SB 1340 California Senate · 2025-2026 Regular Session

Small business liaison: contract information: small business procurement participation.

Summary

Existing law establishes the Office of Small Business Advocate within the Governor's Office of Business and Economic Development, led by the Small Business Advocate, and sets forth its powers and duties relating to advocacy on behalf of small businesses and providing small businesses with the information they need to survive in the marketplace. Existing law, the Small Business Procurement and Contract Act, which requires the directors of the Department of General Services and other state agencies that enter specified contracts to establish a minimum goal for procurement participation for small businesses, including microbusinesses, in the provision of goods, information technology, and services to the state, and in the construction of state facilities, also requires a contractor, upon completion of a contract for which a commitment to achieve a small business or disabled business enterprise participation goal was made, to report to the awarding department the actual percentage of small business and disabled business enterprise participation that was achieved. This bill would also require an awarding department, upon completion of a contract for which a commitment to achieve a small business or disabled business enterprise participation goal was made, to require a prime contractor that entered into a subcontract with a small business to certify specified information to the awarding department, including, among other things, the total amount that the prime contractor received under the contract, that all payments under the contract have been made to the small business, and the actual percentage of small business participation that was achieved. By requiring a prime contractor to certify this information, the bill would expand the crime of perjury and impose a state-mandated local program. The bill would require a prime contractor, after being awarded a contract pursuant to the act, to use the small businesses or microbusiness subcontractor proposed in its bid, proposal, or contract unless certain conditions are met. Existing law, the State Contract Act except as specified, makes all contracts entered into by any state agency for the acquisition of goods or services, the construction, alteration, improvement, repair, or maintenance of property, real or personal, or the performance of work or services by the state agency for or in cooperation with any person, or public body, void unless and until approved by the Department of General Services. This bill would require an awarding department, beginning on January 1, 2028, and annually thereafter, through its small business liaison, to make available a report on payment activity during the previous fiscal year related to all contracts awarded to a small business, as specified. Existing law requires a state agency that significantly regulates small business or that significantly impacts small business to designate at least one person to serve as a small business liaison for the agency. Existing law requires these state agencies to notify the Office of Small Business Advocate within the Governor's Office of Business and Economic Development and the Department of General Services of specified information, including the name and contact information of the agency's small business liaison. This bill would require the small business liaison for each state agency to annually submit the above-described report on payment activity to the Office of Small Business Advocate. The bill would require the Office of Small Business Advocate to post that information on its internet website. The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason.

Issues: ✓ Veterans

Bill status passed both 4 of 5 stages cleared

Introduction

Feb 2026

Committee Review

Aug 2026

Senate Passage

May 2026

Assembly Passage

Aug 2026

Governor

Introduced Feb 20, 2026 Last action Aug 27, 2026

Maddy AI version diff · 4 comparisons

What changed between versions

08/30/26 - Enrolled → SB1340 · 1 edit

MINOR

No substantive policy changes between these two versions. The bill text is identical; the difference is that the 'from' version is the formal enrolled document format (with Senate and Assembly passage lines, signature blocks, and Governor approval line) while the 'to' version is a web page rendering of the same enrolled text from the California Legislature website, with navigation elements and metadata added around it.

TECHNICAL

The formal enrolled bill document formatting (Secretary of Senate, Chief Clerk of Assembly, Private Secretary of Governor signature lines, and Governor approval date line) was replaced with a web page layout including site navigation, bill status timeline, and publication metadata. No statutory language was changed.

08/21/26 - Amended Assembly → 08/30/26 - Enrolled · 4 edits · Aug 30, 2026

MODERATE

The enrolled version of SB 1340 significantly narrows the bill's scope compared to the amended assembly version. Two entire sections were removed: the amendment to Government Code Section 14838 (which contained detailed small business procurement preference rules including a 25 percent participation goal and 5 percent bid preferences) and the amendment to Military and Veterans Code Section 999.10 (which imposed disabled veteran business enterprise subcontractor listing and use requirements). The remaining bill focuses on contract completion certification, annual payment reporting starting January 1, 2028, and a simplified cross-reference for small business liaison reporting.

