
a. Within 10 working days of an award, send a completed STD 16 to the
Department of Fair Employment and Housing if the contract award
exceeds $5,000, including contracts with the University of California (2
CCR § 8117.5).
b. Determine if a Form PWC 100 must be filed with DIR. Effective
January 1, 2012, filing of the PWC 100 is done electronically, and
fulfills the required public works project award notification to both the
Division of Apprenticeship Standards (LC § 1773.3, replacing the
State Contracting Manual – Volume I 155
former DAS-13 notification) and the Division of Labor Standards
Enforcement, Compliance Monitoring Unit (8 CCR § 16451(a).) Form
PWC 100 and additional information about filing requirements can be
found on the DIR Compliance Monitoring Unit website.
F. Prepare the Standard Agreement – STD 213, including:
1. Statement of work;
2. Period of performance;
3. Cost and payment including:
a. Total amount to be paid;
b. When payment(s) will be made;
• If making progress payments, include the provision that the State
shall retain out of each payment an amount not to exceed 5% of the
payment. (PCC § 7201)
c. Address to which invoices and progress reports shall be mailed.
4. Payment Bond (if contract exceeds $25,000).
5. Performance Bond (if contract exceeds $10,000 and progress payments will
be made).
6. Standard California Nondiscrimination Construction Contract Specifications
for contracts exceeding $5,000 (STD 18).
7. National Labor Relations Board Certification, if not included in the General
Conditions.
8. Project monitor’s name and telephone number.
9. Contract amendments.
10. Resolution of disputes.
11. Final approval required before contract has force or effect.
12. Antitrust claims.
13. Americans with Disabilities Act.
14. Restrictions applying to State employees (PCC §§ 10410-10411; GC §
87401 et seq.; GC § 87450).
15. Prevailing wage rates.
16. Certificate of Insurance.
State Contracting Manual – Volume I 156
17. Audit language (if contract exceeds $10,000) and/or DVBE participation.
(See 10.30.C.1.)
18. Instructions to bidders.
19. Bid proposal form.
20. Labor Code certification.
21. Non-collusion Declaration.
22. General conditions.
23. Special provisions.
24. Specifications.
25. Drawings.
G. Prepare the award letter and mail the documents to the contractor, requesting
the following actions:
1. Standard Agreement – STD 213: Fully executed electronically
2. Specifications and Drawings: Sign one (1) set electronically.
3. Payment Bond – STD 807: Have bonding company execute two (2) copies
(if contract exceeds $25,000).
4. Performance Bond: Have bonding company execute two (2) copies on
standard bonding company forms (if contract exceeds $10,000 and
progress payments will be made).
5. Certificate of Insurance: Have insurance agent execute for liability, workers’
compensation, builders’ risk and any other required insurance.
6. Asbestos notification letter if required.
7. Payee Data Record: Complete and return (sends to accounting office and
retains one copy in the contract file).
H. Prepare the Contract Transmittal – STD 215 including:
1. Certificate of Insurance for liability, workers’ compensation, builders’ risk
and any other required insurance.
2. Secretary of State corporate status check.
3. Contractor’s License Board verification.
4. Small business verification (if applicable).
State Contracting Manual – Volume I 157
5. Drug-free workplace and other certificates.
6. DVBE participation package (if applicable).
7. California State Contracts Register advertisement.
8. List of contractors sent bid package.
9. All bids received.
10. Copy of bid package.
I. Route the Standard Agreement and transmittal package to the accounting office
for encumbrance and to DGS/OLS for approval if over $50,000 (PCC §§ 10295,
10351).
J. When the approved contract is returned, send a letter to the contractor with its
approved copy and distribute the remaining approved copies as necessary.
10.20 PUBLIC WORKS CONTRACTS GREATER THAN $388,000*AND
NO MORE THAN $929,000*(OR $1,205,000* FOR RESOURCES
AGENCY DEPARTMENTS)
(Rev 04/22)
A. Obtain approval from DGS/RESD on a Request for Project Undertaking by State
Agency RESD FORM 23.
B. Include all requirements for contracts between $1,000 and $388,000*.
C. Place additional advertisements as follows:
1. Advertise the Notice to Contractors once a week for two (2) consecutive
weeks in one local paper of general circulation published in the county
where the work is to be done. Obtain an affidavit of publication (PCC §
10140).
2. Advertise the Notice to Contractors once a week for two (2) consecutive
weeks as follows:
a. If the work is to be done in the counties of Imperial, Inyo, Kern, Los
Angeles, Mono, Orange, Riverside, San Bernardino, San Diego, San
Luis Obispo, Santa Barbara, Tulare, or Ventura, advertise in a trade
paper of general circulation published in Los Angeles County. Obtain
an affidavit of publication (PCC § 10140).
b. If the work is located in a county other than those listed in 2(a) above,
advertise in a trade paper of general circulation published in San
Francisco and provide a reasonable length of time between the
publication of the advertisement and the date of submission of bids to
State Contracting Manual – Volume I 158
give contractors sufficient time to prepare bids. Obtain an affidavit of
publication (PCC § 10140).
Note: Payments to publications for the cost of these
statutorily required advertisements are exempt from
competitive bidding. (See SCM I § 5.80.B.2.o.)
D. Include in the instructions to bidders the requirement that the bid must be
accompanied by one of the following forms of bidder’s security: cash, a cashier’s
check, a certified check, or a bidder’s bond executed by an admitted surety
insurer and made payable to the State agency. The security must be in an
amount equal to 10% of the amount bid. A bid must not be considered unless
one of the forms of the bidder’s security is enclosed with it (PCC § 10167).
E. Prepare the contract transmittal
1. Include all information shown in SCM 1, section 10.15(H).
2. Include an approved copy of form RESD Form 23.
3. Include the affidavits of publication for advertisements in both the local
paper and the trade paper.
