BILL ANALYSIS                                                                                                                                                                                                    Ó






                            SENATE COMMITTEE ON EDUCATION
                                Alan Lowenthal, Chair
                              2011-2012 Regular Session
                                          

          BILL NO:       SB 835
          AUTHOR:        Wolk
          AMENDED:       June 30, 2011
          FISCAL COMM:   Yes            HEARING DATE:  September 1, 2011
          URGENCY:       No             CONSULTANT:Daniel Alvarez

           NOTE: 
           
          This bill has been referred to committee pursuant to Senate Rule 
          29.10 because Assembly amendments either deleted or 
          substantially changed the version of the bill that passed the 
          Senate earlier this year.  At today's 29.10 hearing, the 
          committee may not amend the bill further and may only hold the 
          bill or return the bill as approved by the committee to the 
          Senate floor.
           
          SUBJECT  :  University of California: Best Value Procedures. 
          
           SUMMARY  

          This bill extends the sunset and expands the application of the 
          University of California (UC) San Francisco pilot program - to 
          all UC campuses and medical centers - to award construction 
          contracts on a "best value" basis, rather than just the lowest 
          responsible bid.  The sunset would be extended from January 1, 
          2012, to January 1, 2017.

           BACKGROUND 

          Current law authorizes the University of California (UC) to 
          conduct a pilot program, from January 2007 through December 
          2011, at their San Francisco campus that allows for construction 
          contracts to be awarded on a "best value" basis, rather than 
          just to the lowest bid.  (Public Contract Code § 10506.4 et. 
          seq.)

          "Best value" means a procurement process whereby the lowest 
          responsible bidder may be selected on the basis of objective 
          criteria with the resulting selection representing the best 
          combination of price and qualifications.  





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           ANALYSIS
           
          This bill:

          1)   Expands the "best value" pilot program to all UC campuses 
               and medical centers for construction projects exceeding $1 
               million. 

          2)   Extends the sunset for the expanded pilot program from 
               January 1, 2012, to January 1, 2017, whereby the UC is 
               permitted to award construction contracts on the basis of 
               "best value" rather than just to the lowest bid.

          3)   Clarifies that the UC Regents will adopt and publish 
               guidelines for evaluating the qualifications of bidders 
               when awarding contracts based on "best value" procedures.

          4)   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.

          5)   Requires UC to submit a report to the Legislature, by 
               January 1, 2016, that describes the various aspects of the 
               implementation of the program, including an assessment of 
               project performance and a summary of any delays or 
               increases in costs.

           STAFF COMMENTS  

           1)   Need for the bill  .  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. 

           2)   As passed by the Senate , the "best value" approach applied 
               only to UCSF campus and extended the pilot program sunset 
               to January 2015, with a report to the Legislature due 
               January 2012.




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           3)   Additional Background  .  Chapter 367, Statutes of 2006 (SB 
               667, Migden) 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.

           4)   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:

               a)        A decrease in bid protests, communication 
                    problems, disputes, the need for multiple inspections 
                    and re-work, change order requests and claims, and 
                    litigation;

               b)        An increase in incentives for contractors to 
                    perform high-quality work safely, while adhering to 
                    high-labor standards;

               c)        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");

               d)        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 




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               with bid protests, claims, and litigation.

           5)   According to opponents  the selection of a contractor based 
               on "best value" qualifications may lead to favoritism and 
               fraud.  The lowest responsible bidder is an objective 
               standard devoid of interpretation. 

           6)   Senate Rule 29.10  .  This bill has been referred to 
               committee pursuant to rule 29.10 because Assembly 
               amendments either deleted or substantially changed the 
               version of the bill that passed the Senate earlier this 
               year.  At today's 29.10 hearing, the committee may not 
               amend the bill further and may only hold the bill or return 
               the bill as approved by the committee to the Senate floor.

           7)   Assembly votes  .
               Floor:    50-23
               Appropriations: 10-5
               Business, Professions and Consumer Protection Committee: 
               6-1


           SUPPORT  (as of 10am Wednesday 8/30)

          University of California
          California Legislative Conference of the Plumbing, Heating and 
          Piping Industry
          Associated General Contractors
          National Electrical Contractors Association - California Chapter

           OPPOSITION  (as of 10am Wednesday 8/30)
           
           Engineering and Utility Contractors Association
          Southern California Contractors Association