The Small Business Procurement and Contract Act is a law that allows the state of California to have a preference for small businesses and micro businesses when awarding contracts for goods, services, or information technology. In other words, when the state requires goods, services, or information technology services, the state has the ability to bypass certain competitive bidding requirements as long as the state obtains a price quote from 2 or more small businesses, including micro businesses, or 2 or more disabled veteran businesses. These contract awards with the state can range anywhere from $5,000 to $250,000. To a small business, indeed any business, these contracts with the state can be quite lucrative.

A “small business” is defined as:

• independently owned,

• not dominant in its field,

• has a principal office in California,

• all officers are domiciled in California,

• has 100 or fewer employees,

• has an average annual gross receipt of $15 Million or less over the previous 3 years,

• or is a manufacturer with 100 or fewer employees.

A “micro business” is defined as:

• a small business

• has an average annual gross receipt of $5 Million or less over the previous 3 years.

The Department of General Services must determine whether or not a business can qualify as a small business or micro business. To do so, the department requires the businesses to submit a written declaration under penalty of perjury that all information it provides to the department is true. If a business provides false information or withholds information that would affect its eligibility as a small business or micro business, the business may have to pay penalties. Businesses would also have to certify that they were not owned by aliens (i.e. individuals illegally in the U.S.) and were, thus, eligible for state and local public benefit. Federal law requires states to affirmatively provide eligibility to aliens. It is not automatic. Interestingly, California has done just that.

The new California law, which was recently signed by Governor Newsom on September 22, 2024, explicitly states that the California Small Business Procurement and Contract Act is a state law that provides assistance and services for all persons regardless of their immigration status. California has now affirmatively provided eligibility to aliens. Yes, now even small businesses and micro businesses owned by illegal aliens can receive these benefits.

This is big news because the California Assembly reports that approximately 10 percent of undocumented workers become entrepreneurs, which represents about $3.5 billion of economic activity in 2016. Businesses created by illegal immigrants are growing in record numbers. Unfortunately, Americans small business and micro business owners are feeling the competition and receiving less state benefits.