10.25 REQUIREMENTS OF PUBLIC WORKS CONTRACTS
(Rev 6/17)
A. Specifications
Ensure that whoever prepares the bid specifications is aware of the following
requirements:
1. Work specifications
Prepare clear and complete written specifications for the work. The
specifications must be adequate in detail to apprise the prospective bidder
of the character and extent of the work to be done and to ensure that bids
will be comparable and competitive. Room for speculation and conjecture
must be reduced to a minimum.
2. Product specifications
Specifications may not be drafted in a manner that limits the bidding, directly
or indirectly, to any one specific concern, or calling for a designated
material, product, item, or service by a specific brand or trade name unless
the specification is followed by the words “or equal.” If the agency is aware
of an equal product manufactured in California, it must name such product
in the specifications (PCC §§ 3400, 10129). Special rules applicable to
roofing contracts are also contained in PCC §§ 3002 and 3004.
3. The specifications shall provide for a period of at least thirty-five (35) days
after the award of the contract for submission of data substantiating a
State Contracting Manual – Volume I 159
request of an “or equal” item. PCC sections 3400 and 10129 provide that if
the agency makes a finding, included in the specifications, that a particular
material, product, item, or service is designated by specific brand or trade
name for any of the following purposes: 1) so that a field test or experiment
may be made to determine the product’s suitability for future use; 2) in order
to match other products in use on a particular public improvement either
completed or in the course of completion; 3) in order to obtain necessary
item that is only available from one source; or 4) in order to respond to a
declared emergency.
B. Prevailing Wages:
1. Obtain from the Department of Industrial Relations the prevailing wage rates
before requesting bids. www.dir.ca.gov (LC §§ 1770 and 1773.)
2. The prevailing wage rates for each of the crafts or trade classifications
involved in the proposed work to be contracted for must be set forth in the
Invitation for Bids and in the contract itself.
Note: Payments to publications for the cost of these statutorily
required advertisements are exempt from competitive
bidding.(See SCM I § 5.80.B.2.o.)
3. The general prevailing rates of wages may be obtained from the
Department of Industrial Relations or any source authorized by the
Department of Industrial Relations.
10.30 PUBLIC WORKS CONTRACTS REQUIRED LANGUAGE
(Rev 04/22)
A. Instructions To Bidders
1. Employment of undocumented aliens
“No State agency or department, as defined in PCC § 10335.7, that is
subject to this code, shall award a public works contract to a bidder or
contractor, nor shall a bidder or contractor be eligible to bid for or receive a
public works contract, who has, in the preceding five (5) years, been
convicted of violating a State or Federal law regarding the employment of
undocumented aliens PCC § 6101.”
2. Antitrust claims
“The contractor offers and agrees and will require all of his other
subcontractors and suppliers to agree to assign to the awarding body all
rights, title, and interest in and to all causes of action they may have under
Section 4 of the Clayton Act (15 USC § 15) or under the Cartwright Act
(Chapter 2 [commencing with section 16700] of Part 2 of Division 7 of the
Business and Professions Code) arising from purchases of goods, services,
or materials pursuant to the public works contract or subcontract. The
State Contracting Manual – Volume I 160
assignment made by the contractor and all additional assignments made by
the subcontractors and suppliers shall be deemed to have been made and
will become effective at the time the awarding body tenders final payment to
the contractor without further acknowledgment or the necessity of tendering
to the awarding body any written assignments.”
“If an awarding body receives, either through judgment or settlement, a
monetary recovery for a cause of action assigned under GC §§ 4550 –
4554, the assignor shall be entitled to receive reimbursement for actual
legal costs incurred and may, on demand, recover from the public body any
portion of the recovery, including treble damages, and attributable
overcharges that were paid by the assignor but were not paid by the public
body as a part of the bid price, less the expenses incurred in obtaining that
portion of the recovery. On demand in writing by the assignor, the assignee
shall, within one year from such demand, reassign the cause of action
assigned under GC §§ 4550 – 4554 if the assignor has been or may have
been injured by the violation of law for which the cause of action arose and
(a) the assignee has not been injured thereby, or (b) the assignee declines
to file a court action for the cause of action.”
B. General Conditions
1. Prevailing Wage (See SCM 1, section 10.25 B.).
2. National Labor Relations Certification.
“By signing the contract, the contractor swears under penalty of perjury that
no more than one final unappealable finding of contempt of court by a
Federal court has been issued against the contractor within the immediately
preceding two (2) year period because of the contractor’s failure to comply
with an order of a Federal court which orders the contractor to comply with
an order of the National Labor Relations Board.”
C. Other Required Contract Terms
1. Audit Language (For contracts in excess of $10,000 and/or when DVBE
participation is required)
“The contractor agrees that the (awarding agency), or the Bureau of State
Audits or its designated representative, shall have an absolute right of
access to all of the contractor’s records, files, documents, accounts, and
financial affairs as deemed necessary for the purpose of conducting an
audit to determine compliance with the terms and conditions of this contract.
The contractor shall provide the auditor(s) with any relevant information
requested without unnecessary delay and, on reasonable notice, permit
access to its premises during normal business hours for the purpose of
interviewing staff and inspecting and copying such books, records,
accounts, and any other material as warranted to conduct the audit. The
contractor further agrees to maintain such records for a period of three (3)
years after final payment is made on this contract or three (3) years after
State Contracting Manual – Volume I 161
resolution of all issues that may arise as a result of any litigation, claim,
negotiation, or audit related to the contract, whichever is later. The State
agrees to treat as confidential any proprietary information obtained as a part
of any such audit.”
