BILL ANALYSIS Ó
AB 2580
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Date of Hearing: April 24, 2012
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Mary Hayashi, Chair
AB 2580 (Furutani) - As Amended: April 16, 2012
SUBJECT : Public contracts: job order contracting.
SUMMARY : Extends the sunset date on the Los Angeles Unified
School District's (LAUSD) job order contracting (JOC) pilot
project from December 1, 2012, to December 31, 2020.
Specifically, this bill :
1)Extends the sunset date on the LAUSD's JOC pilot project from
December 1, 2012, to December 31, 2020.
2)Requires the LAUSD, by June 30, 2017, to submit an interim
report on all job order contract projects completed by
December 31, 2016, to the Department of General Services (DGS)
and the Legislature.
3)Requires the LAUSD, by December 31, 2019, to submit a report
describing each job order contract procured and the work
completed under each contract by June 30, 2019, as specified,
to the DGS and the Legislature.
4)Requires the LAUSD to award job order contracts to the most
qualified bidder, instead of the lowest responsive bidder, who
is prequalified and compliant with the LAUSD's project
stabilization agreement (PSA).
5)Specifies that PSA compliance shall constitute no more than
three major violations on any LAUSD project within the past
three years. If the contractor has more than three
violations, the LAUSD shall seek administrative review of
those violations. Violations include, but are not limited to,
the following:
a) Failure to register core workers with the appropriate
building trade union;
b) Failure to assign apprentices, as specified;
c) Failure to comply with job order contract terms,
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including contract amount thresholds, contract duration
limits, and notification requirements before work
commences, as specified; and,
d) Incorrect assignment of work in accordance with the
LAUSD's PSA.
6)Prohibits a job order contractor from working on a job
contract within seven days after issuance, and requires the
job contractor to provide at least seven days notice to add or
substitute any subcontractor.
7)Requires that any job order changes be compliant with existing
law on allowable job order change amount thresholds, as
specified.
8)Requires the primary job order contractor, instead of LAUSD,
to provide public notice of available work to be subcontracted
by trade, and to notify the LAUSD of the subcontractor
selected. Requires the notification to:
a) Include every subcontractor for all tiers and establish
the authorized subcontractor list for the job order.
Prohibits the commencement of work prior to seven days
notice of the established subcontract list and any
additions of any subcontractor to the job order;
b) Identify the scope of the work to be performed by each
subcontractor to the job order by craft. If a
subcontractor performs multiple crafts, the job order
contractor shall identify the work of each craft to be
performed; and,
c) List any subcontractor subcontractors and the
justification for the substitution, with seven days notice.
Allows the LAUSD to request a hearing to evaluate the
substitution request, in accordance with the Subletting and
Subcontracting Fair Practices Act (Act).
9)Authorizes the LAUSD to terminate the job order or a
contractor's authorization to proceed with awarded work
subject to the LAUSD's specified administrative due process,
if LAUSD determines the contractor violated the Act.
10)Authorizes the LAUSD to declare the contract ineligible for
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future job orders and deny a contractor's prequalification
status for a period of time it determines, if LAUSD determines
the contractor violated the Act.
11)Sunsets the provisions this bill on December 31, 2020.
12)Redefines "job order contract" to mean a contract awarded to
the most qualified bidder, as specified.
13)Makes technical and clarifying changes.
14)Makes legislative findings and declarations related to the
JOC project delivery system being LAUSD-specific to reduce
project costs and expedite project completion, that the
contracts shall be awarded to the most qualified responsible
bidder, and that availability of JOC as a project delivery
method shall not preclude the use of traditional methods of
project delivery if a traditional method results in higher
cost savings.
EXISTING LAW authorizes the LAUSD to use JOC until December 1,
2012.
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of this bill . According to the author's office, "JOC
is set to sunset on December 1, 2012. The JOC provision was
established as a pilot program to study the benefits of an
alternative and optional procedure for bidding public works
projects. LAUSD is seeking to extend the pilot program for the
LAUSD, as there are a few areas of improvement that need to be
addressed.
Background . JOC is a contracting procedure intended to
accelerate completion of projects, lower costs, and reduce the
complexity of the contracting process. JOC allows for the
awarding of a competitively bid contract based upon published
construction tasks and unit prices. Rather than bid a total
price for the project, a contractor will bid an adjustment
factor, which reflects specified costs, to the published unit
prices. The unit price, multiplied by the adjustment factor,
equals the final price for any future task. Awards must be made
to the lowest responsible pre-qualified bidder. The contractor
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is generally informed of a range for the total contract value,
with the owner being obligated to award only the minimum amount
during the term of the contract. Once a contract is awarded,
the contractor is given projects in a work order format. The
owner is able to evaluate the performance of the contractor
based upon the work orders, and, if unsatisfactory, retains the
ability to terminate the JOC once the minimum dollar value of
the range for the contract value is met.
