BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 1280|
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UNFINISHED BUSINESS
Bill No: SB 1280
Author: Pavley (D)
Amended: 8/13/12
Vote: 21
SENATE EDUCATION COMMITTEE : 9-0, 4/25/12
AYES: Lowenthal, Alquist, Blakeslee, Hancock, Huff, Liu,
Price, Simitian, Vargas
NO VOTE RECORDED: Runner, Vacancy
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SENATE FLOOR : 33-0, 5/25/12
AYES: Alquist, Anderson, Berryhill, Blakeslee, Cannella,
Corbett, Correa, De Le�n, DeSaulnier, Dutton, Emmerson,
Evans, Fuller, Gaines, Harman, Hernandez, Huff, La Malfa,
Leno, Lieu, Liu, Lowenthal, Negrete McLeod, Padilla,
Pavley, Price, Rubio, Steinberg, Vargas, Walters, Wolk,
Wright, Yee
NO VOTE RECORDED: Calderon, Hancock, Kehoe, Runner,
Simitian, Strickland, Wyland
ASSEMBLY FLOOR : 72-3, 8/23/12 - See last page for vote
SUBJECT : Public contracts: University of California and
California
Community College districts
SOURCE : Glendale Community College District
Kern Community College District
Los Angeles Community College District
CONTINUED
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Peralta Community College District
San Bernardino Community College District
San Diego Community College District
San Jose-Evergreen Community College District
University of California
West Kern Community College District
Yosemite Community College District
DIGEST : This bill, until January 1, 2018, authorizes a
California Community College (CCC) 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.
Assembly Amendments (1) add language to require, on or
before July 1, 2016, the UC shall provide the Legislative
Analyst's Office (LAO) with a list of the policies and
procedures adopted pursuant to subdivision (a). In
addition, the UC shall also collect and provide the
following information to the LAO for each contract
involving an expenditure of more than $100,000 for goods,
materials, or services that was entered into on or after
the effective date of this section, as specified; and (2)
make various technical changes.
ANALYSIS : Existing 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.
Existing 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.
Existing law also authorizes school districts to consider,
in addition to price, factors such as vendor financing,
performance reliability, standardization, life-cycle costs,
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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.
Existing 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.
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. Specifically,
this bill:
2. 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.
3. Specifies procedures for CCC districts and UC to follow
in advertising, evaluating, and awarding such contracts.
4. Requires CCC districts using the above authority to
report specified information to the Chancellor's Office
by January 1, 2016, and requires the LAO to request this
information from the CCC Chancellor's Office by July 1,
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2016, and requires UC to provide the LAO with similar
information by that date.
5. 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
whether this authority should be continued.
Comments
I. Experience with best value contracting . This bill
proposes best value contracting for the acquisition of
goods and services. While this will 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 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 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
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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. The Senate Education Committee recently
heard and passed SB 1509 (Simitian, 2012) which
eliminates 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 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.
II. 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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III. 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.
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
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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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Assembly Appropriations Committee:
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.
Any costs to districts would be non-reimbursable, as the
bill is discretionary.
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.
SUPPORT : (Verified 8/23/12)
Glendale Community College District (co-source)
Kern Community College District (co-source)
Los Angeles Community College District (co-source)
Peralta Community College District (co-source)
San Bernardino Community College District (co-source)
San Diego Community College District (co-source)
San Jose-Evergreen Community College District (co-source)
University of California (co-source)
West Kern Community College District (co-source)
Yosemite Community College District (co-source)
ARGUMENTS IN SUPPORT : According to the author's office,
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.
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This bill provides 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's office, this bill allows 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.
ASSEMBLY FLOOR : 72-3, 8/23/12
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
Bill Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Cedillo, Chesbro, Cook, Davis, Dickinson, Eng,
Feuer, Fletcher, Fong, Fuentes, Furutani, Beth Gaines,
Galgiani, Garrick, Gatto, Gordon, Hagman, Hall, Harkey,
Hayashi, Hill, Huber, Hueso, Huffman, Jeffries, Knight,
Lara, Logue, Bonnie Lowenthal, Ma, Mendoza, Miller,
Mitchell, Monning, Morrell, Nestande, Nielsen, Norby,
Olsen, Pan, Perea, V. Manuel P�rez, Portantino, Silva,
Skinner, Smyth, Solorio, Swanson, Torres, Valadao,
Wagner, Wieckowski, Williams, Yamada, John A. P�rez
NOES: Donnelly, Grove, Jones
NO VOTE RECORDED: Conway, Gorell, Halderman, Roger
Hern�ndez, Mansoor
PQ:dmk 8/25/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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