2. Americans with Disabilities Act
“By signing this contract, the contractor assures the State that it complies
with the Americans with Disabilities Act (ADA) of 1990 (42 USC § 12101 et
seq.), which prohibits discrimination on the basis of disability, as well as with
all applicable regulations and guidelines issued pursuant to the ADA.”
3. Labor Code Certifications
a. “I am aware of the provisions of LC § 3700 which requires every
employer to be insured against liability for workers’ compensation or to
undertake self-insurance in accordance with the provisions of that
Code, and I will comply with such provisions before commencing the
performance of the work of this contract.”
b. “It is hereby mutually agreed that the contractor shall forfeit to the State
(enter amount from LC § 1775) dollars for each calendar day, or
portion thereof, for each worker paid by him or her, or subcontractor
under him or her, less than the prevailing wage so stipulated and in
addition the contractor further agrees to pay to each worker the
difference between the actual amount paid for each calendar day, or
portion thereof, and the stipulated prevailing wage rate for the same.
This provision shall not apply to properly, registered apprentices.”
Note: LC § 1771.5 allows exemptions from the general
prevailing rate under specific conditions for departments with
Labor Compliance Programs.
c. It is further agreed that the maximum hours a worker is to be employed
is limited to eight hours a day and 40 hours a week and the contractor
shall forfeit, as a penalty to the State, twenty-five dollars ($25) for each
worker employed in the execution of the contract for each calendar day
during which a worker is required or permitted to labor more than eight
hours in any calendar day or more than 40 hours in any calendar
week, in violation of LC §§ 1810-1815, inclusive.
d. Properly registered apprentices may be employed in the prosecution of
the work. Every such apprentice shall be paid the standard wage paid
to apprentices under the regulations of the craft or trade at which he or
she is employed, and shall be employed only at the work of the craft or
trade to which he or she is registered. The contractor and each
subcontractor must comply with the requirements of LC § 1777.5 and
any related regulations regarding the employment of registered
apprentices.
State Contracting Manual – Volume I 162
e.
Each contractor and subcontractor shall comply with the LC § 1776
regarding record keeping
4. The text or summary of PCC section 9204 pertaining to Claims and
Disputes, in accordance with PCC section 9204(e).
5. Other provisions from the State’s current standard terms (GTCs) not
covered elsewhere above, if and as applicable, such as:
a. Assignment
b. Audit
c. Indemnification
d. Disputes
e. Termination for Cause
f. Independent Contractor
g. Recycling Certification
h. Non-Discrimination Clause
i. Contractor Certification Clauses (CCCs)
1) Statement of Compliance
2) Drug-Free Workplace
3) Expatriate Corporations
4) Sweatfree Code of Conduct
5) Contractor Name Change
6) Corporate Qualifications to Do Business
7) Air or Water Pollution Violation
8) Payee Data Record Form Std 204
j. Timeliness
k. Compensation
l. Governing Law
m. Antitrust Claims
n. Child Support Compliance
State Contracting Manual – Volume I 163
o.
Unenforceable Provision
p. Small Business and DVBE Reporting Requirement
State Contracting Manual – Volume I 164
CHAPTER 10 – APPENDIX
NON-COLLUSION DECLARATION TO BE EXECUTED BY BIDDER
AND SUBMITTED WITH BID FOR PUBLIC WORKS
(Rev 04/22)
The undersigned declares:
I am the ________________of _____________________, the party making the
foregoing bid.
The bid is not made in the interest of, or on behalf of, any undisclosed person,
partnership, company, association, organization, or corporation. The bid is genuine and
not collusive or sham. The bidder has not directly or indirectly induced or solicited any
other bidder to put in a false or sham bid. The bidder has not directly or indirectly
colluded, conspired, connived, or agreed with any bidder or anyone else to put in a
sham bid, or to refrain from bidding. The bidder has not in any manner, directly or
indirectly, sought by agreement, communication, or conference with anyone to fix the
bid price of the bidder or any other bidder, or to fix any overhead, profit, or cost element
of the bid price, or of that of any other bidder. All statements contained in the bid are
true. The bidder has not, directly or indirectly, submitted his or her bid price or any
breakdown thereof, or the contents thereof, or divulged information or data relative
thereto, to any corporation, partnership, company, association, organization, bid
depository, or to any member or agent thereof, to effectuate a collusive or sham bid,
and has not paid, and will not pay, any person or entity for such purpose.
Any person executing this declaration on behalf of a bidder that is a corporation,
partnership, joint venture, limited liability company, limited liability partnership, or any
other entity, hereby represents that he or she has full power to execute, and does
execute, this declaration on behalf of the bidder.
I declare under penalty of perjury under the laws of the State of California that
the foregoing is true and correct and that this declaration is executed on (date), at
(city), (state).
Signed: _________________________________
Print/Type Name
State Contracting Manual – Volume I 165
11. ARCHITECTURAL AND ENGINEERING CONTRACTS
11.01 INTRODUCTION
(Rev 04/22)
There are statutory requirements governing the State’s process for selecting the
professional services of private architectural, landscape architectural, engineering,
environmental, land surveying, and construction management firms. The contracts for
these professional services are commonly referred to as A&E agreements. DGS
approval is not required for A&E agreements awarded pursuant to Government Code
section 4525 et seq. and as each agency will need to identify their authority for these
agreements, including regulations unique to the agency, DGS/OLS does not review
these contracts.
Legal authorities include: Article XXII, California Constitution; GC §§ 4525 et seq.; and
PCC § 6106. However, some agencies are subject to alternative statutory authority for
specific types of projects. Therefore, it is essential for contracting staff to consult their
department’s attorneys to ensure the correct statutory process and regulations are
followed.
GLOSSARY
State Contracting Manual – Volume I 1
GLOSSARY OF TERMS
(Rev 04/22)
The following is a listing of definitions commonly used in the contracting process:
Advance Payment Any payment made to a contractor before work has
been performed or goods have been delivered. Advance
payments are permitted only if authorized by statute.