JOC is generally believed to be well suited to repetitive jobs
and situations in which owners know that many small tasks will
arise, but the timing, type of work, and quantity of work are
unknown at the time the contract is signed. These jobs
typically have minimal design requirements, and design work is
typically accomplished quickly by the job order contractor's
in-house design staff. JOC is not generally viewed as an
appropriate method of contracting for large, complex
construction projects that require extensive or innovative
design or are likely to encounter changes and revisions during
construction.
AB 2362 (Horton), Chapter 570, Statutes of 2006, extended the
sunset date on the LAUSD's JOC pilot project from December 1,
2007, to December 1, 2012, and required the LAUSD, by November
30, 2011, to submit a final report detailing each job order
contract procured and the work performed under each contract.
The LAUSD stated that for "job orders completed through November
1, 2011, actual project costs were reduced by an average of
9.26% as compared to the estimates and the procurement time.
The procurement time savings varied among projects, but overall,
produced significant time savings and provided the LAUSD with a
valuable procurement tool."
The LAUSD final report also stated that, "Generally, JOC master
contracts are one year in duration with provisions to extend up
to a total of three years. However, payments under a contract
cannot exceed $10 million in total, but there is no limit on the
number of JOC projects that can be conducted under this cost
ceiling. Since the inception of JOC in 2005, the ŬLAUSD] has
executed 138 master contracts with 44 different contracting
firms. As of November 1, 2011, the ŬLAUS D] has issued JOC
'master' contracts valued at up to $791 million - with total
contract receipts ranging from $200,000 to $10 million per
contractor? Through November 1, 2011, 3,343 JOC projects have
been completed with a total value of $307 million? These
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competitively bid contracts involve general contractors, as well
as specialty trades such as plumbing, electrical, roofing, and
asbestos abatement. Each contract is separately bid and an
individual contractor is permitted to hold multiple JOC
contracts at one time. These contracts have a minimum
guaranteed amount of $25,000."
AB 14 (Horton), Chapter 889, Statutes of 2003, authorized the
LAUSD's JOC pilot program, required an interim report on the JOC
program to the Legislature and the Office of Public School
Construction within DGS by June 30, 2005. The report submitted
on June 22, 2005 by the LAUSD's independent third party
indicated that the LAUSD was still implementing the JOC program
but that there were indications that the JOC program held the
potential to achieve its stated objectives of cost savings,
accelerated project delivery, and a reduction in contract
process complexity. The interim report also recommended that
the LAUSD continue to implement the JOC only for relatively
simple projects that do not require extensive design work and
that require accelerated completion. The interim report also
stated that a key ingredient to the success of the JOC program
rests on increasing the knowledge and capability of the LAUSD
and contractors' staff on JOC processes and systems.
This bill, as last amended, creates a compliance system for JOC,
requires that job order contracts be awarded to the most
qualified bidder, and incorporates prevailing wage,
apprenticeship, and notification requirements.
Support . According to the sponsor, the LAUSD, "ŬThis bill]
would extend the authority already in law that authorizes the
LAUSD to utilize an alternative procedure for bidding public
works projects. With the passage of AB 14 (Horton) in 2003, and
later extended with AB 2362 (Horton) in 2006), the LAUSD has
been able to participate in a pilot program, which has been
studying the benefits of JOC. JOC is a project delivery system
designed to accelerate the completion of public works projects,
provide cost savings, and reduce construction contracting
complexity. Since 2005, the LAUSD has completed 3,300 job
orders totaling more than $300 million. Throughout this period
of time and throughout these projects, the LAUSD has seen how
successful JOC can be. However, the LAUSD has also experienced
issues which necessitate further extension of the JOC provision.
The LAUSD believe the Ŭrecent] amendments to AB 2580 will
strengthen the JOC process."
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Previous Legislation . AB 2362 (Horton), Chapter 570, Statutes
of 2006, extended the sunset date on the LAUSD's JOC pilot
project from December 1, 2007, to December 1, 2012.
AB 14 (Horton), Chapter 889, Statutes of 2003, authorized the
LAUSD's JOC pilot program, and required an interim report on the
JOC program to the Legislature and the Office of Public School
Construction within DGS by June 30, 2005. This bill required
JOC to sunset on December 1, 2007.
REGISTERED SUPPORT / OPPOSITION :
Support
Los Angeles Unified School District (sponsor)
State Building and Construction Trades Council
Opposition
None on file.
Analysis Prepared by : Joanna Gin / B.,P. & C.P. / (916)
319-3301