BILL ANALYSIS                                                                                                                                                                                                    Ó






           SENATE TRANSPORTATION & HOUSING COMMITTEE       BILL NO: AB 720
          SENATOR MARK DESAULNIER, CHAIRMAN              AUTHOR:  hall
                                                         VERSION: 5/23/11
          Analysis by:  Art Bauer                        FISCAL:  no
          Hearing date:  June 21, 2011



          SUBJECT:

          Uniform construction cost accounting: alternative procedures

          DESCRIPTION:

          This bill prohibits a county that chooses to comply with the 
          Uniform Public Construction Cost Accounting Act from utilizing 
          an alternative contracting procedure that applies to contracts 
          entered into by county boards of supervisors and county road 
          commissioners. 

          ANALYSIS:

          Since 1935, state law has specified the conditions governing how 
          a county road commissioner, or a registered civil engineer under 
          the direction of the county director of transportation, may use 
          force account (i.e., county employees), day labor, or contracts 
          with private firms to perform work on county streets and roads. 

          In 1983, the Legislature enacted the Uniform Public Construction 
          Cost Accounting Act (act) to alleviate disputes between public 
          agencies and the construction industry over what projects should 
          be put out to bid and what projects should be completed with 
          county employees.  The act achieves this objective in two 
          principle ways.  First, it establishes a process for developing 
          uniform cost accounting procedures for public construction 
          projects and for recommending the procedures to the State 
          Controller for adoption.  Second, it establishes the dollar 
          limits, which the State Controller may adjust over time, for 
          what work must be done in-house and what work must be contracted 
          out. 

          The use of the act is a discretionary decision of county boards 
          of supervisors, cities, and special districts.  The act only 
          applies to public agencies whose governing boards have elected 
          by resolution to become subject to the act's uniform 
          construction cost accounting procedures. (Signatories to the 




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          act) 

          Counties that elect to be subject to the act's uniform 
          construction accounting procedures, they may continue to use the 
          "road commissioner" procurement procedures established in 1935 
          for highway construction only.  This is known as the "road 
          commissioner exemption." 

          The Uniform Public Construction Cost Accounting Act of 1983:

             1.   Defines "public agency" as a city, county, city and 
               county, including chartered cities and chartered counties, 
               any special district, and any other agency of the state for 
               the local performance of governmental or proprietary 
               functions within limited boundaries.  Included within the 
               definition is a nonprofit transit corporation that is 
               wholly owned by a public agency and formed to carry out the 
               purposes of the public agency. 

             2.   Defines a "public project" as: 

                  a.        The construction, reconstruction, erection, 
                    alteration, renovation, improvement, demolition, and 
                    repair work involving any publicly-owned, leased, or 
                    operated facility. 
                  b.        Painting or repainting of any publicly-owned, 
                    leased, or operated facility. 
                  c.        In the case of a publicly owned utility 
                    system, "public project" includes only the 
                    construction, erection, improvement, or repair of 
                    dams, reservoirs, power plants, and electrical 
                    transmission lines of 230,000 volts and higher. 

             3.   Excludes maintenance work from the definition of a 
               "public project" and defines "maintenance work" as: 

                  a.        Routine, recurring, and usual work for the 
                    preservation or protection of any publicly-owned or 
                    publicly-operated facility for its intended purposes. 
                  b.        Minor repainting. 
                  c.        Resurfacing of streets and highways at less 
                    than one inch. 
                  d.        Landscape maintenance, including mowing, 
                    watering, trimming, pruning, planting, replacement of 
                    plants, and servicing of irrigation and sprinkler 
                    systems. 




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                  e.        Work performed to keep, operate, and maintain 
                    publicly owned water, power, or waste disposal 
                    systems, including, but not limited to, dams, 
                    reservoirs, power plants, and electrical transmission 
                    lines of 230,000 volts and higher.

             4.   Authorizes the governing boards of public agencies to 
               adopt a resolution agreeing to be subject to uniform cost 
               accounting procedures established by the act.

