BILL ANALYSIS                                                                                                                                                                                                    


          |SENATE RULES COMMITTEE            |                   AB 635|
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                                 THIRD READING

          Bill No:  AB 635
          Author:   Assembly Accountability & Administrative Review  
          Amended:  8/20/10 in Senate
          Vote:     27 - Urgency

           SENATE GOVERNMENTAL ORG. COMMITTEE  :  6-2, 8/10/10
          AYES:  Harman, Florez, Negrete McLeod, Padilla, Price,  
          NOES:  Wright, Yee
          NO VOTE RECORDED:  Calderon, Denham, Oropeza

           ASSEMBLY FLOOR  :  Not relevant

           SUBJECT  :    Public contracts:  roof projects

           SOURCE  :     Author

           DIGEST  :    This bill 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, and community colleges.  

           ANALYSIS  :    Under existing law, the Department of General  
          Services 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  


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          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.  (Section 3400 of the Public Contract Code)

          Existing law provides for the State Allocation Board (SAB)  
          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 SAB 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  
          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 SAB, 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 SAB.

          This bill:

          1. 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 is  



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             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 specifications. 

          2. Requires financial disclosure on each roofing project of  
             any financial relationship between any manufacturers,  
             contractors, architects, engineers or consultants  
             involved in the project.  This disclosure must be filed  
             with the district 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 district for any  
             reasonable costs and also subject to a civil penalty, as  
             specified, in addition to any other available remedies.   

          3. Provides a toll-free phone line, as specified, for  
             contractors and others to report bid rigging and to file  
             a complaint.

          4. Provides that this bill does not apply to a school  
             district operating in accordance with Section 20113 or a  
             community college district operating in accordance with  
             Section 20654 of the Public Contract Code.


          According to the author's office, this bill is the result  
          of a lengthy investigation by the Assembly 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 percent.  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  



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          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  
          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 bill is intended to  
          provide additional tools and requirements to deter such  
          activity without taking the decision-making authority away  



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          from state entities or school districts regarding what  
          products to use.  Specifically, this bill requires 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, this bill requires an  
          independent licensed architect, engineer, or certified  
          roofing consultant to make decisions on whether a proposed  
          "or equal" product meets bid specifications.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  No    
          Local:  No

           SUPPORT  :   (Verified  8/25/10)

          Coalition for Procurement Reform

          TSM:mw  8/25/10   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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