BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 835| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 445-6614 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ UNFINISHED BUSINESS Bill No: SB 835 Author: Wolk (D) Amended: 6/20/11 Vote: 21 SENATE EDUCATION COMMITTEE : 10-0, 4/27/11 AYES: Lowenthal, Runner, Alquist, Blakeslee, Hancock, Huff, Liu, Price, Simitian, Vargas NO VOTE RECORDED: Vacancy SENATE APPROPRIATIONS COMMITTEE : 9-0, 5/9/11 AYES: Kehoe, Walters, Alquist, Emmerson, Lieu, Pavley, Price, Runner, Steinberg SENATE FLOOR : 37-0, 05/16/11 AYES: Alquist, Anderson, Berryhill, Blakeslee, Calderon, Cannella, Corbett, Correa, De León, DeSaulnier, Dutton, Emmerson, Evans, Fuller, Gaines, Hancock, Harman, Hernandez, Huff, Kehoe, La Malfa, Leno, Lieu, Liu, Lowenthal, Negrete McLeod, Padilla, Pavley, Price, Rubio, Runner, Simitian, Steinberg, Vargas, Wolk, Wright, Yee NO VOTE RECORDED: Strickland, Walters, Wyland ASSEMBLY FLOOR : 50-23, 8/29/11 - See last page for vote SUBJECT : University of California: best value procedures SOURCE : University of California CONTINUED SB 835 Page 2 DIGEST : This bill expands the Best Value Construction Contract Pilot Program (Best Value Pilot Program) to all University of California campus construction projects statewide valued over $1 million, and extends the sunset date of the Best Value Pilot Program to January 1, 2017. ANALYSIS : Existing law: 1.Establishes, until January 1, 2012, the Best Value Pilot Program authorizing the University of California (UC), San Francisco (UCSF) to award contracts based on best value procedures. 2.Requires the Regents of the UC to submit a report to the Legislature regarding the pilot program, as specified, by January 1, 2010. This bill: 1. Expands the Best Value Pilot Program to all UC campus construction projects statewide and only for construction projects valued over $1 million. 2. Clarifies that the Regents of the UC will adopt and publish guidelines for evaluating the qualifications of bidders when awarding contracts based on best value procedures. 3. Requires the Regents of the UC to submit a report to the Legislature regarding the Best Value Pilot Program, as specified, by January 1, 2016. 4. Sunsets the Best Value Pilot Program to January 1, 2017. 5. Redefines "best value" to mean a procurement process whereby the lowest responsible bidder may be selected on the basis of objective criteria for evaluating the qualifications of bidders with the resulting selection representing the best combination of price and qualifications. CONTINUED SB 835 Page 3 6. Redefines "University" to mean all UC campuses, including the medical centers. 7. Makes technical and clarifying changes. Comments According to the author's office, "The pilot program for best value construction at UCSF is set to expire on January 1, 2012. SB 835 will extend the sunset date to January 1, 2017, and expand the pilot to all the UC campuses." UC is generally required by existing state law to let any contract for a construction project to the lowest responsible bidder. The sponsor, UC, has discovered that for many projects, particularly complex projects such as large research facilities and medical centers, the lowest bidders does not always deliver the project on time and at the bid amount. Additional Background . SB 667 (Migden), Chapter 367, Statutes of 2006, established a five-year pilot program (1/1/2007 - 12/31/2011) authorizing UCSF to assign a "qualification score" to each construction contractor's bid which could, when divided into the bidder's price, impact determination of the lowest cost per quality point based upon five factors which impart best value to the University. The five statutory non-price factors are (1) financial condition, (2) relevant experience, (3) demonstrated management competency, (4) labor compliance, and (5) safety record of the bidder. Interim Report . In February 2010, the UC issued an interim report on the "Best Value Pilot Program." Since the pilot was initiated, UCSF reports having awarded 23 contracts totaling $158.3 million under the program - the executive summary indicates the following: 1.A decrease in bid protests, communication problems, disputes, the need for multiple inspections and re-work, change order requests and claims, and litigation. 2.An increase in incentives for contractors to perform high-quality work safely, while adhering to high-labor CONTINUED SB 835 Page 4 standards. 3.Increased likelihood of contractors staffing a project with their best workers and to choose subcontractors which are most appropriate for the work (rather than "low bid"). 4.A reduction in administrative oversight and contract/project management staff time. UCSF believes that the Best Value Construction Pilot Program has demonstrated that this selection method results in contracts with a higher success rate in terms of price, quality, and timely completion. Based on the volume of construction contracts bid in 2009 and 2010 - and applying the most conservative estimate of savings to that number based on Pilot Program experience (savings = two percent of contract value) - UCSF would expect to yield approximately $30 million in annual savings. In addition, UCSF notes that savings also accrue from avoiding costs associated with bid protests, claims, and litigation. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: Yes Fiscal Impact (in thousands) Major Provisions 2011-12 2012-13 2013-14 Fund Sunset extension Minor reporting cost one time; unknown, General likely major savings through 1/1/2015 over competitive (low bid) bidding process SUPPORT : (Verified 8/29/11) University of California (source) Associated General Contractors National Electrical Contractors Association - California Chapter California Legislative Conference of the Plumbing, Heating and Piping Industry CONTINUED SB 835 Page 5 OPPOSITION : (Verified 8/29/11) Southern California Contractors Association ARGUMENTS IN SUPPORT : According the University of California, the sponsor of the bill, "best value" contracting ensures that there is a match between the price proposed and the capability of the contractor to perform the work. Use of the best value method of evaluation to select a contractor allows the university to take into account both the proposed price and other defined criteria, including financial condition, relevant experience and demonstrated management competency. ARGUMENTS IN OPPOSITION : In opposition, the Southern California Contractors Association (SCCA) states, "SB 835 appears to give the University of California additional authority and procedures to award construction contracts through so-called 'best value' criteria." SCCA continues, "This is a dangerous precedent. The selection of a contractor based on its qualifications is an invitation to corruption. The lowest responsible bidder is an objective standard devoid of any interpretation - the lowest bid wins the project. On the contrary, the introduction of a subjective 'best value' standard requires the UC to determine which contractor has the 'best value." ASSEMBLY FLOOR : 50-23, 8/29/11 AYES: Alejo, Allen, Ammiano, Atkins, Beall, Bill Berryhill, Block, Blumenfield, Bonilla, Bradford, Brownley, Buchanan, Butler, Charles Calderon, Campos, Carter, Cedillo, Chesbro, Davis, Dickinson, Eng, Feuer, Fletcher, Fong, Fuentes, Gatto, Gordon, Hayashi, Roger Hernández, Hill, Huber, Hueso, Huffman, Lara, Bonnie Lowenthal, Ma, Mendoza, Mitchell, Monning, Pan, Perea, V. Manuel Pérez, Portantino, Skinner, Solorio, Swanson, Wieckowski, Williams, Yamada, John A. Pérez NOES: Achadjian, Donnelly, Beth Gaines, Garrick, Grove, Hagman, Halderman, Harkey, Jeffries, Jones, Knight, Logue, Mansoor, Miller, Morrell, Nestande, Nielsen, CONTINUED SB 835 Page 6 Norby, Olsen, Silva, Smyth, Valadao, Wagner NO VOTE RECORDED: Conway, Cook, Furutani, Galgiani, Gorell, Hall, Torres CPM:cm 8/30/11 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED