BILL ANALYSIS Ó
Bill No: AB
2580
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2011-2012 Regular Session
Staff Analysis
AB 2580 Author: Furutani
As Amended: April 16, 2012
Hearing Date: June 26, 2012
Consultant: Paul Donahue
SUBJECT
Public contracts: LAUSD job order contracting pilot project
DESCRIPTION
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 to the
Department of General Services (DGS) and the Legislature
an interim report on all job order contract projects
completed by December 31, 2016.
3)Requires the LAUSD, by December 31, 2019, to submit a
report to the DGS and the Legislature describing each job
order contract procured and the work completed under each
contract by June 30, 2019, as specified.
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
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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,
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
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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 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.
EXISTING LAW
Authorizes the LAUSD to use job order contracting (JOC)
until December 1, 2012.
BACKGROUND
1)Purpose : 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.
2)In General : JOC is a contracting procedure intended to
accelerate completion of projects, lower costs, and
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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 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.
3)LAUSD Reports on JOC : The LAUSD reports 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, "since the
inception of JOC in 2005, the LAUSD has executed 138
master contracts with 44 different contracting firms. As
of November 1, 2011, the LAUSD has issued JOC 'master'
contracts valued at up to $791 million - with total
contract receipts ranging from $200,000 to $10 million
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per contractor. Through November 1, 2011, 3,343 JOC
projects have been completed with a total value of $307
million. These 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."
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.
4)Support : According to the sponsor, the LAUSD, this bill
would extend a successful program that is designed to
accelerate the completion of public works projects,
provide cost savings, and reduce construction 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.
5)Opposition : Opponents to the bill state that it
perpetuates an unfair contracting system for a school
district that has shown an abysmal ability to manage its
resources. The opponents also object to provisions in
the JOC that call for project labor agreements (aka
"project stabilization agreements" in the JOC).
PRIOR/RELATED 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.
SUPPORT:
Los Angeles Unified School District (source)
State Building and Construction Trades Council of
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California
OPPOSE:
Associated Builders and Contractors of California
Plumbing-Heating-Cooling Contractors Association of
California
Western Electrical Contractors Association
FISCAL COMMITTEE: Senate Appropriations Committee
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