BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 1280
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          Date of Hearing:   July 3, 2012

                       ASSEMBLY COMMITTEE ON HIGHER EDUCATION
                                 Marty Block, Chair
                    SB 1280 (Pavley) - As Amended:  June 26, 2012

           SENATE VOTE  :   33-0
           
          SUBJECT  :   Public contracts: University of California and 
          community college districts: competitive bidding: best value.

           SUMMARY  :   Authorizes a California Community College (CCC) 
          district and the University of California (UC), until January 1, 
          2018, 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.  
          Specifically,  this bill  :   

          1)Authorizes CCC 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.

             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:








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             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.

             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 CCC 
            district based solely upon the criteria set forth in the 








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            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 CCC 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 CCC district opting to use this authority to report 
            specified information by January 1, 2016, to the Chancellor's 
            office, and requires the Legislative Analyst Office (LAO) to 
            request this information and report to the Legislature, as 
            specified, by January 1, 2017. 

          9)Establishes parallel authority, requirements, and 
            responsibilities to UC with the following differences:

             a)   Applies the best value authority to contracts of 
               $100,000 or more.

             b)   Authorizes best value when UC determines it can expect 
               long term savings 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 UC and achieved as delineated in the bill.

             d)   Applies its provisions to all UC campuses, including 
               medical centers, national laboratories, and any future UC 
               locations.

             e)   Clarifies that the best value authority granted by this 
               bill applies solely to the procurement of goods, materials, 
               or services and prohibits its application to construction 
               contracts. 

          10)Requires UC to provide specified information to the LAO 
            before July 1, 2016, and requires LAO to report to the 








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            Legislature on the use of best value procurement by the UC, as 
            specified, by February 1, 2017.

          11)Sunsets the best value authorities extended to both CCC and 
            UC on January 1, 2018.

           EXISTING LAW  : 

          1)Requires a CCC 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)

          2)Requires that the UC Regents 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.  (PCC § 10507.7)

          3)Authorizes UC to use best value for construction projects 
            valued over $1 million until January 1, 2017.  (PCC § 10506.4)

          4)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, 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.  
            Existing 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.)

          5)Authorizes Municipal Utility Districts 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)








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           FISCAL EFFECT  :   This bill was approved by the Senate 
          Appropriations Committee pursuant to Senate Rule 28.8.

           COMMENTS  :    Need for this bill  .  According to the author, UC and 
          CCC can only consider up-front costs for the acquisition of 
          materials, equipment, services, and supplies.  In many cases, 
          this process prevents these public institutions from purchasing 
          products in the most cost effective manner.  This bill would 
          allow, on a five-year pilot basis, UC and CCC to structure a 
          competitive bid process using best value procurement, allowing 
          them to consider factors such as life-cycle costs, servicing 
          costs, durability, and factors other than price.  In order to 
          stretch their scarce funds, UC and CCC should have the 
          flexibility necessary to be able to make wise procurement 
          decisions.

           Use of best value in California  .  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. 
           
           1)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 
            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 has since elected to use the 
            process, must have submitted a specified report to the LAO on 
            or before January 1, 2011.  If best value contracting was not 
            utilized by a MUD during this period, the authority to do so 
            expired on January 1, 2012.

          2)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 








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            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.  SB 1509 (Simitian), pending in the Assembly Education 
            Committee, would eliminate the sunset on the authority of CCC 
            and K-12 districts to use design-build for their construction 
            projects.  SB 835 (Wolk), Chapter 636, Statutes of 2011, 
            authorized UC to use best value for construction projects 
            valued over $1 million until January 1, 2017, extending and 
            expanding a pilot program established by SB 667 (Migden), 
            Chapter 367, Statutes of 2006.

          3)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 procurement of any product available in substantial 
            quantities to the general public.  Similarly, 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.  

          Related LAO study  .  According to its 2006 statutorily required 
          report on the use of best value procurement by MUDs, the 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.








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           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 UC.  Both bills were vetoed by the Governor 
          Schwarzenegger, 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.

           REGISTERED SUPPORT / OPPOSITION  :

           Support 
           
          Community College League of California
          Glendale Community College District
          Kern Community College District
          Los Angeles Community College District
          Peralta Community College District
          San Diego Community College District
          San Jose-Evergreen Community College District
          West Kern Community College District
          Yosemite Community College District
           
            Opposition 
           
          None of file.








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           Analysis Prepared by  :    Sandra Fried / HIGHER ED. / (916) 
          319-3960