(a) A business that has obtained classification as a small business or microbusiness by reason of having furnished incorrect supporting information or by reason of having withheld information, and that knew, or should have known, the information furnished was incorrect or the information withheld was relevant to its request for classification, and that by reason of that classification has been awarded a contract to which it would not otherwise have been entitled, shall do all of the following:

(1) Pay to the state any difference between the contract amount and what the state’s costs would have been if the contract had been properly awarded.

(2) Pay to the awarding state agency and the department an amount that is equal to the costs incurred for investigating the small business or microbusiness certification that led to the finding that the contract had been improperly awarded. Costs incurred shall include, but are not limited to, costs and attorney’s fees paid by the awarding state agency or the department related to hearings and court appearances.

(3) In addition to the amounts described in paragraphs (1) and (2), be assessed a penalty in an amount of not more than 10 percent of the amount of the contract involved.

(b) The department shall suspend any person who violates subdivision (a) from transacting any business with the state either directly as a prime contractor or indirectly as a subcontractor, for a period of not less than three years and not more than 10 years. State agencies may reject the bid of a supplier offering goods, information technology, or services manufactured or provided by a subcontractor if that subcontractor has been declared ineligible to transact any business with the state under this chapter, even though the bidder is a business in good standing.

(c) All payments to the state pursuant to paragraphs (1) and (2) of subdivision (a) shall be deposited in the fund or funds out of which payments on the contract involved were made, except payments to the department made pursuant to paragraph (2) of subdivision (a) shall be deposited in the Service Revolving Fund.

(d) All payments to the state pursuant to paragraph (3) of subdivision (a) shall be deposited in the state General Fund.

(e) The small business certification, and the disabled veteran business enterprise certification if the business has both certifications, of a business found to have violated subdivision (a) shall be revoked by the department for a period of not less than five years. For an additional or subsequent violation, the period of certification revocation or suspension shall be extended for a period of up to 10 years. The certification revocation shall apply to the principals of the business and any subsequent businesses formed by one or more of those principals.

(f) Prior to the imposition of any sanctions under this article, a business shall be entitled to a public hearing and to at least five working days’ notice of the time and place thereof. The notice shall state the reasons for the hearing.

(g) Any business or person that fails to satisfy any of the amounts specified in paragraphs (1) to (3), inclusive, of subdivision (a) shall be prohibited from further contracting with the state until all amounts are satisfied.

(h) For purposes of this section, “awarding state agency” means a state agency or other state governmental entity that awarded the contract, if it was not awarded by the department.

(Amended by Stats. 2010, Ch. 342, Sec. 1. (AB 177) Effective January 1, 2011.)