BILL ANALYSIS Ó
SENATE COMMITTEE ON EDUCATION
Alan Lowenthal, Chair
2011-2012 Regular Session
BILL NO: SB 1280
AUTHOR: Pavley
AMENDED: April 18, 2012
FISCAL COMM: Yes HEARING DATE: April 25, 2012
URGENCY: No CONSULTANT:Kathleen Chavira
SUBJECT : Public contracts: University of California and
community college districts.
SUMMARY
This bill, until January 1, 2018, authorizes a community
college district and the University of California (UC) to
let any contract for expenditures greater than $50,000 and
$100,000, respectively for the purchase of supplies and
materials in accordance with "best value" policies as
adopted by the local governing board, and UC Regents,
respectively.
BACKGROUND
Current law requires a community college governing board to
let any contract involving an expenditure of $50,000 or
more for purchase of equipment, materials, supplies repairs
and services, other than construction services, to the
lowest responsible bidder or to reject all bids. (Public
Contract Code § 20651)
Current law also requires that the Regents of the UC let
any contract involving an expenditure of $100,000 or more
for purchase of equipment, materials, supplies repairs and
services, other than construction services, to the lowest
responsible bidder or to reject all bids. (Public Contract
Code § 10507.7)
Current law also authorizes school districts to consider,
in addition to price, factors such as vendor financing,
performance reliability, standardization, life-cycle costs,
delivery timetables, support logistics, the broadest
possible range of competing products and materials
available, fitness of purchase, manufacturer's warranties,
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and similar factors in the award of contracts for
technology, telecommunications, related equipment,
software, and services, in recognition of the highly
specialized and unique nature of these items and services,
and the rapid technological changes they undergo. Current
law specifically limits this authority to the procurement
this type of equipment and prohibits its application to
contracts for construction or the procurement of any
product available in substantial quantities to the general
public. (PCC § 20118.2.)
Current law authorizes Municipal Utility Districts (MUDs)
to let contracts for the purchase of supplies and materials
in excess of $50,000 in accordance with "best value at the
lowest cost acquisition" policies adopted by the local
governing board and outlines specific elements to be
included in these policies.
(Public Utilities Code § 12751.3)
ANALYSIS
This bill :
1) Authorizes community college districts, until January
1, 2018, to use best value contracting, pursuant to
policies adopted by the local governing board, for the
purchase of supplies and materials when the
expenditure exceeds $50,000 and the district
determines that it can expect long-term savings
through the use of objective performance criteria
other than price.
2) Defines "best value" as value determined by objective
performance criteria that may include, but are not
limited to:
a) Price features.
b) Long-term functionality.
c) Life-cycle costs.
d) Overall sustainability.
e) Required services to make operational for
the community college.
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f) Other criteria deemed appropriate by the
community college district.
3) Requires that a CCC district adopting best value
policies consider all of the following:
a) Price and service level proposals that
reduce overall operating costs, including
end-of-life expenditures and impacts.
b) Equipment, services, supplies and materials
standards that support strategic acquisition and
management program direction.
c) A procedure for bid protest and resolution.
4) Authorizes consideration of the following factors:
a) Total cost to the district, as specified.
b) Operational cost or benefit as a result of a
contract award.
c) Added value to the district of vendor-added
services.
d) Quality and effectiveness of supplies,
materials, and services.
e) Reliability of delivery or installation
schedules.
f) Terms and conditions of product warranties
and vendor guarantees.
g) Financial stability of the vendor.
h) Vendor's quality assurance program.
i) Vendor experience.
j) Consistency of the vendor's program, as
specified, with the district's supplies and
materials procurement program.
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aa) Economic benefits to the local community,
including, but not limited to job creation or
retention.
bb) Environmental benefits to the local
community.
5) Requires the contract be awarded to the bidder whose
proposal is determined, in writing, to be the best
value to the district based solely upon the criteria
set forth in the request for proposal.
6) Requires the local governing board to issue written
notice of intent to award, as specified, and to
publicly announce its award, identify the winning
bidder and the details of the winning proposal, as
specified, and with the notice and contract file
sufficient to satisfy an external audit.
