Cal. Code Regs. Tit. 2, § 1896.15 - Definition and Determination of Commercially Useful Function (CUF)

(a) A certified small business contractor, subcontractor or supplier of goods and/or services that contributes to the fulfillment of the contract requirements, shall perform a Commercially Useful Function (CUF) for each contract.

(b) A small business contractor, subcontractor, or a supplier of goods and/or services is deemed to perform a CUF if the business does all of the following:

(1) Is responsible for the execution of a distinct element of the work of the contract (including the supplying of services and goods);

(2) Carries out its obligation by actually performing, managing, or supervising the work involved;

(3) Performs work that is normal for its business services and functions;

(4) 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.

(5) Is not further subcontracting a portion of the work that is greater than that expected to be subcontracted by normal industry practices.

(c) A contractor, subcontractor, or supplier will not be considered to perform a commercially useful function if its role is limited to that of an extra participant in a transaction, contract or project through which funds are passed in order to obtain the appearance of small business participation.

(d) Contracting/procurement officials of the awarding department must:

(1) Evaluate if a certified small business (including microbusiness) awarded a contract meets the CUF requirement as defined in subdivision (b), and

(2) Monitor for CUF compliance for the duration of the contract. (See State Contracting Manual Volume 2, Chapter 12, Section 1200.1).

(3) Verify the procurement file contains a certification, signed under penalty of perjury, that the work performed in fulfillment of the contract requirements is CUF-compliant in accordance with the requirements in Government Code section 14837, subdivision (d)(4).

(e) If a CUF evaluation identifies potential program violations, the awarding departments shall investigate and report findings to the OSDS in accordance with section 1896.20, subdivision (a).

Notes

Cal. Code Regs. Tit. 2, § 1896.15

1. New section filed 1-23-2017; operative 1-23-2017 pursuant to Government Code section 11343.4(b)(3) (Register 2017, No. 4).
2. Editorial correction of NOTE (Register 2017, No. 13).
3. Amendment of subsection (d)(2), new subsection (d)(3), amendment of subsection (e) and amendment of NOTE filed 6-29-2023; operative 6-29-2023 pursuant to Government Code section 11343.4(b)(3) (Register 2023, No. 26).

Note: Authority cited: Sections 14837, 14839.1 and 14843, Government Code. Reference: Sections 14837, 14839 and 14842.5, Government Code; Sections 999, 999.6 and 999.10, Military and Veterans Code; and Volume 2, Chapter 12, State Contracting Manual.

1. New section filed 1-23-2017; operative 1-23-2017 pursuant to Government Code section 11343.4(b)(3) (Register 2017, No. 4).
2. Editorial correction of Note (Register 2017, No. 13).
3. Amendment of subsection (d)(2), new subsection (d)(3), amendment of subsection (e) and amendment of Note filed 6-29-2023; operative 6/29/2023 pursuant to Government Code section 11343.4(b)(3) (Register 2023, No. 26).