BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 566|
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THIRD READING
Bill No: AB 566
Author: O'Donnell (D)
Amended: 6/17/15 in Senate
Vote: 21
SENATE EDUCATION COMMITTEE: 6-2, 6/10/15
AYES: Liu, Block, Leyva, Mendoza, Monning, Pan
NOES: Runner, Vidak
NO VOTE RECORDED: Hancock
SENATE APPROPRIATIONS COMMITTEE: 5-2, 7/6/15
AYES: Lara, Beall, Hill, Leyva, Mendoza
NOES: Bates, Nielsen
ASSEMBLY FLOOR: 53-26, 5/11/15 - See last page for vote
SUBJECT: School facilities: leasing property: construction
contracts
SOURCE: Author
DIGEST: This bill clarifies that prequalification requirements
currently applicable to state bond funded school facility
construction projects include projects reimbursed from any
future state school bond, are applicable to lease/leaseback or
lease-to-own contracts regardless of the funding source, and
requires that school districts that enter into lease/leaseback
or lease-to-own contracts for school facility construction must
use a skilled workforce, as specified.
ANALYSIS:
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Existing law: Prequalification
1)Authorizes the governing board of a school district to require
prequalification of prospective bidders for a contract for a
public project. A prospective bidder may be required to
complete and submit to the district a standardized
questionnaire and financial statement in a form specified by
the district, including a complete statement of the
prospective bidder's financial ability and experience in
performing public works. A school district that establishes a
prequalification process is required to adopt and apply a
uniform system of rating bidders on the basis of the completed
questionnaires and financial statements. School districts are
authorized to establish a process for prequalifying
prospective bidders on a quarterly basis and to consider a
prequalification to be valid for up to one calendar year
following the date of initial prequalification. (Public
Contract Code § 20111.5)
2)Requires, until January 1, 2019, school districts with an
average daily attendance (ADA) of more than 2,500 using state
school facilities bond funds for school construction projects
to establish a prequalification process whereby a prospective
bidder, and any electrical, mechanical and plumbing
subcontractors, of a public works contract with a projected
expenditure of $1 million or more, is required to complete and
submit a standardized prequalification questionnaire and a
financial statement subject to the same requirements outlined
in PCC § 20111.5. Existing law requires the Director of
Industrial Relations to submit a report to the Legislature, on
or before January 1, 2018, evaluating whether, during the
years prequalification applied to contracts, violations of the
Labor Code on school district projects have decreased as
compared to the same number of years immediately preceding
required prequalification, and any recommended improvements on
the prequalification system. (PCC § 20111.6)
Leasing
3)Authorizes the governing board of a school district to enter
into a lease/leaseback contract without advertising for bids.
Current law prescribes that real property may be let by the
district for a minimum rental of $1 per year if the lessee is
required to construct, or provide for the construction of a
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building/buildings for the use of the school district during
the term of the lease, and requires that title of the building
vests in the school district at the expiration of that term.
(Education Code § 17406)
4)Authorizes the governing board of a school district to enter
into a lease to own agreement in which a person, firm, or
corporation is required to construct or provide for the
construction of a building to be used, and leased by the
district. Current law requires that title of the building
vests in the school district at the expiration of that term
and authorizes the vesting of title to the property prior to
the expiration of the lease. Current law requires that the
agreement be entered into with the lowest responsible bidder
as specified. (Education Code § 17407)
5)Requires, until January 1, 2019, that school districts
entering into
lease/leaseback or lease-to-own contracts comply with specified
pre-qualification requirements, if the project is funded with
state bond funds, the expenditure of the project is $1 million
or more, and the average daily attendance (ADA) of the school
district is greater than 2,500. (EC § 17406 and § 17407)
This bill:
1)Clarifies that prequalification requirements currently
applicable to projects funded with state school facility bond
funds include projects reimbursed from any future state school
bond.
2)Expands prequalification requirements applicable to
lease/leaseback or lease-to-own contracts to include all such
contracts regardless of the funding source.
