BILL ANALYSIS                                                                                                                                                                                                    

                                                       Bill No:  AB  
                       Senator Roderick D. Wright, Chair
                           2009-2010 Regular Session
                                 Staff Analysis

          AB 635  Author:  De La Torre
          As Amended:  August 5, 2010
          Hearing Date:  August 10, 2010
          Consultant:  Art Terzakis


                        Public Contracts: roof projects 

          AB 635 is an  urgency measure  that adds a new article to the  
          Public Contract Code to promote competition and enhance  
          bidding practices for the replacement or repair of roofing  
          projects for public schools, community colleges, state  
          universities, or any facility owned or operated by the  
          state.  Specifically, this measure: 

          1.  Stipulates that in order to promote competition,  
            specifications for any roofing project for any public  
            school, community college, state university or state  
            facility shall: (1) name a minimum of three separate  
            manufacturers that share no financial, partnership, or  
            subsidiary relationships, or interests, or shared product  
            lines, or (2) require performance standards that at least  
            three manufacturers have indicated, in advance of the  
            bidding period, the ability to comply with.        
           2.  Makes it explicit that specifications requiring  
            proprietary products or a proprietary warranty may not be  
            included in specifications for a roof project if these  
            items would cost more than 10% more than for similar  
            projects utilizing open competitive bidding without a  
            requirement for proprietary products or a proprietary  


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           3.  Provides that if a substitution is offered in a bid for  
            a roof project, the governing body (e.g., school  
            district, community college district, state university,  
            or state agency) shall require decisions on whether the  
            proposed substitution is "equal," to be made by an  
            independent architect, engineer, or roofing consultant  
            based on industry standards for performance  
            characteristics and any necessary generic industry  
            testing standards. 
           4.  Provides that for any roofing project, a material,  
            product, thing, or service shall be considered "equal" if  
            it meets all the following requirements: (a) it's at  
            least equal in quality, durability, design, and  
            appearance but not necessarily of an identical color; (b)  
            it will perform the intended function at least equally  
            well; and, (c) it conforms substantially, even with  
            deviations, to the detailed requirements contained in the  
          5.  Provides the governing body must ensure and verify in  
            writing that an architect, engineer, or roofing  
            consultant develops the plans and specifications for a  
            roof project to ensure the project is designed to conform  
            to state codes and structural integrity and conformity  
            with existing law.

          6.  Requires financial disclosure on each roofing project  
            for state buildings and public schools of any financial  
            relationship between any manufacturers, contractors,  
            architects, engineers or consultants involved in the  
            project.  This disclosure must be filed with the  
            governing body initiating the roofing project.  Also  
            provides that any person who knowingly provides false  
            information and fails to disclose a financial  
            relationship shall be liable to the governing body for  
            any reasonable costs and also subject to a civil penalty,  
            as specified, in addition to any other available  
           7.  Provides a toll-free phone line, as specified, for  
            contractors and others to report bid rigging and to file  
            a complaint or request an investigation regarding  
            improper bidding and requires the governing body to  
            publish on its Internet Web site the specifications for a  
            roof project from the day those specifications are issued  
            until six months after the bid is accepted and awarded.


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           8.  Specifies that the State Allocation Board, the Office  
            of Public School Construction and the Department of  
            General Services may provide educational programs,  
            information, or on-line material to school and state  
            government administrators to ensure they are adequately  
            informed regarding the statutory requirements for a fair  
            and transparent bidding process. 
                                  EXISTING LAW

           Under existing law, the Department of General Services  
          (DGS) generally governs state procurement activities,  
          including acquisition of materials, supplies, and services.

          Under existing law (the State Contract Act) and various  
          provisions in the Local Agency Public Construction Act,  
          state and local agencies awarding contracts are required to  
          award the contract to the lowest responsible bidder.

          Existing law prohibits a state agency or political  
          subdivision of the state letting a bid from requiring  
          public works specifications that require specific brand  
          materials (sole-sourcing) or that limits bidding to one  
          material, product, or service, unless an "or equal" clause  
          is applied, allowing bidders to provide equal materials,  
          products, or services as a substitute.  Existing law also  
          requires that the bid specifications provide a time period  
          prior to, after, or prior to and after, the award of a  
          contract for the contractor to submit data substantiating  
          that items are equal when requesting permission to use  
          substitutes.  If no time period is specified, data may be  
          submitted any time within 35 days after the award of a  
          contract.  (Public Contract Code Sec. 3400.)

          Existing law provides for the State Allocation Board  
          (Board) which is responsible for determining the allocation  
          of state resources (proceeds from General Obligation Bond  
          Issues and other designated State funds) used for the new  
          construction and modernization of local public school  
          facilities. The Board is the policy level body for the  
          programs administered by the Office of Public School  
          Construction (OPSC).
          The OPSC facilitates the processing of school applications  
          and makes funding available to qualifying school districts.  
           The OPSC is also charged with the responsibility of  


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          verifying that all applicant school districts meet specific  
          criteria based on the type of funding which is being  
          requested.  It is also incumbent on the OPSC staff to  
          prepare regulations, policies and procedures which carry  
          out the mandates of the Board, and to work with school  
          districts to assist them throughout the application  
          process. The OPSC is responsible for ensuring that funds  
          are disbursed properly and in accordance with the decisions  
          made by the Board.