SCOPE

The entire amendment to Government Code Section 14838 was removed. This section had contained detailed small business procurement preference provisions including a 25 percent minimum participation goal, 5 percent bid preferences (capped at $50,000 per bid and $100,000 combined), special consideration for small businesses (reduced experience and inventory requirements), assistance with bid preparation, project division to allow small business participation, and precedence rules over non-small business bidders.

The entire amendment to Military and Veterans Code Section 999.10 was removed. This section had required bidders to list disabled veteran business enterprise (DVBE) subcontractors in their bids, required prime contractors to use listed DVBE subcontractors unless approved otherwise, prohibited substitution or termination of DVBE subcontractors without agency approval, and applied the Subletting and Subcontracting Fair Practices Act to DVBE subcontractor information.

The bill's title and legislative counsel digest were updated to reflect the removal of the Section 14838 and Section 999.10 amendments, no longer referencing disabled veteran business enterprise participation as a standalone topic.

TECHNICAL

Section 11148.5.1 was simplified from a detailed enumeration of reporting requirements (lists of contracts, dollar amounts, payment totals) to a single cross-reference requiring the small business liaison to submit 'the information required under subdivision (a) of Section 19200 of the Public Contract Code,' eliminating duplication between the two sections.

06/18/26 - Amended Assembly → 08/21/26 - Amended Assembly · 5 edits · Aug 21, 2026

MODERATE

SB 1340 was restructured to create a new standalone section (Government Code 14841) for post-contract certification and reporting requirements, and to add an entirely new chapter (Public Contract Code Section 19200) requiring annual payment activity reports on small business contracts starting January 1, 2028. The bill also changed the state-mandated local program designation from 'no' to 'yes,' reflecting that the new certification requirements impose obligations on local agencies. These changes shift the bill from a single-section amendment approach to a multi-code framework with a future compliance date.

Scope change

The bill's scope expanded from amending only the Government Code and Military and Veterans Code to also adding a new chapter to the Public Contract Code. The title changed from 'relating to small businesses' to 'relating to businesses,' and the legislative digest now references the Small Business Procurement and Contract Act and the State Contract Act as additional existing law frameworks being modified.

REQUIREMENT

New Government Code Section 14841 requires prime contractors to certify specific information upon contract completion, including total amount received, contract number and description, name/address/certification ID of the small business, amount and percentage of work committed versus paid, confirmation that all payments were made, and the actual percentage of small business participation achieved. It also requires prime contractors to use the subcontractors proposed in their bid unless a written substitution is approved before work begins.

TIMELINE

New Public Contract Code Section 19200 (Chapter 12) requires each awarding department, beginning January 1, 2028 and annually thereafter, to produce a report on payment activity during the previous fiscal year for all contracts awarded to small businesses. The report must include contractor name, contract number, term, total amount, and amounts paid.

SCOPE

Government Code Section 11148.5.1 was changed from requiring the small business liaison to submit a detailed list of contracts and dollar amounts directly, to instead submitting 'the information required under subdivision (a) of Section 19200 of the Public Contract Code,' consolidating the reporting obligation into the new chapter.

The certification requirements previously embedded in subdivision (j) of Government Code Section 14838 were removed from that section and relocated to the new Section 14841, which also adds a requirement that contracts with disabled veteran business enterprise participation must meet the requirements of Article 6 of Chapter 6 of Division 4 of the Military and Veterans Code.

ENFORCEMENT

The state-mandated local program designation changed from 'no' to 'yes,' indicating the bill now imposes costs on local agencies through the expanded perjury provisions tied to the new certification requirements in Section 14841.

02/20/26 - Introduced → 06/18/26 - Amended Assembly · 8 edits · Jun 18, 2026

MODERATE

SB 1340 was substantially expanded from a narrow bill requiring small business liaisons to report contract data to a comprehensive procurement reform package. The amended version adds binding requirements that prime contractors must use the specific small business and disabled veteran business enterprise subcontractors they listed in their bids, prohibits swapping those subcontractors without agency approval, and imposes certification and payment-verification obligations at contract completion. It also codifies a 25 percent small business participation goal and a 5 percent bidder preference with dollar caps.

