BILL ANALYSIS Ó SB 1280 Page 1 SENATE THIRD READING SB 1280 (Pavley) As Amended August 13, 2012 Majority vote SENATE VOTE :33-0 HIGHER EDUCATION 8-0 APPROPRIATIONS 17-0 ----------------------------------------------------------------- |Ayes:|Block, Olsen, Brownley, |Ayes:|Fuentes, Harkey, | | |Fong, Galgiani, Lara, | |Blumenfield, Bradford, | | |Miller, Portantino | |Charles Calderon, Campos, | | | | |Davis, Donnelly, Gatto, | | | | |Hall, Hill, Lara, | | | | |Mitchell, Nielsen, Norby, | | | | |Solorio, Wagner | | | | | | ----------------------------------------------------------------- SUMMARY : Authorizes a California Community College (CCC) district and the University of California (UC), until January 1, 2018, to award contracts for supplies and materials over $50,000 and $100,000, respectively, to the lowest responsible bidder offering the "best value," as determined pursuant to specified policies adopted by district governing boards and by UC. Specifically, this bill : 1) Defines "best value" as the most advantageous balance of price, quality, service, performance, and other elements as defined by the CCC district board or UC. 2) Specifies procedures for CCC districts and UC to follow in advertising, evaluating, and awarding such contracts. 3) Requires CCC districts using the above authority to report specified information to the Chancellor's Office by January 1, 2016, and requires the Legislative Analyst's Office (LAO) to request this information from the CCC Chancellor's Office by July 1, 2016, and requires UC to provide the LAO with similar information by that date. 4) Requires the LAO to report to the Legislature by February 1, 2017, on CCC districts' and UC's use of this contracting method, including any recommendation as to SB 1280 Page 2 whether this authority should be continued. FISCAL EFFECT : According to the Assembly Appropriations Committee: 1)Minor absorbable one-time costs for UC and CCC districts to provide the required information for the LAO, and for the LAO to complete the required reports. 2)Any costs to districts would be non-reimbursable, as the bill is discretionary. 3)To the extent UC and CCC districts successfully implement best value purchasing, significant savings could be realized over time. UC estimates that it could save up to $20 million in five years in computer software and hardware alone. COMMENTS : 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. (The California State University has had statutory authority to do best value contracting for many years.) Best value contracting has generally been recognized as a viable alternative for construction projects and for the acquisition of technology, telecommunications and related equipment. 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 by municipal utility districts (MUDs) for procurement of individual supplies and materials purchases over $50,000 ƯAB 793 (Cox), Chapter 665, Statutes of 2001]. An evaluation of this authority by LAO found that while low-cost purchasing still has an important role in government procurement, getting the best value for a product or service does not always mean choosing the lowest bidder. LAO also noted that an organization must make the up-front investment necessary SB 1280 Page 3 to support best value procurement, and procurement managers must ensure staff are properly trained on the process and must help their staff develop requirements that promote the organization's strategic goals. LAO noted that, early on, best value procurements can be time-consuming and cumbersome as bid evaluation criteria are developed, but that with repeated use, agencies can perform best value procurements with a similar level of effort as traditional procurements. According to LAO, based on the limited experience to date, best value procurement authority appears to provide MUDs with an important tool. Analysis Prepared by : Sandra Fried / HIGHER ED. / (916) 319-3960 FN: 0004749