3)Prohibits a school district from entering into a
lease/leaseback or lease-to-own agreement unless the entity
has provided an enforceable commitment that it and its
subcontractors will use a skilled and trained workforce on the
project, as specified. It:
a) Establishes the following definitions for purposes of
these requirements:
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i) "Skilled journeyperson" as a worker who either
graduated from an applicable apprenticeship program which
met specified state or federal approval requirements, or
had at least as many hours of on-the-job experience in an
applicable occupation as would be required for graduation
from a state-approved apprenticeship program.
ii) "Apprenticeable occupation" as an occupation for
which the Chief of the Division of Apprenticeship
Standards of the Department of Industrial Relations (DIR)
had approved an apprenticeship program before January 1,
2014.
iii) "Skilled and trained workforce" as a workforce in
which all the workers are skilled journeypersons or
apprentices registered in an apprenticeship program
approved by the Chief of the Division of Apprenticeship
Standards of the DIR.
b) Establishes the following phased-in implementation of
the proportion of skilled journeypersons and subcontractors
at every tier, employed that must be approved
apprenticeship program graduates to meet the condition of
having a "skilled and trained workforce" :
i) At least 30% by January 1, 2016.
ii) At least 40% by January 1, 2017.
iii) At least 50% by January 1, 2018.
iv) At least 60% by January 1, 2019.
c) Provides that, for an apprenticable occupation with no
approved program prior to January 1, 1995, up to one-half
of the apprenticeship program graduate percentage
requirements may be met by skilled journeypersons who
commenced work in the occupation prior to the approval of
an applicable apprentice program in the county of the
project's location.
d) Authorizes three methods by which an entity may
establish that it has committed to the use of a skilled and
trained workforce on a project/contract. These include:
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i) An agreement between the entity and the school
district governing board to comply with these
requirements and the provision of a monthly report
demonstrating such compliance during the performance of
the project/contract.
ii) A project labor agreement (PLA), entered into by the
school district governing board, that includes these
requirements and that binds all
contractors/subcontractors working on the
project/contract and agreement by the entity to become a
party to the PLA.
iii) Evidence that the entity has entered into a PLA that
includes these requirements and that binds the entity and
all its subcontractors at every tier performing the
project/contract.
4)Requires that a monthly report provided in compliance with
2(D)(i) be:
a) Subject to the California Public Records Act and open to
public inspection.
b) Cause for cessation of payments to the entity in the
event of a failure to provide the report to the school
district governing board.
5)Makes a number of technical changes.
Comments
1)Need for the bill. According to the author, requiring the use
of registered apprentices and graduates of registered
apprenticeship programs ensures the quality of a project,
especially when the contract is not awarded based on a public
bidding process. The provisions of this bill relative to a
skilled workforce are very similar to recently adopted
provisions regarding the use of a design-build method for
awarding public works contracts by state and local agencies
(SB 785, Chapter 931, Statutes of 2014), as well as contracts
for the construction, alteration, demolition, installation,
repair, or maintenance work at petroleum refineries (SB 54,
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Chapter 795, Statutes of 2013).
2)Leasing provisions. Current law requires the governing board
of a school district, to competitively bid, and award to the
lowest responsible bidder, any contract for a public project
involving an expenditure of $15,000 or more. Lease/leaseback
is a process whereby a governing board of a school district
may, without advertising for a bid, rent district property for
a minimum of $1 a year, to any person, firm or corporation.
The person, firm or corporation constructs the school building
and rents the facility back to the school district. At the
end of the lease, the district resumes title to the building
and site. In practice, some school districts have used state
and local bond funds to make construction payments during
construction. The lease is terminated when the building is
constructed.
In a lease-to-own agreement, the governing board of a school
district, through a bidding process, may enter into a contract
with a person, firm, or corporation with the lowest bid, under
which the entity that receives the contract will construct the
building on a designated site and lease the property to the
school district. The school district secures title to the
property at the end of the lease.
3)Concerns about lease/leaseback. In January 2004, the State
Allocation Board (SAB) was presented with a report to discuss
the use of lease/leaseback agreements for project delivery of
facilities funded through the School Facility Program.
According to that report, the use of this project delivery
method was growing. Increasingly, districts were interpreting
existing law to allow the use of these provisions to award a
public works project without a competitive bid. The report
noted that some districts do institute a competitive selection
process voluntarily, but many do not, and expressed concern
that an interpretation that would potentially allow billions
of state bond dollars to be contracted through a "sole-source"
mechanism should be closely examined.
