BILL ANALYSIS Ó SB 835 Page 1 Date of Hearing: July 13, 2011 ASSEMBLY COMMITTEE ON APPROPRIATIONS Felipe Fuentes, Chair SB 835 (Wolk) - As Amended: June 20, 2011 Policy Committee: Business and Professions Vote: 6-1 Urgency: No State Mandated Local Program: No Reimbursable: SUMMARY This bill extends and expands the University of California's (UC's) pilot program to award construction contracts based on "best value" rather than lowest bid. Specifically, this bill: 1)Extends the pilot program sunset date from January 1, 2012 to January 1, 2017. 2)Expands the pilot program to all UC campuses for construction projects exceeding $1 million. (The currently program is limited to projects of any value at the San Francisco campus (UCSF) only.) 3)Requires the UC Regents to report specified information regarding the pilot program to the Legislature by January 1, 2016. FISCAL EFFECT 1)Based on the results to date of the pilot program at UCSF, the university should realize significant annual savings, potentially in the tens of millions, in contract and contract administration costs for the next five years. 2)Costs for the required report are minor and absorbable. COMMENTS 1)Background . SB 667 (Migden)/Chapter 367 of 2006, established the five-year Best Value Pilot Program at UCSF. Under this program, UC prequalifies bidders, then evaluates the bid and SB 835 Page 2 assigns a qualification score based upon five factors, which include the bidder's financial condition, relevant experience, demonstrated management competency, labor compliance, and safety record. UC then divides each bidder's price by its qualification score, and the lowest resulting cost per quality point represents the best value bid. Under this program, UCSF has awarded 30 construction contracts totaling $960 million (out of 228 contracts totaling $1.3 billion entered into during the same period). According to UC, the pilot program has demonstrated the following advantages: a decrease in bid protests, communication problems, disputes, the need for multiple inspections and rework, change order requests and claims, and litigation; increased incentives for contractors to perform high-quality work safely, while adhering to high-strike standards; increasing likelihood of contractors staffing a project with their best workers and selection of subcontractors most appropriate for the work; and reduced administrative oversight and contract or project management staff time. 2)Purpose . UC believes that, based on results from the pilot program to date, expanding the best value program systemwide will result in savings of at least $30 million annually. Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081