             5.   Establishes the following contracting procedures for 
               public agencies that have adopted a resolution:

                  a.        Public projects of $25,000 or less may be 
                    performed by agency employees, by force account, by 
                    negotiated contract, or by purchase order.
                  b.        Public projects of $100,000 or less may be let 
                    to contract by informal procedures specified in the 
                    act.
                  c.        Public projects of greater than $100,000 are 
                    let to contract by a formal bidding procedure 
                    specified in the act and must be awarded to the lowest 
                    responsible bidder. 
                  d.        The above limits may be, and have been, 
                    adjusted by the Controller to account for inflation.  
                    The current limit for use of agency workforce is 
                    $30,000, the informal bidding limit is up to $120,000, 
                    and the formal bidding procedure must be followed for 
                    construction procurement over $120,000.

             6.   Establishes procedures for performing work during 
               emergencies and allows the work to be performed by day 
               labor, under the direction of the agency, by a contractor, 
               or by both. 



          The Road Commissioner Authority

          The 1935 Road Commissioner Authority authorizes a county road 
          commissioner or a county engineer to use an alternative 
          procurement procedure for street and road purposes that the 
          Legislature adopted in 1935.  This procedure includes the 
          following contract options: 

                  a.        Awarding a contract covering both work and 




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                    material, with the contract let to the lowest 
                    responsible bidder.  
                  b.        Purchasing the material and letting a contract 
                    for the performance of the workwith the material 
                    bought at the lowest possible cost and the contract 
                    let to the lowest responsible bidder. 
                  c.        Purchasing the material and having the work 
                    done by day labor, in which case advertising for bids 
                    is not required. 
                  d.        Authorizing the county road commissioner or a 
                    registered civil engineer under the direction of the 
                    county director of transportation to execute changes 
                    up to $5,000 for any contract of $50,000 or less, or 
                    ten percent for contracts over $50,000 but not to 
                    exceed $250,000.  For contracts whose original cost 
                    exceeds $250,000, the extra cost for any change or 
                    addition to the work so ordered cannot exceed $25,000, 
                    plus five percent of the amount of the original 
                    contract costs in excess of $250,000. 
                  e.        Purchasing the material and letting a contract 
                    for the work or by letting a contract covering both 
                    work and material without advertising for bids when 
                    the estimated cost of emergency work necessitated by 
                    the imminence or occurrence of a landslide, flood, 
                    storm damage, or other emergency exceeds $25,000 and 
                    the public interest and necessity demand immediate 
                    action to safeguard life, health, or property.

          This bill: 

             1.   Limits the discretion of a county that is a signatory to 
               the act from using its road commissioner exemption by 
               placing a cap on the value of new construction and 
               reconstruction contracted for under the road commissioner 
               exemption to 20 percent of the value of all work performed 
               by force account as reported in the Controller's Streets 
               and Roads Annual Report as of January 1 of each year.  
               Maintenance and emergency work, however, is exempt from 
               this limitation.

             2.   Increases force account cap that allows signatories to 
               use their own work force from $30,000 to $45,000 and 
               increases the formal bidding threshold under the act from 
               $125,000 to $175,000.

          COMMENTS:




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              1.   Purpose  .  According to the proponents, the bill brings 
               into alignment conflicting provisions between the act and 
               the road commissioner authority by placing a threshold on 
               the amount of new road construction projects counties may 
               perform themselves before they have to put the work out to 
               bid.  

              2.   Background  .  The act was established to ensure a fair, 
               open, and transparent bidding and accounting procedures for 
               all local public agencies-cities, counties, school 
               districts, special districts- that are signatories to the 
               act and adhere to its rules, in exchange for more flexible 
               bidding and advertising procedures.  Thirty-four of the 
               state's fifty-eight counties are signatories, including 
               small counties such as Trinity and Alpine and large 
               counties like Riverside and Contra Costa.  From the 
               prospective of contractors, the act creates uniformity in 
               the construction procurement market.  

