BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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          |SENATE RULES COMMITTEE            |                   SB 258|
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                                 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.

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           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  

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             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.

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               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.

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               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  

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          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)

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          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.

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          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 

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                         SUPPORT/OPPOSITION:  SEE ABOVE

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