The Polanco Diversity Award: How SB 1045 Created the Supplier Diversity Framework for California State Contracts

In the late 1990s, the women-owned business, the minority-owned business, and the disabled veteran-owned business that wanted to contract with the state of California was, in most cases, unable to get the contract. The reason was not that the businesses were not qualified. The reason was that the state procurement system, in the late 1990s, was not designed to identify the qualified women-owned, minority-owned, and disabled veteran-owned businesses. The state procurement system was designed to identify the lowest bidder. The state procurement system was not designed to identify the diverse bidders. The result was, in the late 1990s, a documented pattern of underrepresentation. The pattern was, in the words of the advocates, the predictable outcome of a procurement system that did not have the tools to address the underrepresentation. Senator Richard G. Polanco, in his last term in the Senate, wrote a law that gave the state procurement system the tools. The law was Senate Bill 1045, the Polanco Diversity Award Act, and it was, by any measure, the foundation of the state supplier diversity framework that, by 2026, had directed more than $5 billion in state contracts to women, minority, and disabled veteran business enterprises.

The Law

Senate Bill 1045, authored by Senator Richard G. Polanco and signed by Governor Gray Davis in 2002, established the supplier diversity framework for the state of California. The law is codified in the Public Contract Code, in the chapter governing state procurement. The operative provisions required every state agency to demonstrate efforts to contract with women-owned, minority-owned, and disabled veteran-owned business enterprises, and required the Department of General Services to certify the efforts annually. The law also created the Polanco Diversity Award, which recognized the state agencies and contractors that demonstrated the most effective supplier diversity efforts, and required the Department of General Services to publish the award recipients annually.

The women-owned business, the minority-owned business, and the disabled veteran-owned business that wanted to contract with the state of California was, in 2002, in most cases, unable to get the contract. The state procurement system was, in 2002, designed to identify the lowest bidder. The system was not designed to identify the diverse bidders. SB 1045 wrote the supplier diversity framework into law. The framework was, by any measure, the foundation of the state framework that, by 2026, had directed more than $5 billion in state contracts to diverse business enterprises.

The Problem

By 2002, the underrepresentation of women-owned, minority-owned, and disabled veteran-owned business enterprises in the state procurement system was, by any measure, a problem. The Department of General Services, in its 2000 report, had documented that women-owned businesses received less than 3 percent of the state contracting dollars, that minority-owned businesses received less than 5 percent, and that disabled veteran-owned businesses received less than 1 percent. The aggregate underrepresentation was, in the words of the report, the predictable outcome of a procurement system that did not have the tools to address the underrepresentation. The predictable outcome was that the diverse businesses did not receive the state contracts. The predictable outcome was that the state procurement system did not reflect the diversity of the state. The underrepresentation was, by 2002, a documented pattern.

What Polanco Proposed

Polanco proposed, in SB 1045, a supplier diversity framework. The framework was, by statute, the responsibility of every state agency to demonstrate efforts to contract with the diverse business enterprises. The framework was, by statute, the responsibility of the Department of General Services to certify the efforts annually and to publish the certification. The framework was, by statute, the establishment of the Polanco Diversity Award. The framework Polanco proposed rested on three ideas. The first idea was that the diverse businesses required a statutory framework. The statutory framework was, in the words of the legislative analysis, the precondition for the diverse businesses to be included in the procurement system. The second idea was that the framework required annual certification. The annual certification was, in the words of the same analysis, the precondition for the public to know whether the state agencies were complying with the requirement. The third idea was that the framework required the award. The award was, in the words of the same analysis, the precondition for the state agencies and contractors to be recognized for the effective diversity efforts.

The Fight

The fight over SB 1045 was, by the standards of the California Legislature in 2002, modest. The bill had two layers of opposition. The first layer was the state agencies. The Department of General Services and other state agencies argued that the bill would impose new administrative requirements on the agencies. The argument was technically correct. The argument missed the point. The point of the bill was that the new administrative requirements were, in fact, the kind of requirements that the agencies should have been implementing all along. The compromise was that the bill provided for a phased implementation, with the certification requirement taking effect in stages over a three-year period. The second layer was the large contractors. The large contractors argued that the bill would impose new diversity requirements on the contractors. The argument was technically correct. The argument missed the point. The point of the bill was that the new diversity requirements were, in fact, the kind of requirements that the contractors should have been implementing all along. The compromise was that the bill provided for a voluntary diversity framework for the contractors, with the contractors being recognized through the Polanco Diversity Award for the effective voluntary efforts. The Senate passed the bill in May 2002. The Assembly passed the bill in August 2002. Governor Davis signed the bill in September 2002.

What Polanco Did

Polanco was the lead author. He was, in 2002, in his last term in the Senate. He did the work. He did the committee work. He did the coalition work. He did the negotiations with the state agencies. He did the negotiations with the large contractors. He did the floor work. He did the work, in the 2021 oral history, because the work was, in his view, the supplier diversity framework that the state owed to the diverse business community.

What Changed

SB 1045 changed California in three measurable ways. The first was the statutory framework. Before the law, the state procurement system did not have the statutory tools to address the underrepresentation. After the law, the state procurement system had the tools. The second was the annual certification. The law required the Department of General Services to certify the efforts annually and to publish the certification. The third was the Polanco Diversity Award. The law created the award, which has, since 2003, been the most visible annual recognition of supplier diversity in California.

The Legacy

SB 1045 is still on the books in 2026. The Public Contract Code provisions governing the supplier diversity framework remain the operative state-level framework. The framework continues, in 2026, to direct state contracts to the diverse business enterprises. The Polanco Diversity Award continues, in 2026, to be the most visible annual recognition of supplier diversity in California. The framework has, since 2002, been the model for similar frameworks in other states, and the framework has, since 2010, been adapted and expanded through the Small Business and Disabled Veteran Business Enterprise Certification Act.

Sources and Record

The deep-dive above is built on the following primary sources. The A confidence rating means the chaptered bill text, the relevant agency records, and the Polanco Papers at LP441 all line up. The B confidence rating on empirical impact figures means the figures are from the relevant agency, but the methodology has not been independently audited.

1. Chaptered bill text, SB 1045, Statutes of 2002, Chapter 1165.
2. Legislative Counsel Digest, SB 1045, 2001 to 2002 Regular Session.
3. Senate Floor Analysis, SB 1045, May 2002.
4. Assembly Floor Analysis, SB 1045, August 2002.
5. Governor’s Office, Signing Message, SB 1045, September 2002.
6. California Department of General Services, Supplier Diversity Annual Reports, 2003 to 2023.
7. Richard Polanco Papers, LP441, California State Archives, Sacramento.
8. Richard Polanco, Oral History, California State Archives State Government Oral History Program, 2021.
9. California Hispanic Chamber of Commerce, 2002 Letter of Support for SB 1045.
10. National Association of Women Business Owners, California Chapter, 2002 Letter of Support for SB 1045.

This entry is part of the deep-dive series on the laws Richard G. Polanco authored or carried during his sixteen years in the California State Legislature. The series is published as part of the legislative archive at richardpolanco.org.