BILL ANALYSIS                                                                                                                                                                                                    




                                                                  SB 258
                                                                  Page A
          Date of Hearing:   June 29, 2010

              ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER  
                                     PROTECTION
                                 Mary Hayashi, Chair
                    SB 258 (Oropeza) - As Amended:  June 10, 2010

           SENATE VOTE  :   (vote not relevant)
           
          SUBJECT  :   Public contracts: school districts: bidding  
          requirements. 

           SUMMARY  :   Requires the prequalification questionnaire and  
          uniform system a school district uses to rate bidders on a  
          public works project to contain substantially similar  
          information, questions, and requirements to the questionnaire  
          and guidelines for rating bidders developed by the Department of  
          Industrial Relations (DIR), and requires prequalification for  
          school public works projects costing $1 million or more.   
          Specifically,  this bill  :   

          1)Requires, when the school district board requires contractors  
            to prequalify for a project, that the questionnaire and  
            uniform system of rating bidders contain substantially similar  
            information, questions, and requirements to the standardized  
            questionnaire and model guidelines for rating bidders  
            developed by the DIR.

          2)Mandates the school district to use prequalification for  
            public works projects costing $1 million or more, allows the  
            school district board to use the uniform system of rating  
            bidders adopted by the school district board, or requires, if  
            the school district board has not adopted a system, to use the  
            standardized questionnaire and model guidelines for rating  
            bidders developed by the DIR. 

           EXISTING LAW  : 

          1)Allows the school district to use the prequalification process  
            for the following public works contracts: 

             a)   Contracts costing $50,000 or more for equipment,  
               materials, supplies, non-construction services, and  
               non-maintenance repairs; or, 










                                                                  SB 258
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             b)   Contracts costing $15,000 or more for construction  
               projects.  

          2)Requires a school district using prequalification for public  
            works projects to adopt and apply a uniform system of rating  
            biddings on the basis of completed questionnaires and  
            financial statements in order to determine the size of the  
            contracts upon which each bidder shall be deemed qualified to  
            bid. 

          3)Prohibits school districts from furnishing bid proposal forms  
            to people who have not submitted a questionnaire and financial  
            statement for prequalification at least five calendar days  
            prior to the public bid opening date and have been  
            prequalified at least one day prior to the public bid opening  
            date.

           FISCAL EFFECT  :   Unknown

           COMMENTS  :   

           Purpose of this bill  . According to the author's office, "With  
          the economic downturn, school districts are receiving bids from  
          contractors who have never worked on a public works project, are  
          unfamiliar with the additional rules and regulations relating to  
          public works projects, and have never bid on projects worth over  
          $1 million.  This only adds to the risk that a contractor will  
          not be able to complete a project as expected, which comes at  
          the expense of the school district and the taxpayer. 

          "A prequalification process seeks to mitigate against as many of  
          these risks as possible.  A properly designed pre-qualification  
          process like the one developed by the DIR leads to a fair and  
          objective evaluation procedure which produces a list of  
          qualified contractors who can ensure the project is built on  
          time, within budget, without workplace violations, and at an  
          expected quality level.  This bill establishes a  
          prequalification process for school district projects valued  
          over $1 million."

           Background  .  AB 574 (Hertzberg), Chapter 972, Statutes of 1999,  
          allowed many public agencies to require licensed contractors  
          that wish to bid on public works jobs to prequalify for the  
          right to bid on a specific public works project, or on public  
          works project undertaken by a public agency during a specified  









                                                                  SB 258
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          period of time.  AB 574 further authorized public entities to  
          require prospective bidders to complete questionnaires and  
          required the DIR, in collaboration with affected agencies and  
          interested parties, to develop a standardized questionnaire and  
          model guidelines for rating bidders that public entities may  
          use.  AB 574 applies to all cities, counties, and special  
          districts, but does not apply to K-12 school districts.

          Existing law does not require, but authorizes every public  
          agency to adopt a prequalification system.  Current law allows a  
          public agency to establish two different kinds of  
          prequalification procedures for public works projects.  A public  
          agency may establish a prequalification procedure linked to a  
          single project or adopt a procedure by which a contractor may  
          qualify to bid on projects which are put out for bid by that  
          agency for a period of one year after the date of initial  
          prequalification. 

          A public agency that requires prequalification must use a  
          standardized questionnaire and financial statement, adopt and  
          apply an objective uniform system of rating bidders based on  
          completed questionnaires and financial statements, and create an  
          appeals process to allow a contractor denied prequalification to  
          challenge that determination.  

          Current law does not mandate a public entity to utilize the  
          prequalification process nor requires that an expenditure amount  
          trigger the use of the prequalification process.  