(For example, interagency agreements may provide for
advance payments under (GC § 11257.)
Agreement A contract.
Amendment A formal modification or change of a material term, such
as the term, cost, or scope of work, in one or more
provisions of an existing contract.
Assignment Transfer of contractual rights from one person to
another.
Authorized
service
representative
A term used in relation to those persons who may
perform repair and maintenance of equipment and are
so designated by the equipment manufacturer.
Awarding agency The contracting State agency, the agency soliciting the
contract and making the contract award.
Bid A potential contractor’s reply to a solicitation for
purchase of goods or services, which represents what
the contractor would charge to provide those goods or
services.
Bidder An individual, sole proprietorship, firm, partnership,
corporation, or any other business venture that
responds to an Invitation for Bids or Request for
Proposals by submitting a bid to the contracting agency.
A potential contractor.
Bidder’s
conference
A meeting with potential bidders before the bid
submission date.
Bidder’s security A bond or undertaking required for public works projects
(SCM 1, chapter 10).
Board resolution A formal decision by the governing body of a public
agency often required to authorize the purchase of
goods or services.
GLOSSARY
State Contracting Manual (Volume I) 2
Breach of contract Failure, without legal reason, to comply with the terms of
the contract.
California State
Contracts
Register
The State publication (now electronic) containing
advertisements for contract solicitations and a list of
contracts for which exemptions from bidding have been
approved.
Certified small or
microbusiness, or
small business for
the purpose of
public works
A business that has been certified by the Office of Small
Business and DVBE Certification, Department of General
Services, as a small or microbusiness as defined in GC §
14837 and 2 CCR § 1896.
A system generated printable certification is issued to
the business that allows the business to claim the small
business preference when submitting bids and to obtain
statutory penalties for late payments on contracts (SCM
1, chapter 8).
Circumvention The act of avoiding the effect or intent, going around,
defeating by ingenuity or strategy, or nullifying the
purpose.
Commercially
Useful Function
(CUF)
Person or entity doing all of the following: the execution of
a distinct element of the work of the contract; carrying out
obligation by actually performing, managing or
supervising work involved; performs work 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; and is not further
subcontracting a portion of work greater than expected to
be subcontracted by normal industry practices. (California
Military and Veterans Code § 999(b)(5)(B).)
Commodities Goods, including such tangible items as movable or
personal property, as opposed to services.
Competitive
bidding
An acquisition process in which the opportunity to make
offers to supply goods or services is not limited to any one
bidder. All bidders are evaluated on the same fixed
criteria.
Consideration Something of value that induces a person to enter into a
contract. The consideration may include some right,
interest, profit, or benefit obtained by one party, or some
GLOSSARY
State Contracting Manual (Volume I) 3
forbearance, detriment, loss, or responsibility assumed by
the other party.
Consulting
services contract
A contract for services of an advisory nature, which
provides a recommended course of action or personal
expertise. The definition does not include A&E contracts
(PCC § 10335.5).
Contract A contract is an agreement to do or not to do a certain
thing. (CCP § 1549)
Contract manager A person designated by the responsible State agency or
department to manage performance under a contract.
Contractor A party contracting with the awarding agency. Vendor is
often used synonymously, with contractor.
Contractor
identification
number
The number assigned to the contractor for tax purposes.
This may be the social security number or the Federal
identification number.
Cooperative
agreements
A special agreement with the Federal government in
which there is a general public benefit, as opposed to a
specific benefit accruing only to the contracting Federal
agency.
Corporation A fictional entity, created by or under the authority of the
laws of a State, which has the legal authority to engage in
certain activities.
Debarment Under Federal contracting law, a process in which a
contractor is precluded from bidding on or entering into
contracts with the Federal government. Federal rules also
prohibit Federal contractors from contracting with
debarred businesses.
Default Failure to perform an obligation in a contract.
Disabled Veteran
Business
Enterprise (DVBE)
A business that meets all of the following criteria: (1) at
least 51% of the business is owned by one or more
disabled veterans or, in a business whose stock is
publicly held, at least 51% or more of the stockholders are
disabled veterans; (2) the management and control of the
business are exercised by one or more disabled veterans;
(3) the business is domestically owned and its home
office is in the United States; and (4) the business has
GLOSSARY
State Contracting Manual (Volume I) 4
been certified as a DVBE by DGS/OSDS (Military and
Veterans Code § 999(g)).
Encumbrance A commitment of funds guaranteeing a source of payment
for a specific transaction.
Evaluation
committee
A committee or panel that convenes to evaluate the
qualifications of bidders who respond to a Request for
Proposals.
Execution of a
contract
The act of signing a contract, which provides a legal basis
for required performance by parties to the contract.
Executive order A directive issued by the Governor that establishes
binding policy for government agencies covered therein.
Exemption A formal waiver by DGS, of DGS responsibilities required
by statute, regulation, or policy, or a delegation of such
responsibilities by DGS to a State agency. Some common
exemptions awarded by DGS involve contract approval,
advertising, and competitive bidding requirements.
Exemption letter The letter of authorization establishing an exemption
issued by DGS.
General
provisions
Terms and conditions that apply to all contracts for
services and are included in any final document.
Goods Commodities (tangible items, such as movable or
personal property), as opposed to services
Grant To bestow or confer a benefit on another, with or without
consideration. In contrast, a contract requires an
exchange of consideration. Grants provided by State
agencies must be authorized by the Legislature.
Hazardous activity An activity that unduly exposes the contracting agency to
liability for personal injury or property damage, an ultra-
hazardous or dangerous activity. Contracts for hazardous
activities must be accompanied by a certificate of
insurance that names the State as an additional insured
and financially protects the State in the event of a legal
action arising out of performance of services under the
contract.
