Evaluating Commercially Useful Function Business Services Small Business and DVBE Program Department of Water Resources Commercially Useful Function (CUF) CCR 1896.71 Government Code 14837 Military and Veterans Code 999

Commercially Useful Function (CUF) legislation was enacted in January 2006 and relates to the department’s procurement and contracting evaluation and award activities. CUF evaluation is required when certified small / micro or DVBE businesses respond to department solicitations, or are identified as subcontractors, in relation to DWR procurements for commodities, IT goods / services, personal services (including A&E) and construction contracts. CUF is an evaluation that establishes whether the SB/MB or DVBE firm meets established CUF criteria (CCR 1871.96). What is CUF?

To prevent SB/DVBE Businesses from acting as a “pass-through” or “front”. To prevent contractors from using SB or DVBE contractors or suppliers who artificially meet SB and DVBE socio-economic objectives. To assure the selected SB or DVBE firm meets CUF regulatory requirements. WHY IS CUF EVALUATED?

Performs work that is normal for its business services and functions 1. Is responsible for the execution of a distinct element of work for the contract 2. Carries out contractual obligations by actually performing, managing, or supervising the work involved 3. Performs work that is normal for its business services and functions 4. Is not further subcontracting a portion of the work that is greater than expected to be subcontracted by normal industry practices 5. 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 6. Its role is not an extra participant in the transaction, contract or project through which funds are passed in order to obtain the appearance of DVBE participation A certified SB/MB and or DVBE is must meet each of the above points to be considered CUF compliant. CUF Evaluation Criteria

Who does the CUF Evaluation? CUF evaluation is conducted by the DWR contract specialist, buyer or DWR SB/DVBE Advocate during a bid award evaluation to determine a proposed bidder or supplier has met the definition of providing a commercially useful function in relation to the bid for services or goods. Who does the CUF Evaluation?

Affected Solicitations The following solicitation categories require a CUF review prior to contract award: Informal services or commodities less than $5,000 SB Option (services and goods) DVBE Option (services and goods) Invitation for Bid Request for Proposal (Primary) Request for Proposal Secondary Request for Quote (IT) Request for Qualifications (A&E) Commodities Procurements Rule: CUF is evaluated whenever there are SB/MB or DVBE prime of subcontractors involved in the contract award process. Affected Solicitations

Capturing CUF Information

CUF information is obtained when the contractor or supplier completes the following: Bidder Declaration Form GSPD-05-105, Written Version, or Bidder Declaration Form GSPD-05-106, Verbal Version DVBE Declaration Std. 843 DWR 9526 (pg. 6), Bidder Certification of DVBE Participation DWR 9666, (pg. 6) Bidder Certification of DVBE Participation CUF Forms

GSPD 05-105/106

GSPD-05-105/106 Bidder Declaration Provides centralized location to evaluate the various factors required by law and policy as it relates to small/micro- business and DVBE programs. Contractors must complete this form. During formal bid situations non-compliant bidders are disqualified if they do not complete the subcontractor information. GSPD-05-105/106 Bidder Declaration

Bidder Declaration GSPD-05-105 / GSPD-05-106 Identifies the prime as SB/MB or DVBE Identifies the prime as a broker Identifies subcontractors Identifies sub work to be performed or goods provided Identifies SB/MB or DVBE designated subs Identifies prime’s SB/DVBE commitment level Identifies if Sub(s) is in good standing Identifies level of equipment rental, if applicable

DVBE Declaration, Std. 843 The purpose of the Std. 843 is to distinguish DVBE equipment rental brokers from DVBE equipment owners. Bidders must declare whether or not they are an equipment owner DVBE equipment owners must have 51% ownership of the equipment. Bidders are non-compliant if they utilize a DVBE that identifies themselves as an equipment broker in response to DWR equipment rental companies. The DVBE Declaration must indicate whether the firm is a broker or owner, it must be completed by the DVBE firm. If the Std.843 is not submitted and signed by the DVBE, the bid is rejected.