7) Requires the district to ensure all businesses have a
fair and equitable opportunity to compete for and
participate in district contracts and that
discrimination, as defined in specified law, does not
occur.
8) Requires a district opting to use this authority to
report specified information by January 1, 2016, to
the Chancellor's Office.
9) Requires the LAO to request this information from the
Chancellor's office by July 1, 2016, and to report to
the Legislature by January 1, 2017, a summary of the
information received, as specified, and
recommendations whether to continue the best value
procurement authority.
10) Establishes parallel authority, requirements, and
responsibilities to the University of California with
the following differences:
a) Applies the best value authority to
contracts of $100,000 or more.
b) Authorizes best value when the University
determines it can expect long term savings
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through the use of life-cycle cost methodology,
the use of more sustainable goods and material,
and reduced administrative costs.
c) Defines "best value" as the most
advantageous balance of price, quality, service,
performance and other elements, as defined by the
university and achieved as delineated in the
bill.
d) Applies its provisions to all campuses of
the UC including medical centers, national
laboratories, and any future UC locations.
e) Clarifies that the best value authority
granted by the bill applies solely to the
procurement of goods, materials, or services and
prohibits its application to construction
contracts.
11) Sunsets the best value authorities extended to both
the CCC and the UC on January 1, 2018.
STAFF COMMENTS
1) Need for the bill . According to the author awarding
contracts on the basis of "lowest responsible bidder"
does not always result in the ability to purchase
supplies and materials in the most cost effective and
economic manner. An ability to consider criteria other
than price (such as longevity of product, sustainable
characteristics, operating expenses) and the ability
to include additional discounts and services are
necessary. This bill would provide the ability to
structure a competitive bid process that recognizes
life cycle cost, sustainable characteristics and
efficiency in the acquisition process. According to
the author, this bill would allow the UC and the CCC
the ability to stretch scarce funds as far as possible
by giving them the flexibility to make wise
procurement decisions.
2) Consistency and conformity . This bill provides
similar authority to both the UC and the CCC to
develop and utilize best value policies for the
purchase of supplies and goods. Staff recommends the
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bill be amended to conform the language in each
section that delineates when selection of a contract
on the basis of "best value" is authorized and to
conform the related definitions of "best value" in
each of the two authorizing sections of the bill.
3) Maintain the goal of "lowest responsible bidder ."
Although this bill authorizes best value acquisition,
the intent is to authorize the selection of the bidder
that, over the life of the contract, provides for
greater savings, even when the bid costs at the front
end may be higher. To reinforce the intent and goal
that the alternative process result in overall cost
savings, the bill should be amended to ensure there is
consideration and evaluation of whether the State is
realizing a better value by allowing such flexibility
in the early stages of the bidding process. Staff
recommends the bill be amended in 20651.7 to insert,
where appropriate, "lowest responsible bidder" and in
10507.8 (f)(1) to require the UC to provide
information to the LAO that allows for a comparison of
the overall cost of best value acquisition to
traditional low bid procurement practices.
4) Technical amendments . On page 4 delete lines 39-40,
and on page 5 delete line 1. Insert, "On or" in line
2.
5) Experience with best value contracting . This bill
proposes best value contracting for the acquisition of
goods and services. While this would be the first
attempt authorized for educational entities, best
value has been authorized and used in other instances.
a) Best value contracting for goods and
services . The provisions of this bill are
generally patterned after the authority extended
to Municipal Utility Districts (MUDs) which
appear to be the only sector of state government
currently authorized to use best value
contracting for the acquisition of goods and
services. AB 793 (Cox, Chapter 665, Statutes of
2001) authorized MUDs to use best value
procurement for individual supplies and materials
purchased over $50,000 until 2007. SB 1169 (Cox,
Chapter 248, Statutes of 2006) extended this
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authority on a limited basis, making the statute
permanent for those that used the process before
January 1, 2006. However, any MUD that did not
use the "best value" contract process prior to
January 1, 2006, but now elects to use the
process, must submit a specified report to the
Legislative Analyst on or before January 1, 2011.