Indemnification Contractual provision in which one party will reimburse
the other party for settlements or judgments on claims
arising from the contract.
GLOSSARY
State Contracting Manual (Volume I) 5
Independent
contractor
A person working for an entity under contract and not an
employee of the contracting agency. The contracting
entity does not pay unemployment, disability, or workers’
compensation insurance or withhold taxes from payments
to the person. An independent contractor normally follows
the contracting agency’s direction on the results of the
work but not on the means of accomplishing the work.
Information
Technology (IT)
A contract for the acquisition of goods or services related
to information technology: computer hardware, software
licenses, software development, and maintenance of
hardware and software.
In-kind services Services performed in exchange for other services in lieu
of money.
Interagency
agreement
An agreement between two (2) or more State agencies
(GC §§ 11256 – 11263.
Invitation For Bids
(IFB)
A type of solicitation document used in a formal
competitive bidding process, which contains a detailed
statement of what the agency is attempting to purchase.
Qualifying bidders compete solely on the basis of cost.
Joint Powers
Agency (JPA)
An agency formed by agreement of two (2) or more public
agencies. Under this agreement, the joint powers
authority may exercise any power common to the
contracting parties (GC § 6502).
Lease A contract for the exclusive use or possession of real or
personal property for a limited period of time in exchange
for a valuable consideration.
Legal services Services rendered by an attorney.
Local assistance
contract
An agreement financed out of the local assistance portion
of the budget, includes agreements providing assistance
to local governments and aid to the public directly or
through an intermediary, such as a nonprofit corporation
organized for that purpose.
Master Service
Agreement (MSA)
An agreement entered into by the Department of General
Services pursuant to PCC § 10298 for use by other State
agencies that wish to use the same services.
Microbusiness See certified small or microbusiness.
GLOSSARY
State Contracting Manual (Volume I) 6
Non-collusion
Declaration
A declaration required of bidders on public works
contracts, which asserts that the bidders did not conspire
with each other in preparing and submitting bids.
Non-Competitive
Bid (NCB)
NCB refers to the form and statutory process by which
agencies apply to DGS for approval to make an
acquisition without competitive bidding.
Non-profit A group, often a corporation, organized for purposes
other than generating profits; for example, a charitable,
educational, religious, or scientific organization.
Certification by the IRS or Franchise Tax Board is a
common attribute.
Notice to
contractors
The cover letter or instruction for prospective bidders that
is attached to an Invitation for Bids or Request for
Proposals.
Payment bond A bond required for public works contracts in excess of
$25,000. The bond covers the costs of labor and/or
materials provided by the contractor’s employees,
subcontractors, and suppliers in the event that the
contractor fails to make those payments.
Performance bond A bond required for public works contracts in which
progress payments are made; the bond guarantees the
contractor’s performance of the work required by the
contract.
Person An individual or a business entity, including but not limited
to a sole proprietorship, partnership, corporation, or joint
venture. For purposes of SCM 1, “person” may also refer
to a government agency or a nonprofit association.
Personal property Property consisting of any moveable or intangible items
as opposed to land or fixtures on land (real property).
Prevailing wage The wages paid, as and determined by the California
Department of Industrial Relations to a distinct trade,
craft, classification, or type of worker in the specified
geographic area in which a public work is performed.
Progress
payments
Partial payments related to steps or phases toward the
completion of the required services under a contract.
GLOSSARY
State Contracting Manual (Volume I) 7
Prompt Payment
Act
Statutory provisions that establish late payment penalties
for late payments made by State agencies or State
contract. (GC § 927, et seq.)
Proprietary
software
Software that is owned and copyrighted by the contractor
who in turn sells licenses for the use of this product.
Protest A formal challenge by a bidder to the intended award of a
contract solicited by an Invitation for Bids or a Request for
Proposals.
Protestant A bidder who files a protest.
Real property Land and fixtures on land.
Request for
application
A document that solicits potential grantees to apply for a
grant.
Ratification An act or an agreement by which something previously
done is confirmed or adopted.
Responsive bid A bid that meets the specifications and other
requirements contained in the IFB or RFP.
Service contract A contract in which the contractor provides a duty or
labor, as opposed to commodities or goods.
Small business See certified small business.
Subsidiary
agreement
An agreement awarded under a DGS Leveraged
Procurement Agreement (LPA). Sometimes also known
as a “user agreement” or “order.”
Subvention
contract
See local assistance contract.
Target Area
Contract Preference
Act (TACPA)
TACPA (GC § 4530 et seq.) provides preferences for
contracting opportunities in distressed areas.