DWR 9526/9666

Be sure that information on the 9526/9666 is consistent with the GSPD- 05-105/106 and vice versa. Review the following and compare between the two document sets: Contractor information DVBE subcontractor information Services/goods provided Commitment level Certification information If you have any questions about the any of the above, don’t hesitate to question the prime firm regarding their services or that of their subcontractor(s). Document in email, or file documentation what was said and determined. DWR 9526/9666

CUF EVALUATION

Evaluating the Bidder Declaration Review for Buyer/Contract Specialist/Advocate Evaluates Contract Dynamics Relationship factors Consistency with stated CUF regulations Determines whether the circumstances dictate eligibility to contract with at prime and/or transact business with subcontractors Who is involved in the contract as: The prime/subs listed Relationships between suppliers identified Role and responsibility of each supplier is described Business eligibility to contract with the State based upon: State imposed sanctions resulting in suspension Possession of applicable licenses and permits Valid Secretary of State standing for corporations Certification Factors Validates bidder claims for preferences and adherence to certain laws Validity of identified certifications Certified firms are CUF compliant Suppliers claiming preference qualify Suppliers proposing DVBE goals qualify Broker status of DVBE firms DVBE equipment rental requirements are met Documenting Defects Must document all defects found during the evaluation contained in the Bidder Declaration Subsequent determination can be made as to whether or not it’s material or immaterial Evaluation Approach Review form and any attachments for proper completion Analyze information provided on the form and attachments

CUF Evaluation Test Questions 2 3 Is the supplier responsible for execution of a distinct element of the contract? Will the supplier actually be performing, managing, or supervising the contract? Is the supplier performing work that is normal for its business, services and function? Is there any further subcontracting that is greater than that expected to be subcontracted by normal industry practices? Is the supplier responsible for products, inventories, materials and supplies required for the contract, for negotiating price, determining quality and quantity, ordering, installing, and if applicable, and making payment The supplier/contractor is not an extra participant in the transaction, contract or project through which funds are passed in order to obtain the appearance of DVBE participation CUF Evaluation Test Questions

File documentation cannot be stressed enough when determining a firm’s CUF compliance. Negative CUF evaluations may lead to a bidder’s disqualification from award of contract. This may be followed by a bidder’s protest. DWR must be able to defend the negative CUF evaluation by fully documenting the reasons for the determination. Therefore, files should include as much information as possible: Timeline Phone conversations Email Written correspondence Face-to-face meeting content: minutes/discussion Additional research and supporting documentation Contract specialists, buyers and DWR’s SB/DVBE Program Manager must document the procurement/contract file. The rationale for a conclusion and any follow-up measure taken to verify compliance must also be included. File Documentation

File Documentation DWR 9526/9666 DVBE Documentation (pgs 5/6) Completed Bidder Declaration (GSPD 05-105 or GSPD 06-106) SB or DVBE Certification Notes, emails, phone call logs with Prime or Subs establishing CUF or non-CUF situations Web research to determine prime or subcontractor services are consistent with certification UNSPNC Codes and Key Words File Documentation

If you suspect violations of the SB or DVBE program take immediate action. Consult with the DWR Program Manager/Advocate immediately Document your concerns Notify the DWR SB/DVBE Program Manager The SB/DVBE Program Manager must document and notify DGS if the department finds that a bidder has committed any of the following: Knowingly and with intent to defraud, fraudulently represent that a CUF is being performed by a certified SB/MB in order to obtain or retain a bid preference Knowingly and with intent to defraud, fraudulently represent participation of a DVBE in order to obtain or retain a bid preference Suspected Violations

Need Assistance? This email address is the centralized contact point for SB/DVBE program information and is monitored by two site administrators. SB/DVBE Program Manager SB.DVBE@water.ca.gov You may also call the SB/DVBE program manager directly at: 916.651.9705, or the Advocate Assistant at: 916.653.8578.