           Purpose of AB 635:   According to the author's office, this  
          measure is the result of a lengthy investigation by the  
          Assembly Committee on Accountability and Administrative  
          Review (Committee) and a June 30, 2010 hearing that  
          uncovered evidence of consistent overcharging on school  
          roofing projects in amounts commonly between 30 and 100%.   
          The author's office notes that despite Public Contract Code  
          provisions that require competitive bidding in  
          publicly-funded construction, the Committee found  
          widespread efforts to limit competition in school roofing  
          projects throughout the state.  The author's office points  
          out that in both large and small school districts,  
          community college districts and state universities,  
          proprietary specifications are used in bidding documents to  
          force contractors to use a specific roofing manufacturer's  
          products, even though there are more than a dozen roofing  
          manufacturers selling similar products in California.

          The author's office contends that bidding documents  
          examined by the Committee for school re-roofing projects  
          throughout the state all limited roofing products to a  
          specific manufacturer and created significant hurdles for  
          any contractor attempting to substitute an alternative  
          product that could be similar in quality but at less cost.   
          The author's office emphasizes that roofing industry  
          officials, contractors and school district officials  
          interviewed by the Committee all suggested this limited  
          competition occurs routinely in numerous school districts,  
          community college districts and universities, and leads to  
          non-competitive bidding and higher prices.  

          School roofing projects are typically awarded to a  
          contractor with the lowest bid through a procurement  
          process set up by the purchaser.  The author's office  


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          points out that while the bidding processes that the  
          Committee reviewed indicated that multiple contractors bid  
          on these jobs, the contractors were often limited to the  
          products they could use by the specifications put forth by  
          the school district.  Some contractors also could not bid  
          on certain jobs because they were not approved by the  
          manufacturer singled out for the project in the  
          specifications.  It was found that such a process often  
          leads to inflated project costs amounting to 25 percent or  
          more.  Industry officials who testified at the June 30th  
          hearing indicated that at least three roofing manufacturers  
          have specific business models aimed at subverting the  
          competitive bidding process.  It was reported that sales  
          representatives from these roofing manufacturers provide  
          free consultations for the district officials, design  
          consultants or architects who do the construction planning  
          and procurement for schools.  Additionally, the Committee  
          found that the manufacturers' representatives routinely  
          provided bidding documents with specifications favoring  
          their company.  It was disclosed that school district  
          officials use these documents because they often lack  
          in-house roofing expertise.

          According to the author's office, this measure is intended  
          to provide additional tools and requirements to deter such  
          activity without taking the decision-making authority away  
          from state entities or school districts regarding what  
          products to use.  Specifically, this measure would require  
          active financial disclosure on each roofing project  
          (replacement or repair) for state buildings or public  
          schools of any financial relationships between any  
          manufacturer, contractor, architects, engineers or  
          consultants involved in the project.   Additionally, AB 635  
          would require an independent licensed architect, engineer,  
          or certified roofing consultant to make decisions on  
          whether a proposed "or equal" product meets bid  

           Arguments in Opposition:   Writing in opposition, The  
          Garland Company, Inc., believes that this measure "will  
          ultimately increase the construction costs for California  
          schools and result in the installation of inferior roofing  
                               PRIOR LEGISLATION


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          AB 1086 (Miller), Chapter 132, Statutes of 2009.   Codified  
          the intent of Public Contract Code Section 3400 to  
          encourage contractors and manufacturers to develop and  
          implement new and ingenious materials, products, and  
          services that function as well, in all essential respects,  
          as materials, products, and services that are required by a  
          contract, but at a lower cost to taxpayers.
          SB 110 (Margett) Chapter 233, Statutes of 2003.   Authorized  
          a bid specification of a certain product if the awarding  
          authority makes a finding that a particular material or  
          service is designated by a brand or trade name in order to  
          obtain a necessary item that is only available from one  
          source or to respond to a local or state declared  

          AB 2666 (Mountjoy) 2001-02 Session.   Identical to SB 110  
          (Margett) of 2003.  (Held in Senate G.O. Committee at  
          author's request)
          AB 1442 (Pescetti) Chapter 267, Statutes of 2001.   Revised  
          certain provisions of the Public Contract Code so that the  
          restrictions on the manner of drafting bid specifications  
          would not apply if an awarding authority makes a finding  
          that a particular material or service is designated by a  
          brand name, either to make a field test or to match a  
          material or service in use on a particular public  

           AB 2156 (Pescetti) Chapter 690, Statutes of 2000.    
          Required, with respect to state contracts, that if no time  
          period is specified, data substantiating a request for a  
          substitution of "an equal" item may be submitted by the  
          bidder 35 days after award of the contract.   
          SUPPORT:   None on file as of August 6, 2010.
          OPPOSE:   The Garland Company, Inc.
          FISCAL COMMITTEE:   Senate Appropriations Committee



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