The report concluded that the SAB might wish to consider
whether new construction and modernization projects
interpreting the authority as an exemption from competitive
bidding requirements should continue to be presented for state
funding, and whether legislation clarifying the appropriate
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use of this authority was necessary. The SAB did not accept
the report, some members expressed interest in pursuing
proposed legislation to address this issue, and staff were
directed to provide written notification to school districts
to proceed with caution when using lease/leaseback and
interpreting the law.
This bill does not propose changes or clarifications to the
broader issues and concerns surrounding lease/leaseback
agreements and competitive bidding. According to the
sponsors, it is intended to address issues such as the sole
sourcing of projects to less than qualified contractors and
violations of labor laws for public works projects by
"significantly raising the standards for contractors,
increasing the quality of construction, and protecting
taxpayers and workers on lease-leaseback construction
projects."
4)Apprenticeship programs. According to the DIR, apprenticeship
programs combine training on the job with related and
supplemental instruction at school. Each program operates
under apprenticeship training standards agreed to by labor
and/or management in accordance with State and Federal laws.
The period of training is from 1 to 6 years, depending upon
the trade with most programs being about 4 years. Apprentices
attend classes of related technical instruction, giving
apprentices a comprehensive understanding of the theoretical
aspects of their work. In most cases this means attending
classes at night 4 hours each week, for at least 108 hours a
year. Instruction includes such subjects as safety laws and
regulations, mathematics, drafting, blueprint reading and
other sciences connected with the trade.
In March 2015, the Legislative Analyst's Office reported that
there are more than 50,000 apprentices registered in 47 trades,
with the vast majority in the construction trades and public
safety. The state budget currently provides $23 million for the
education component of apprenticeship programs. The Governor
has proposed a $29 million augmentation to Apprenticeship
Programs in the 2015-16 budget.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
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According to the Senate Appropriations Committee ultimately, the
costs of this bill are unknown but increases in costs of
facility construction projects at the local level could
potentially lead to state-level cost pressures.
" Skilled and trained workforce: Potentially significant
increases in state-funded and locally-funded contracts to
comply with labor requirements which could lead to increases
in the cost of labor.
" Prequalification: Since school districts are already required
to use a prequalification process to determine qualified
prospective bidders for public projects funded by state bond
funds that exceed $1 million, potential local costs to modify
the process to apply to public projects funded by local
resources could be minor. The expansion of prequalification
requirements could lead to increased costs in contracts, but
could also result in savings to the extent project outcomes
improve.
" According to the Department of General Services, the costs
associated with implementing this bill at the state level are
minor and absorbable.
" The DIR cites unknown, likely minor costs for potential
increases in workload to investigate apprentice complaints and
evaluate applications for new apprenticeship programs in the
building and construction trades.
SUPPORT: (Verified7/6/15)
Air Conditioning Sheet Metal Association
Air-Conditioning & Refrigeration Contractors Association
California Legislative Conference of the Plumbing, Heating and
Piping Industry
Finishing Contractors Association of Southern California
National Electrical Contractors Association
State Building and Construction Trades Council
United Contractors and the Wall and Ceiling Alliance
OPPOSITION: (Verified7/9/15)
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Air Conditioning Trade Association
Associated Builders and Contractors - San Diego Chapter
Associated Builders and Contractors of California
National Right to Work Committee
Plumbing-Heating-Cooling Contractors Association of California
Western Electrical Contractors Association
ASSEMBLY FLOOR: 53-26, 5/11/15
AYES: Alejo, Bloom, Bonilla, Bonta, Brown, Burke, Calderon,
Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd,
Eggman, Frazier, Cristina Garcia, Eduardo Garcia, Gatto,
Gipson, Gomez, Gonzalez, Gordon, Gray, Roger Hernández,
Holden, Irwin, Jones-Sawyer, Levine, Linder, Lopez, Low,
McCarty, Medina, Mullin, Nazarian, O'Donnell, Perea, Quirk,
Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth,
Mark Stone, Thurmond, Ting, Weber, Williams, Wood
NOES: Achadjian, Travis Allen, Baker, Bigelow, Brough, Chang,
Chávez, Dahle, Beth Gaines, Gallagher, Grove, Hadley, Harper,
Jones, Kim, Lackey, Maienschein, Mathis, Mayes, Melendez,
Obernolte, Olsen, Patterson, Wagner, Waldron, Wilk
NO VOTE RECORDED: Atkins
Prepared by:Kathleen Chavira / ED. / (916) 651-4105
7/9/15 11:07:20
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