If best value contracting is not utilized by a
MUD during this period, the authority to do so
expires on January 1, 2012.
b) Best value contracting in construction
projects . Best value contracting has generally
been recognized as a viable alternative for
construction projects. Traditionally,
construction projects have been bid out and
awarded based upon a "lowest-cost" approach. Best
value, a competitive contracting process, allows
projects to be awarded to the contractor offering
the best combination of price AND qualifications,
instead of just the lowest bid. In California,
for example, design-build best value is a method
of project delivery/procurement based on
combining the requirements for designing and
constructing a project into one contract. In
addition to submitting bids for project cost,
prospective design-build teams also submit
technical proposals. The technical proposals are
evaluated based on evaluation criteria, and
scores are compiled. The scores are then used to
weigh or adjust the submitted bid price. The
contract is awarded to the design-build team with
the best value. This committee recently heard and
passed SB 1509 (Simitian) which eliminated the
sunset on the authority of CCC and K-12 districts
to use design-build for their construction
projects.
c) Best value contracting for technology
equipment . Best value contracting has also been
used for the acquisition of technology,
telecommunications and related equipment. As
noted in the background of this analysis, school
districts are granted this authority, but
specifically prohibited from applying this
authority to contracts for construction or to the
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procurement of any product available in
substantial quantities to the general public.
Similarly, Municipal Utility Districts (MUDs)
serving more than 250,000 customers have been
authorized to use best value procurements to
acquire information technology and industry
specific equipment. This specific authority was
repealed in 2006.
6) Related LAO study . According to its 2006 statutorily
required report on the use of best value procurement
by MUDs, the Legislative Analyst (LAO) opines that
best value procurement can provide MUDs with an
important tool. The LAO also notes that an
organization must make the up-front investment
necessary to support such procurement through staff
training and develop procurement requirements that
promote the organization's strategic goals. The LAO
also noted that, early on, best value procurements
could be time-consuming and cumbersome as bid
evaluation criteria are developed and fine-tuned.
7) Broader discretion ? In 2011, issues and concerns were
raised around the implementation of the Los Angeles
Community College District's (LACCD) construction
program. An independent panel was appointed by the
District's Chancellor to review the district's
rebuilding projects and recommend changes to ethics
rules and construction oversight. In January 2012, the
panel recommended that district implement stronger
financial controls, modify construction management
structures and implement new procedure to ensure all
actions within the building program met the highest
ethical standards. The panel also determined that the
building program generally had achieved "a good level
of success" in the number of projects that had been
completed. The LACCD reports that it has taken
numerous steps to reform its building program by
strengthening the District Citizen's Oversight
Committee, directing the preparation of a master
budget plan, and implementing cost controls.
While this bill addresses contracts for acquisition of
goods and services and not construction contracts, is
it prudent to extend broader contracting discretion to
local community college districts? Should the
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conditions to authorize this be more centrally
developed? Staff notes that this bill requires an
evaluation and report by the LAO, which may provide
some assurance that community college districts will
be accountable for the policies they develop and the
contracts that they award under the more subjective
best value process.
8) Prior legislation . This bill is almost identical to
AB 2448 (Furutani, 2010) and AB 2550 (Furutani, 2008),
with the exception that these bills did not include
the provisions regarding the UC. Both bills were
vetoed by the Governor whose veto messages read, in
pertinent part:
AB 2448 (Furutani, 2010) - This bill is
substantially the same as legislation I have
vetoed in the past because it may allow
subjective methods to govern the bidding process
for procurement of supplies and materials, which
could be more open to manipulation and abuse in
the ultimate bid selection. Such abuse could lead
to non-competitive bidding and higher costs to
the State's taxpayers and community college
students.
AB 2550 (Furutani, 2008) - I support the notion
that best value contracting is a reasonable
alternative for construction projects which
allows projects to be awarded based on a
combination of best price and qualifications
because construction projects represent a large,
long term investment of resources. However, I am
concerned that this legislation may allow
subjective methods to govern the bidding process
for procurement of supplies and materials with a
relatively short life cycle, which could be more
open to manipulation and abuse in the bid
selection process.
SUPPORT
Glendale Community College District
Kern Community College District
Los Angeles Community College District
Peralta Community College District
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San Diego Community College District
San Jose-Evergreen Community College District
University of California
West Kern Community College District
Yosemite Community College District
OPPOSITION
None received.