INDEX
State Contracting Manual – Volume I 1
INDEX
Rev (04/22)
-
A -
Advance payments, statutory authority required
7.32
DGS/OLS approval 4.03(3)
Advertising State
-contracting opportunities 5.75
Exemption from advertising in the CSCR 5.80
Agency responsibilities
1.04
Amendments
3.09; 5.81
Advertising, may be required in some cases 5.75
Advertising, when not required 5.80
Approval of Amendments 4.10
Contract manager’s responsibility 9.04.A.8; 9.05.C
Federal funds, reduction of 3.11.A.3
Legal services contracts, consent of AG to amend
3.07
Non-Competitive Bid Approval Requirement 3.09; 5.81
Standard language 2.07 (Table 2.2)
Vendor name change or vendor change 3.09.A.13
Americans
with Disabilities Act 2.07 (Table 2.2)
Annual reporting
7.15
Antitrust claims
2.07 (Table 2.2.); 5.02.B.2;
5.30.A.9
Approvals
Agency responsibilities 1.04
Amendments, approval of 4.10
INDEX
State Contracting Manual – Volume I 2
Architectural & Engineering contracts, approval of 11.01
Emergency contracts, approval of 4.07
Emergency contract processing procedures 3.10
Circumvention prohibited 1.06
Commencement of work prior to approval 4.09
Contracting process, approvals in the 2.04 (Table 2.1#6)
Contracts not requiring DGS/OLS approval 4.04
Contracts requiring DGS/OLS approval 4.03
Contracts with no dollar amount 7.45
DGS contract approval Chapter 4
Exemptions from DGS/OLS approval 4.05
Grants exempt from DGS/OLS approval 4.06
Hazardous contracts, review by DGS/ORIM 3.12
Interagency agreements, DGS/OLS approval of 4.03
Lease/purchase analysis 7.62
Legal services contracts, Attorney General
approval
3.07
Obtaining approval from DGS/OLS 4.08
ORIM (DGS/ORIM) approval 3.12; 7.40
Other required approvals 4.11
Preliminary considerations 2.03
Public works project approvals 10.10; 10.20.A
Purchase options, approval of 7.61.B
Responsibility for contract approval 4.02
Architectural and engineering (A&E) contracts
Chapter 11
INDEX
State Contracting Manual – Volume I 3
Classification as a type of 1.05.B.1
Contract Regulations required 11.00
Asbestos
Hazardous contracts 3.12.A.8
Notification letter 10.15.G.6
Attorney General
Approval of legal services contracts 3.07
Grants exempted from DGS approval per opinions
4.06
Audits
7.50
Contract clause 2.07 (Table 2.2); 7.50
DVBE requirements 8.16.D
Records retention for audit purposes 7.50; 9.09; 9.16
Authority to contract
Joint Powers Agreement (JPA) 3.13
Local governments 2.06.C; 3.05
State agencies 2.06.A
State boards and commissions 2.06.B
Authorization of public works contracts
10.10
Authorizing resolutions
See Authority to contract
Availability of funds
1.04; 2.03; 7.31
Availability of the State Contracting Manual
1.02
Award(s)
Multiple awards 5.85
Posting of intent to award 6.10.A
Protest Procedure 6.10
INDEX
State Contracting Manual – Volume I 4
-
B -
Bidding methods
Chapter 5
Bidding exemptions
5.05, 5.80
Bid protest(s)
Chapter 6
Bonds
10.15.A.7.b; 10.20.D
Breach of confidentiality by contractor
7.90
Budgets
7.30
Builders Exchange
10.15.C.3
-
C -
CAL
-card 7.34
California State Contracts Register (CSCR)
4.08.A.5; 5.02.B.5; 5.06
(Table 5.1); 5.75; 5.80;
10.15.B
Certifications
2.07 (Table 2.2); 10.15.A.4,
10.15.A.6
Disabled Veteran 8.14
Drug Free Work Place 7.55
National Labor Relations Board (NLRB)
2.07 (Table 2.2);
10.15.A.7.d; 10.30.B.2
Small Business/Microbusiness 8.20
Child Support
Language, when required 2.07 (Table 2.2)
Circumvention of responsibilities prohibited
1.06
Civil Service considerations
2.03.B; 2.04 (Table 2.1);
Chapter 2 Appendix;
4.08.A.2.e; 7.05
Classification of contracts
1.05
Closing of service
contracts 9.14
CMAS
3.04
INDEX
State Contracting Manual – Volume I 5
Colleges and universities, contracts with
3.18; 3.03; 3.06
Commencement of work prior to approval
Basic policy 4.09.A
Necessity of time management 4.09.B
Consultant Contracts 4.09.C
Warning to contractors 4.09.D
Commercial office moving services
3.25
Commercially Useful Function (CUF)
8.14.A.2.d-e.; 8.15.B;
8.20.D; 8.21.B.3
Commodity and goods, purchase of
1.00.B; 1.05.B.3
Competitive bidding
Chapter 5
Bid opening 5.06 (Table 5.1); 6.10.B
Comparison of bidding methods 5.06 (Table 5.1)
Competitive bidding issues 5.70
Differences between IFBs and primary RFPs 5.07 (Table 5.2)
Differences between primary and secondary 5.08 (Table 5.3)
RFPs Evaluation committee 5.15.F
Exemption from advertising, obtaining for a
contract
5.80
Exemption from competitive bidding 5.05; 5.80
Fundamental Rules 5.03
Posting of Notice of Intent to Award 6.10.A
Required language in competitive bidding 5.30
Time for completion of the competitive bidding 5.60
Conflicts of interests
7.10; 9.07
Congo, contracting ban
3.31
INDEX
State Contracting Manual – Volume I 6
Consultant services contracts
3.02
Commencement of work prior to approval 4.09.C
consultant Post-performance evaluation 3.02.5
Dispute resolution clause 3.02.1.B.4
Expert witness contracts, a type of consultant 3.02.B; 3.08
Evaluations 3.02.5
Legal services contracts, a type of 3.02.B; 3.07
Reporting, annual 7.15.A
Required provisions 2.07 (Table 2.2); 3.02; 3.07
Contract(s)
Definition of 2.02
Elements of 2.08
Electronic Submittals 4.08.B
Flagging small business contracts 8.23.D
Forms and Format, standard 1.07; 4.08
Not requiring DGS approval 4.04
Termination/Cancellation 2.07 (Table 2.2); 9.12
Under ten-thousand dollars 5.90
With no dollar amount 7.45
Contract Manager/officer
9.0
Manager “Don’ts” 9.05
Responsibilities 9.04
Contracting
Process, overview of 2.04 (Table 2.1)
Contractor
Evaluation of consultants 3.02.5
INDEX
State Contracting Manual – Volume I 7
Name change 3.09.A.13
Breach of confidentiality 7.90
Construction contracts
See Public Works
Consideration
2.05
Contingent liability
4.03
Convention and
Conference Facilities contracts 3.20
Corporate qualification to do business in California
5.30.A.6
Cost
opening 5.03.D; 5.06; 5.07; 5.08
-
D -
Darfur Contracting Act
3.29
Disabled Veteran Business Enterprise (DVBE)
8.10 et seq.
