BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair SB 118 (Yee) Hearing Date: 5/9/2011 Amended: 4/28/2011 Consultant: Bob Franzoia Policy Vote: G O 8-4 _________________________________________________________________ ____ BILL SUMMARY: SB 118 would require a public agency, prior to awarding or entering into an agreement or lease, to publish a request for information, qualification, or proposal pursuant to a public process determined by the public agency, and would provide that the contract be awarded based on best value. By imposing new duties on public agencies, this bill would impose a state mandated local program. _________________________________________________________________ ____ Fiscal Impact (in thousands) Major Provisions 2011-12 2012-13 2013-14 Fund State mandated $500 $1,000 $1,000 General local program _________________________________________________________________ ____ STAFF COMMENTS: This bill meets the criteria for referral to the suspense File. An energy service contract means a contract entered into by a public agency with any person for electrical or thermal energy or conservation services to a public agency from an energy conservation facility that provides alternative energy equipment, cogeneration equipment, or conservation measures located in public buildings or on land owned by public agencies. Existing law allows a public agency to avoid the formal bidding requirements if it is proven that the energy service project will result in savings. This is generally accomplished by the energy service company conducting an analysis which is submitted to the public agency. If the analysis indicates a savings, the public agency may award the contract to that company. While this bill promotes a more competitive bidding process, it does so at a cost that is borne by the state. By requiring the public agency to publish a request for information, SB 118 (Yee) Page 1 qualification, or proposals pursuant to a public process, this bill increases the cost of the contract process by imposing a reimbursable state mandate. Also, those public agencies which voluntarily incur costs to send out a Request for Qualification (RFQ) and a Request for Proposal (RFP) in order to attract greater competition would be able to claim those costs for reimbursement. The winning bid may not always be the lowest priced. Public agencies take into consideration a number of factors when making their selection. For example, a public agency will consider ongoing maintenance costs, material life cycle costs, upfront costs, type of installation, etc. Each of these cost considerations carries a different value to individual public agencies. Collectively, with the proposed cost savings, a public agency will make a selection that provides the best overall value. This makes a comparison of contracts between public agencies difficult. Actual mandate costs are unknown. Pursuant to Government Code 17564 (a), local entities must have costs of $1,000 or more in order to seek reimbursement for mandate costs. However, cities, counties (and school district through county offices of education) can aggregate claims in order to meet that threshold. If each of the approximately 1,000 school districts in the state incurred costs of $1,000 to implement the bidding process required by this bill, costs would be $1,000,000. Costs to cities, counties, special districts, etc. are likely similar.