           Support  .  According to the sponsor, the State Building and  
          Construction Trades Council of California, "Billions in local  
          and state school bonds have been approved by voters in recent  
          years to address the critical need to modernize and build new  
          school facilities throughout California.  School districts are  
          charged with spending public taxpayer dollars in the most  
          efficient, effective manner and public works contractors should  
          be among the state's most responsible and attentive contractors.

          "This bill institutes a proven and effective process for  
          contractors bidding on school contraction projects to guarantee  
          they meet truthworthiness, quality, fitness, capacity and  
          experience standards in order to qualify to bid.   
          Prequalification provides the school district with a useful tool  
          to ensure school projects are built on time, within budget and  
          to the highest quality standard.









                                                                  SB 258
                                                                  Page D

          "Prequalification provides the school district with a useful  
          tool to ensure school projects are built on time, within budget  
          and to the highest quality standard.  The public depends on  
          these contractors for the safety and quality of facilities that  
          millions of students, teachers and other school personnel  
          utilize year-round.  By utilizing the standard prequalification  
          document developed by the DIR in collaboration with industry  
          stakeholders, this bill will help minimize the risk of awarding  
          a contract to an unqualified and inexperienced contractor.   
          School districts already using the prequalification similar to  
          that of the DIR would not be subject to this requirement." 

           Opposition  .  According to the Small School Districts Association  
          (SSDA), "This bill would require all school projects that are  
          greater than $1 million to use pre-qualification.  Small, rural  
          school districts, particularly in rural counties such as  
          Siskiyou, Modoc, Del Norte, Plumas, Inyo, Mono and other such  
          rural counties have significant difficulty in finding  
          contractors under the current process.  SSDA believes that  
          requiring pre-qualifications will further limit the pool of  
          potential contractors and further increase costs.  Most small  
          school districts have almost no administrative support; it has  
          been severely reduced given the current school funding crisis.   
          Many small districts simply have a superintendent/principal, a  
          single person doing two jobs for their school district.  Without  
          sacrificing instructional leadership responsibilities, this  
          individual does not have the time to go through a new  
          prequalification mandate for needed school facility projects."

          According to California's Coalition for Adequate School Housing,  
          "This bill targets only school districts and county offices of  
          education as the public agencies to be mandated to use the  
          pre-qualification process.  The option to use pre-qualification  
          of bidders is current law and has been utilized in the past by  
          some school districts and county offices of education in bidding  
          construction projects that were awarded to a single general  
          contractor...  The requirement that all school districts and  
          county offices of education prequalification documents contain  
          'substantially similar information, questions, and requirements'  
          as the DIR document does not allow school districts and county  
          offices of education to develop their own prequalification  
          documents based on their local bid market or other local  
          technical or experiential concerns for a given project. 
           









                                                                  SB 258
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          "Since the late 1980's, the use of multi-prime contracts has  
          become more common; through this process, a school district will  
          hire a construction manager who assists the district in bidding  
          the project through multiple bids and awarding multiple  
          contracts that involve 30 to 40 prime contractors.  The  
          multi-prime bidding process gives greater control to the school  
          district and provides opportunities for efficiencies and  
          therefore cost savings."  
           
          Previous legislation  .  AB 2614 (Levine) of 2004 prohibits the  
          acceptance of contract bid proposals from a bidder who is  
          required to submit a completed questionnaire and financial  
          statement, but has not done so at least 15 days prior to the  
          public bid opening date.  This bill was vetoed with the  
          following veto message: "The law already allows school districts  
          to require that the information be submitted earlier than the  
          stated five days and therefore this change is both unnecessary  
          and would reduce school district flexibility."

          AB 574 (Hertzberg), Chapter 972, Statutes of 1999, defined the  
          term "responsible bidder" as it relates to public contracts,  
          authorized public entities to require prospective bidders to  
          complete questionnaires with specified information, and required  
          the DIR to develop a standardized questionnaire and model  
          guidelines for rating bidders that public entities may use. 

           REGISTERED SUPPORT / OPPOSITION  :

           Support 
           
          National Electrical Contractors Association (sponsor) 
          State Building and Construction Trades Council (sponsor)
          California Legislative Conference of the Plumbing, Heating and  
          Piping Industry
           
            Opposition 
           
          Association for California School Administrators
          Association of California Construction Managers 
          California Association of School Business Officials
          California's Coalition for Adequate School Housing 
          California Construction Management
          Castaic Union School District
          Contra Costa County Superintendents' Coalition
          Fresno Unified School District









                                                                  SB 258
                                                                  Page F
          Riverside County Schools Advocacy Association
          Riverside County Superintendent of Schools
          Rocklin Unified School District 
          School Facility Manufacturers' Association 
          Small School Districts' Association 
          Visalia Unified School District
          Westside Union School District

           Analysis Prepared by  :    Joanna Gin / B.,P. & C.P. / (916)  
          319-3301