SCOPE

The bill now amends Government Code Section 14838 (small business procurement) and Military and Veterans Code Section 999.10 (disabled veteran business enterprise program), in addition to the original new section on contract reporting. A coauthor (Assembly Member Caloza) was added.

REQUIREMENT

Prime contractors awarded state contracts must use the specific small business or microbusiness subcontractor they identified in their bid proposal unless the awarding agency approves otherwise. They are prohibited from substituting, replacing, or terminating that subcontractor without agency approval.

The same utilization and no-substitution requirements now apply to disabled veteran business enterprise subcontractors listed in bids under the Military and Veterans Code program.

Upon contract completion, prime contractors must certify to the awarding agency the total amount received, names and addresses of participating small businesses, the percentage of work committed versus actually paid, and confirmation that all payments were made. The agency may request proof of payment.

DEFINITION

Bidders must certify under penalty of perjury that each disabled veteran business enterprise subcontractor's portion of work serves a commercially useful function, expanding the scope of the crime of perjury and triggering a state-mandated local program finding.

FISCAL

A 5 percent bidder preference is established for small business and microbusiness bidders (and up to 5 percent for nonsmall business bidders who include small business subcontractors), capped at $50,000 per bid and $100,000 in combined preferences. A 25 percent minimum procurement participation goal for small businesses is codified.

ELIGIBILITY

Small business and microbusiness bidders receive precedence over nonsmall business bidders: a bidder preference available to nonsmall bidders cannot be used to deny an award to a qualified small business bidder. In the event of an exact tie between a small business and a disabled veteran-owned small business, the contract goes to the disabled veteran-owned entity.

ENFORCEMENT

The state-mandated local program determination changed from 'no' to 'yes' because the perjury expansion creates costs for local agencies. A no-reimbursement section was added citing the crime-creation exception under Article XIII B of the California Constitution.

Floor votes · Senate May 22, 2026 · Assembly Aug 26, 2026

How they voted

33–0

Passed · 7 other

Total votes 40

May 22, 2026

D Democratic30

25 Yea 5

83% Yea

R Republican10

8 Yea 2

80% Yea

Vote distribution

All Yea All Nay Mixed No data

Full legislative history

Actions timeline

Total actions

Key actions

Committee

Amendments

Aug 27, 2026

Upper · Passed

Assembly amendments concurred in. (Ayes 39. Noes 0.) Ordered to engrossing and enrolling.

upper

Aug 26, 2026

Introduced

In Senate. Concurrence in Assembly amendments pending.

upper

Aug 26, 2026

Lower · Passed

Read third time. Passed. Ordered to the Senate.

lower

Aug 21, 2026

Lower · Passed

Read third time and amended.

lower

Aug 13, 2026

Lower · Passed

From committee: Do pass. (Ayes 15. Noes 0.) (August 13).

lower

Jun 23, 2026

Lower · Passed

From committee: Do pass and re-refer to Com. on APPR. with recommendation: To consent calendar. (Ayes 8. Noes 0.) (June 23). Re-referred to Com. on APPR.

lower

Jun 18, 2026

Lower · Passed

From committee with author's amendments. Read second time and amended. Re-referred to Com. on E.D., G., & H.I.

lower

Jun 1, 2026

Committee

Referred to Com. on E.D., G., & H.I.

lower

May 22, 2026

Upper · Passed

Read third time. Passed. (Ayes 33. Noes 0. Page 4420.) Ordered to the Assembly.

upper

May 14, 2026

Upper · Passed

From committee: Do pass. (Ayes 7. Noes 0. Page 4273.) (May 14).

upper

Apr 13, 2026

Upper · Passed

From committee: Do pass and re-refer to Com. on APPR. (Ayes 11. Noes 0. Page 3841.) (April 13). Re-referred to Com. on APPR.

upper

Mar 24, 2026

Upper · Passed

From committee: Do pass and re-refer to Com. on B. P. & E.D. with recommendation: To consent calendar. (Ayes 14. Noes 0. Page 3658.) (March 24). Re-referred to Com. on B. P. & E.D.

upper

Mar 4, 2026

Committee

Referred to Coms. on G.O. and B. P. & E.D.

upper

Feb 20, 2026

Introduced

Introduced. To Com. on RLS. for assignment. To print.

upper

1 primary · 1 co-sponsor