Bid information 8.15
Bidders’ response to DVBE participation 8.13
Certification/Qualification as a DVBE 8.14
Incentive program 8.17
Introduction to DVBE Participation Program 8.10
Management of DVBE contract requirements 8.16
Participation Report, annual 7.15.A; 8.18
Regulations 8.11
Substitution of DVBE subcontractors 8.16.B
When to apply the DVBE goal to a contract 8.12
DVBE two
-quote contract award process (GC § 14838.5)
5.80.A.9
Dis
-encumbrance of funds 9.14
Disputes
2.07 (Table 2.2);3.02.1.B.4
Drug Free Work Place
4.08.A.7; 7.55
INDEX
State Contracting Manual – Volume I 8
-
E -
Elevator maintenance contracts
3.12.A.4; 3.26
Emergency contracts
3.10; 5.80.A.3
Encumbrance
9.04.A.4; 2.04 (Table 2.1)
Elements of a valid contract
2.05
Equipment
7.29; 7.61; 7.62
Lease/Purchases 7.62
Rental 7.60
Option to buy 7.61
Purchase 7.29; 7.30.A.4
Subvention & local assistance contracts 3.17.2.B
E
-Signatures 4.08.F
Ethics
9.07
Evaluation committee
5.15; 5.25
Evaluation of a consultants
3.02.5
Exemption from advertising
5.75; 5.80
Exemption from competitive bidding
5.05; 5.80
Exemption from DGS approval
4.04; 4.05
Exemption
Letters 4.05
Expert
Witness Contracts 3.08; 5.80.A.6
-
F -
Fair and Reasonable
5.80.B.2.p; 5.90
Fair Employment and Housing, reporting to
7.15.D
Federally funded contracts
3.11
FEMA
3.11.D
INDEX
State Contracting Manual – Volume I 9
Fiscal
Intermediaries 3.24
Follow
-on contracts 3.02.7
Forms
Commonly used in contracting 1.07
NCB and SCR 5.80.B.1.c-d
213, Standard Agreement 3.03.C; 4.08; 10.15.F
215, State Contract Transmittal 4.08.A.2; 4.08.D; 10.15.H
4, Contractor Evaluation (consulting) 3.02.5; 7.15.D; 9.04.A.17;
9.09.9
16, Contract Award Report, DFEH 7.15.B.2; 10.15.E.5
18, Calif. Nondiscrimination Construction Contract
Specifications
10.15.A.7.e
23, Request for Project Undertaking, DGS/RESD 10.20.A; 10.20.E.2
204, Vendor (Payee) Data Record 7.25
807, Payment Bond 10.15.A.3, 10.15.A.7
810, Contracting Activity Reports 7.15
811, Small Business Preference Certification 10.15.E.1.f
821, Request For Exemption From Contract 5.75.C
830 TACPA preference Request Form 8.30.C
Forms & certifications for competitive bidding
5.30
Fundamental rules of competitive bidding
5.03
Funding
2.03.D; 7.31; also see
Budgets & Federally funded
-
G -
Government
entities & public universities, agreements
with
Grants
3.06
Exempt from DGS approval 4.04.4; 4.06
INDEX
State Contracting Manual – Volume I 10
Limited applicability of protests 6.30.B
-
H -
Hazardous services contracts
3.12; 4.03; 7.40.B
-
I -
Indemnity
7.86
Identification numbers
(contractor & taxpayer) 7.25
Independent contractors
See Civil Service
considerations & Conflict of
Information technology and telecommunications
1.00.C; 1.05.B.4; 3.19
Inspection of records
7.50; 9.09
Insurance
Legal malpractice insurance 3.07.E.5
Hazardous activities 3.12.B, 3.12.C
Public works 10.15.F.16
Requirements 3.12; 7.40
Intellectual Property
7.11
Intent to
award 6.10.A
Interagency agreements
DGS approval 4.03; 4.04.A.5
Standard language 2.07 (Table 2.2)
Use of 3.03
Interest penalties
7.20; 8.23
Invitation for bid (IFB)
5.07; 5.11; 5.30
Posting requirements 5.65.B
Iran Contracting Act
3.30
INDEX
State Contracting Manual – Volume I 11
-
J -
Janitorial/Building Maintenance Contracts
3.14, 3.14.1
Joint Powers Agreements
3.13
-
L -
Late
contracts 4.08.A.6; 4.09.D.3
Lease/purchase analysis for leases of equipment
7.62
Legal malpractice insurance
3.07.E.5
Legal services contracts
3.07
Leveraged Procurement Agreements (LPAs)
3.04
Local assistance contracts, subventions
3.17; 5.80.B.2.b
Local government, contracts
with 3.05; 3.06; 5.80.A.5
Loss Leader
3.28
-
M -
Management, contract
2.03.F; chapter 9
Manager, contract
See Contract
Master
Agreements for services & consulting services 3.04
Memberships
3.23
Microbusiness
8.20
Flagging of Contracts 8.23.D
Participation Report 7.15
Moving services
3.25
Multiple awards
5.85
Multiple year contracts
7.80
-
N -
NCBs/SCRs (Non
-competitive bid requests) 5.80.B.1
INDEX
State Contracting Manual – Volume I 12
National Labor Relations Board (NLRB)
2.07 (Table 2.2);
10.15.A.7.d; 10.30.B.2
No dollar amount, contracts with
7.45
Nonprofit organizations, contracts with
3.15
Non
-collusion Declaration Chapter 10 Appendix
Nondiscrimination program
7.65
No
n-Small Business Preference Program 8.22
Notification letter, asbestos
10.15.G.6
-
O -
Obtaining approval from DGS/OLS
4.08
Office moving service
3.25
Office of Small Business and DVBE Certification
Chapter 8
Consolidated Annual Reporting 7.15, 8.18
Consultant services report, annual 7.15.D
DVBE participation program 8.10 et seq.
