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