BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 258| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: SB 258 Author: Oropeza (D) Amended: 5/14/09 Vote: 21 SENATE BUSINESS, PROF. & ECON. DEVELOP. COMM. : 7-3, 4/27/09 AYES: Negrete McLeod, Corbett, Correa, Florez, Oropeza, Romero, Yee NOES: Wyland, Aanestad, Walters SENATE APPROPRIATIONS COMMITTEE : 8-4, 5/11/09 AYES: Kehoe, Corbett, DeSaulnier, Hancock, Leno, Oropeza, Wolk, Yee NOES: Cox, Denham, Runner, Walters NO VOTE RECORDED: Wyland SUBJECT : Contractors: public works SOURCE : California Chapters of the National Electrical Contractors Association Construction Employees Association State Building and Construction Trades Council DIGEST : This bill establishes a public works certification requirement under an unnamed state certifying agency for licensed contractors and subcontractors who perform public works projects. CONTINUED SB 258 Page 2 ANALYSIS : Existing law, the Business and Professions Code: 1. Provides for the licensure and regulation of more than 250,000 contractors under the Contractors State License Law (Contractors Law) by the Contractors' State License Board (CSLB) within the Department of Consumer Affairs. 2. Authorizes the CSLB to adopt regulations to set various application, licensure, and renewal fees, not to exceed specified limits, and provides for the deposit of those fees in the Contractors License Fund. 3. Requires the CSLB to initiate disciplinary action against a licensee upon certified notification of the Labor Commissioner's finding of the licensee's willful and deliberate violation of the Labor Code. 4. Authorizes the CSLB to adopt regulations to establish specialty classifications of contractors, and provides that in public works contracts, the awarding authority shall determine the license classification necessary to perform the project. 5. Requires contractors to obtain special certifications from the CSLB in order to perform asbestos-related work or to engage in hazardous substance removal or remedial action, as specified. Existing law, the Public Contract Code: 1. Authorizes a public entity to require that each prospective bidder for a contract complete and submit a standardized questionnaire and financial statement, including a complete statement of the prospective bidder's experience in performing public works. 2. Requires the Department of Industrial Relations, in collaboration with affected agencies and interested parties, to develop model guidelines for rating bidders, and draft the standardized questionnaire, that may be used by public entities for these purposes. 3. Requires the questionnaire and financial statement to be CONTINUED SB 258 Page 3 verified under oath by the bidder in the manner in which civil pleadings in civil actions are verified. 4. Authorizes a public entity to establish a process for prequalifying prospective bidders on a quarterly basis and makes a prequalification valid for one calendar year following the date of initial prequalification. This bill: 1. States legislative intent to certify that only the most qualified contractors perform on public works projects in order to promote the safety of California's publicly owned facilities and ensure the best use of tax dollars. 2. Establishes within the Contractors Law, beginning January 1, 2012, that a contractor is prohibited from performing work as a contractor or subcontractor on a public work contracted by the state or a state agency, or any other public agency, unless the contractor has obtained a public works certification from a state certifying agency to be determined by the Legislature. 3. Provides that to obtain the public works certification, the license qualifier shall submit the public works certification prequalification document developed and administered by the agency and receive certification from the agency. 4. Authorizes the agency to deny or revoke a public works certification for a contractor's failure to comply with the laws which apply to public works, or for committing any acts which are grounds for license denial, and requires revocation of a public works certification to be subject to the Administrative Procedures Act. 5. Specifies that the above provisions shall not be construed to: A. Affect the requirements relating to specialty contractors. B. Restrict the state or any other public agency from imposing additional requirements on contractors in awarding public works contracts. CONTINUED SB 258 Page 4 C. Expand the enforcement authority of the agency. 1. Defines certain terms relative to the bill: A. "Public agency" is a city, county, city and county, including chartered cities and chartered counties, the University of California and any special district, and any other agency of the state for the local performance of governmental or proprietary functions within limited boundaries. "Public agency" also includes a nonprofit transit corporation owned by a public agency, as specified. B. "Public work" is any work that is subject to the requirements of Chapter 1 (commencing with Section 1720) of Part 7 of Division 2 of the Labor Code. 1. Provides that the certifying agency shall do all of the following: A. By January 1, 2011, establish and validate minimum standards for the competency and prequalification of all contractors performing work on public works projects through a system of prequalification certification. B. By March 1, 2010, establish advisory committees as necessary to carry out these functions. Provides that the committees shall be made up of contractor representation from both the general contractor community and the subcontractor community with at least one representative from the following organizations on all committees or panels: Associated General Contractors, Construction Employers Association, California Legislative Conference of the Plumbing, Heating and Piping Industry, and the National Electrical Contractors Association, and at least one representative from organized labor designated by California Building and Construction Trades Council. C. By July 1, 2011, adopt regulations to enforce these provisions. CONTINUED SB 258 Page 5 D. Issue certification cards to contractors who have been prequalified and certified pursuant under the bill. E. Make information on certified contractors publicly available. 1. The public works prequalification certification shall be developed according to professionally accepted principles for prequalification and should adhere as closely as possible to the guidelines set forth in the Public Contract Code (see Existing law, the Public Contract Code, above). The certification shall not be based on a per-project basis and shall be based on a per-applicant basis. 2. Establishes fees which shall be deposited into the Public Works Certification Fund, as follows: A. By January 1, 2011, requires the certifying agency to establish fees necessary to implement the public works certification, and charge each applicant the fee. B. Until December 31, 2014, establishes a public works certification examination fee of not more than $65, after which the fee shall be not more than $125. 1. Creates the Public Works Certification Fund within the State Treasury, which upon appropriation by the Legislature to the certifying agency may only be used for the costs to prequalify and certify contractors and subcontractors, and issue certification cards. Prior Legislation This bill is essentially the same as last year's SB 1698 (Romero) which was vetoed by the Governor. That bill would have prohibited a contractor from performing work as a contractor or a subcontractor on a public work unless the contractor obtained a public works certification from the CSLB. The bill required CSLB to develop a certification CONTINUED SB 258 Page 6 examination and required the qualifier for certification to pass the license exam. The bill authorized the CSLB to charge a fee in an amount sufficient to pay for the costs of administering the examination. SB 1698 passed the Senate by a vote of 24-14. In his veto message, the Governor stated: I believe that sufficient safeguards are already in place to prevent contractors from bidding on public works projects if they fail to comply with current Labor Code provisions. This bill would create barriers to small business by adding additional requirements to become a qualified bidder on public works projects, while providing little additional value to the public works process. By creating this barrier, competition on public works projects could be reduced, that may result in increased bid and project costs. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No According to the Senate Appropriations Committee: Fiscal Impact (in thousands) Major Provisions 2009-10 2010-11 2011-12 Fund New certification for public works contractors licensing $389 $688 $377 Special* $115 ongoing enforcement $0 $161 $321 $321 ongoing testing $60 Application fee ($825) ($825)($130)Special* (revenue) ($130) ongoing * Public Works Certification Fund SUPPORT : (Verified 5/14/09) CONTINUED SB 258 Page 7 California Chapters of the National Electrical Contractors Association (co-source) Construction Employers Association (co-source) State Building and Construction Trades Council (co-source) Air Conditioning Sheet Metal Association Air-conditioning & Refrigeration Contractors Association California Labor Federation California Legislative Conference of the Plumbing, Heating and Piping Industry OPPOSITION : (Verified 5/14/09) Associated Builders and Contractors Associated General Contractors of California California Landscape Contractors Association California Professional Association of Specialty Contractors El Dorado Irrigation District Engineering and Utility Contractors Association ARGUMENTS IN SUPPORT : According to the author's office, many contractors are unaware of the additional rules regarding public works projects. This results in those contractors who abide by the laws to be at a competitive disadvantage relative to those contractors who fail to comply with current labor laws and regulations. In short, the good actors are punished for obeying the law. The author further states, with infrastructure projects funded by the bonds voters passed in 2006, and the federal stimulus dollars coming to California, it is now more important than ever to ensure that all contractors bidding on these public work projects are knowledge about the process and applicable laws and regulations. The State Building and Construction Trades Council argue that unlike general contracting law, public works contracts require specific protocols as their projects are being constructed. For instance, construction workers must be paid the local prevailing wage, the contractor must maintain certified payrolls under penalty of law, and the contractor must maintain special surety bonds. CONTINUED SB 258 Page 8 Other supporters contend that current law requires public agencies to use the contractor or contractors who submit the lowest responsible bid on public works projects. These requirements are in statute for good reason, as they ensure competitive bid prices, protect against corruption and guarantee equity in the bidding process. This places agencies in a position of having to use contractors that might have submitted the low bid, but do not have the experience, knowledge of public work requirements or financial stability to complete the project. Providing a state minimum standard of competency for contractors who wish to bid on public works projects would correct this issue. ARGUMENTS IN OPPOSITION : Opponents of this bill do not see the need for this legislation, and argue that public agencies already have the authority to pre-screen bidders on public works projects to assure that the prime contractor and subcontractor have the requisite experience, knowledge of public works contracting law, and financial capacity to perform. California Landscape Contractors Association (CLCA) sees the bill as being inconsistent with the goal of encouraging greater small business participation in government contracting and states: "Requiring smaller contractors to obtain special ? certification before bidding on public works projects erects yet another barrier that discourages participation in taxpayer-financed works of improvement." Associated Builders and Contractors (ABC) argues that the bill is unneeded because of the existing certification authorization, but contends that any type of certification issues for public works is more appropriately placed in the Department of Industrial Relations. However, ABC suggests before embarking on a new certification program, some demonstration of the existence of a problem needs to be provided, "particularly since certification proposals often have the unintended impact of restricting competition and choices for consumers and ultimately, for taxpayers." JA:nl 5/15/09 Senate Floor Analyses CONTINUED SB 258 Page 9 SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED