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California passes bill authorizing suits for CUF fraud

The California state legislature has recently passed a bill, Assembly Bill 1574, which authorizes certain parties to bring a civil action for violations in which it has been fraudulently represented that a certified disabled-veteran owned business enterprise (DVBE) or certified small business enterprise (SBE) or microbusiness enterprise is performing a "commercially useful function" (frequently referred to as a "CUF") in order to obtain or retain a bid preference or state contract award.

Under existing California law, when a fraudulent representation of a DVBE or SBE performing a CUF is made, the agency letting the project in question may terminate its contract with the defrauding company, as well as levy penalties and costs, as appropriate. Under AB 1574, "any city attorney, county attorney or county counsel, district attorney, or Attorney General" is authorized to bring a civil action for violations involving knowing fraudulent representations of a CUF being performed by a DVBE or SBE in order to win a contract or obtain a bid preference. Civil action by such attorneys would not be authorized if the California Department of General Services (DGS) has already concluded an administrative action against the violation, however.

In addition to this expansion of law relating to the CUF standard, AB 1574 makes several new provisions, including: requiring the Director of the Office of Small Business Advocate to maintain and distribute an up-to-date list of small business liasons for all state government agencies; requiring the California Disabled Veteran Business Enterprise Program Advocate to create a system to track the effectiveness of promotional activities under the auspices of the program; and expands the category of persons eligible for workforce preferences under the Target Area Contract Preference Act.

AB 1574 has already been signed into law by Governor Gavin Newsom.

Read the bill at https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=202120220AB1574.

Find the California Department of General Services' (DGS) page on understanding the definition of a commercially useful function at https://www.dgs.ca.gov/PD/Resources/Page-Content/Procurement-Division-Resources-List-Folder/Commercially-Useful-Function-for-Certified-Firms.