               The road commissioner authority, established in 1935, was 
               an early effort at legislating uniform contracting 
               procedure for county public works programs.  A notable 
               feature of the road commissioner authority is it does not 
               include a dollar cap above which the counties must seek 
               competitive bids.  A unique feature of the act, which only 
               counties enjoy, is that counties that are signatories to it 
               may also select to procure construction services under the 
               terms of the road commissioner authority.  Many smaller 
               counties use the road commissioner authority because their 
               projects are modest in value and the local construction 
               industry may have limited capacity.  A few larger counties 
               who are signatories to the act continue to use the road 
               commissioner authority notably Riverside County, which is 
               in a metropolitan region. 

              3.   How this bill affects contracting  .  This bill limits the 
               discretion of a county that is a signatory to the act by 
               placing a cap on the dollar value of the new construction 
               or reconstruction projects performed by its own workforce.  
               The cap is calculated as follows: a county may use its own 
               workforce provided the value of work it performs does not 
               exceed 20 percent of the total value of all work performed 
               by its employees, except for the cost of maintenance and 
               emergency work, from the previous year.  For example, if a 
               county in year one uses its workforce to construct $500,000 




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               of new construction and reconstruction projects, the county 
               in year two would be allowed to use its workforce to 
               construct $100,000 of eligible construction projects.  Any 
               amount above the $100,000 cap would have to be put out to 
               contract.  Year after year the amount available to a county 
               to use its own workforce would diminish. 

              4.   Arguments for the bill  .  The Construction Industry Force 
               Account Council argues that by permitting counties to 
               become signatories to the act and at the same time to 
               continue to use the pre-existing authority of the road 
               commissioner provision, the purpose of the act "to ensure a 
               fair, open and transparent bidding and accounting 
               procedures for public agencies" is undermined.

              5.   Arguments against the bill  .  The California State 
               Association of Counties (CSAC) believes this bill limits 
               counties' ability to determine "when it is most efficient 
               and cost-effective to use their own forces for new road 
               construction and road reconstruction projects."  The 
               counties further argue that requiring competitive 
               procurement on small projects is costly and not 
               cost-effective.  Counties also point out that when they use 
               their own workforce, the materials are purchased from the 
               private vendors.  Counties also argue that rural counties 
               and remote unincorporated areas of large counties do not 
               have an active contractor presence.  Finally, counties 
               contend that that the skill level of road crews will 
               decline because of this bill as there will be insufficient 
               work to maintain a workforce to execute routine maintenance 
               and emergency work. 

              6.   Double referred  .  Rules Committee has also referred this 
               bill to the Governance and Finance Committee.

          Assembly Votes:
               Floor:    48-18
               L Gov:      7-0

          POSITIONS:  (Communicated to the Committee before noon on 
          Wednesday, 
                     June 15, 2011)

               SUPPORT:  Associated General Contractors
                        California Chapter of the American Fence 
          Association                            




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                        California Chapters of the National electrical 
          Contractors Association 
                        California Fence Contractors Association 
                        California Landscape and Irrigation Council
                        California-Nevada Conference of Operating 
          Engineers
                        California State Council of Laborers
                        California State Pipes Trade Council
                        Construction and General Laborers' Local 185
                        Construction Industry Force Account Council
                        D.T. Benton Construction, Inc.
                        Flasher Barricade Association
                        Golden State Builders Exchange
                        International Brotherhood Electrical Workers
                        Marin Builders Association
                        Sierra Mountain Construction, Inc.
                        State Building and Construction Trades of 
          California
                        Western State Council of Sheet Metal Workers
             
          
               OPPOSED:  California State Association of Counties
                         California Emergency Services Association
                         Regional Council of Rural Counties
                         Urban Counties Caucus
                         The following counties:  Alpine, Del Norte, 
                    Glenn, Humboldt, Imperial, 
                         Kings, Los Angeles, Madera, Marin, Mendocino, 
                    Mono, Napa 
                         Orange, San Mateo, Plumas, Sacramento, San 
                    Bernardino, Santa Clara,
                         Sierra, Solano, Riverside, Stanislaus, Trinity, 
                    Yolo and Yuba