DVBE participation report 7.15, 8.18
Responsibility and legal references 8.02 (Table 8.1)
Small business participation report 7.15
Small business preference 8.21
Small and microbusiness business program 8.20 et seq.
Target Area Contract Preference Act (TACPA) 8.02 (Table 8.1); 8.30
Officer, contract
See Contract
Manager/officer
Overhead limits on administrative fees,
subcontracts 3.06.B
Overview of the contracting process
2.04 (Table 2.1)
INDEX
State Contracting Manual – Volume I 13
-
P -
Payee data record
7.25
Payment by State credit card (CAL
-card) 7.34
Per
Diem expenses See Travel and per diem
Posting Requirements IFB, RFP
5.65
Point count method
(RFP secondary, high score RFP) 5.08; 5.25
Preferences
Small Business 8.21; 8.22
Target Area Contract preference Act (TACPA) 8.30
Prevailing wages
2.07 (Table 2.2); 3.25;
10.15;10.25; 10.30.B.1
Primary RFP
5.07; 5.08; 5.15; 5.20
Printing
services contracts 3.21
Progress payments
2.07; 3.02.1.B.3; 5.35.3.a;
7.33
Prompt payment
2.07, 7.20
Protests
Chapter 6
Affecting vital services 6.05
Costs of the proceeding 6.19
Decision on the hearing 6.18
Exclusions 6.03
Grounds for protest 6.02
Minimizing protest exposure 6.40
Notification of the right to protest 6.35
Posting of awards 5.65; 6.10.A
Procedure for protesting an award 6.10
INDEX
State Contracting Manual – Volume I 14
Oral Hearing Guidelines 6.15
Role of DGS in contract protest hearings 6.04
Public Records
Act 9.09
Public
Works Chapter 10
Public works contracts between $1,000 and
$388,000
10.15
Public works contracts between $388,000 and
$929,000 (or $1,205,000* for Resources Agency)
10.20
Required language in public works contracts 10.25, 10.30
Purchase options
7.61; Also see equipment
-
Q -
Qualification to do business in California, Corporate
5.30.A.6
Qualifications, review of technical
3.02.2, 5.35, 5.40
Qualifying as a DVBE
8.14
Qualifying as a small business
8.20
-
R -
Record keeping
9.09
Recycled product content and provisions
7.70
Rental agreements
7.60
Reports
Annual statewide contracting activity 7.15; 9.04
Fair Employment and Housing, reports of awards 7.15.B.2; 9.04.B.1
Request for
proposals (RFP)
Evaluation committee 5.15
Primary RFP and IFB differences 5.06; 5.07
Primary RFP and secondary RFP differences 5.06; 5.08
INDEX
State Contracting Manual – Volume I 15
Guidelines, criteria & considerations in evaluating 5.40
Point count method (secondary or high score) 5.25
Posting requirements for 5.65
Primary method (two envelope method) 5.20
Secondary method (point count or high score) 5.25
What to Include in an RFP 5.30; 5.35
Resolutions, authorizing
See authority to contract
Responsibilities of the contrac
t manager 9.04
Responsibility for contract approval
4.02
Responsibility, non
-responsible bidder 5.70
Retention of contract records
9.16
Revenue agreements
3.16
-
S -
SCR (Special Category Request, non
-competitive bid) 5.80.B.1
Secondary
method (point count or high score RFP) 5.25
Secretary of State, corporate qualifications to do
business
5.30.A.6
Small business
8.20 et seq.
Certification 8.20
Flagging of contracts, prompt payment 8.23 D
Participation report 7.15
5% preference 8.21
Small business two
-quote contract award process 5.80.A.9
Social Security number
7.25
Splitting contracts, prohibited
5.03.B
INDEX
State Contracting Manual – Volume I 16
Standard language
2.07 (Table 2.2); 4.08; 5.30
Standard forms
See Forms
Starting work prior to
approval See Commencement of
Work prior to approval
State Contract and Procurement Registration System
4.12
Statutory and regulatory references
2.07 (Table 2.2); 5.02; 8.02
(Table 8.1)
Student assistant contracts
3.22
Subcontract, limitations in publi
c entity contracts 3.06
Subcontractors, substitution of
8.16.B
Subsidiary agreements, LPAs
3.04
Subvention and local assistance contracts
3.17
-
T -
Target Area Contract Preference Act (TACPA)
8.30
Tax delinquencies, contract ban
3.32
Taxpayer identification number
7.25
Termination of the contract
2.07 (Table 2.2.); 7.85; 9.11
Terms and conditions
2.07 (Table 2.2); 4.08; 5.30
Tie Bids
5.45; 8.21.C
Time for completion of the competitive bidding process
5.60
Travel and per diem
7.30, 3.17.2 A.4
-
U -
UC, CSU, and authorized CSU auxiliary organizations
3.18
Use of manual (SCM), guide
1.03
Union notice
3.07.B; 3.21; 4.11; 7.05.D
Universities
3.18
INDEX
State Contracting Manual – Volume I 17
-
V -
Valid contract, elements of
2.05
Vendor Data Record, STD 204
7.25
Vendor name change or vendor change
3.09.A.13
-
W -
Withholds
5 35.3; 7.33; 8.16 (DVBE)
WSCA/NASPO
See Leveraged
Procurement Agreements
