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 Page B 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 Page C 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 Page E "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