BILL ANALYSIS Ó
AB 566
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CONCURRENCE IN SENATE AMENDMENTS
AB
566 (O'Donnell)
As Amended June 17, 2015
Majority vote
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|ASSEMBLY: |53-26 |(May 11, 2015) |SENATE: |26-13 |(July 13, 2015) |
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Original Committee Reference: ED.
SUMMARY: Requires school districts entering into specified
school building lease contracts to use a skilled and trained
workforce. Specifically, this bill:
1)Requires the person, firm or corporation constructing a school
building, including, but not limited to, the prime contractor
and if used, the electrical, mechanical, and plumbing
subcontractor under a lease-leaseback or a lease-to-own
project to comply with prequalification requirements,
regardless of the source of funding for the project.
2)Prohibits a school district governing board from entering into
a lease-leaseback or lease-to-own contract with any entity
unless the entity provides to the governing board of the
school district an enforceable commitment that the entity and
its subcontractors at every tier will use a skilled and
trained workforce to perform all work on the project or
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contract that falls within an apprenticeable occupation in the
building and construction trades.
3)Defines "apprenticeable occupation" as an occupation for which
the Chief of the Division of Apprenticeship Standards (DAS) of
the Department of Industrial Relations (DIR) had approved an
apprenticeship program before January 1, 2014.
4)Defines "Chief" as the Chief of the DAS of the DIR.
5)Defines "skilled and trained workforce" as a workforce that
meets all of the following conditions:
a) All workers are either skilled journeypersons or
apprentices registered in an apprenticeship program
approved by the chief.
b) Individuals employed to perform work on the contract or
project are comprised of skilled journeypersons and
subcontractors at every tier that are graduates of an
apprenticeship program approved by the chief or located
outside California and approved for federal purposes
pursuant to the apprenticeship regulations adopted by the
federal Secretary of Labor, meeting the specified
percentages and timeline:
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.
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c) Specifies that for an apprenticeable occupation in which
no apprenticeship program had been approved by the Chief of
DAS before January 1, 1995, up to one-half of the
graduation percentage requirements may be satisfied by
skilled journeypersons who commenced working in the
apprenticeable occupation prior to the chief's approval of
an apprenticeship program for that occupation in the county
in which the project is located.
6)Defines "skilled journeyperson" as a worker who either: a)
graduated from an apprenticeship program for the applicable
occupation that was approved by the chief or located outside
California and approved for federal purposes pursuant to
apprenticeship regulations adopted by the Secretary of Labor,
or b) has at least as many hours of on-the-job experience in
an applicable occupation as would be required to graduate from
an apprenticeship program for the applicable occupation that
is approved by the chief.
7)Provides that an entity's commitment that a skilled and
trained workforce will be used to perform the project or
contract may be established by any of the following:
a) The entity's agreement with the governing board of the
school district that the entity and its subcontractors at
every tier will comply with the requirements specified in
this bill and that the entity will provide to the governing
board of the school district, on a monthly basis while the
project or contract is being performed, a report
demonstrating that the entity and its subcontractors are
complying with the requirements of this bill.
i) If the entity fails to provide to the governing
board of the school district the monthly report, the
governing board of the school district shall immediately
cease making payments to the entity.
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ii) The monthly report provided to the governing board
of the school district shall be a public record under the
California Public Records Act and shall be open to public
inspection.
b) If the school district has entered into a project labor
agreement that will bind all contractors and subcontractors
performing work on the project or contract and that
includes the requirements of this bill, the entity's
agreement that it will become a party to that project labor
agreement.
c) Evidence that the entity has entered into a project
labor agreement that includes the requirements of this bill
and that will bind the entity and all its subcontractors at
every tier performing the project or contract.
8)Specifies that the requirement to prequalify and rate
potential contractors and any electrical, mechanical and
plumbing subcontractors applies to school district projects
seeking reimbursement from future state bond funds.
The Senate amendments strike the provision requiring a school
district to prequalify and rate potential contractors and any
electrical, mechanical and plumbing subcontractors regardless of
the source of funding, reinstate existing law specifying that
the prequalification requirement applies to all projects over $1
million funded by state bond funds, and clarifies that the
requirement includes projects seeking reimbursement from future
state bond funds.
FISCAL EFFECT: According to the Senate Appropriations
Committee, 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. Since school
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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. Minor costs to the Department of
General Services and the Department of Industrial Relations.
COMMENTS: Lease-leaseback. Under current law, school districts
are required to competitively bid any public works contract over
$15,000 and award the contract to the lowest responsible bidder.
Lease-leaseback is a process whereby a governing board of a
school district may, without advertising for 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 that entity that receives the contract will construct the
building on a designated site and lease the property to the
school district. The school district gets the title at the end
of the lease. While this method helps expedite the construction
of a project, it allows school districts to bypass the bidding
process.
What does this bill do? This bill prohibits a governing board
from entering into a lease-leaseback or lease-to-own contract
unless the entity commits that the entity and its subcontractors
at every tier will use a skilled and trained workforce. Skilled
and trained workforce means a workforce where all of the workers
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working on the project are either skilled journeypersons or
apprentices registered in an apprenticeship program approved by
the Chief of the DAS under the DIR. Skilled journeyperson is
defined as either someone who has graduated from a state
approved apprenticeship program or a program approved for
federal purposes, or someone who has as many hours of on-the-job
experience in the applicable occupation as would be required to
graduate from an apprenticeship program.
The entity and its subcontractors must also agree to employ
skilled journeypersons who are graduates of a state approved
apprenticeship program for the applicable occupation according
to a specified composition and timeline. This requirement is
very similar to provisions adopted in the provisions under the
Public Contract Code authorizing state and local agencies to use
a design-build method for awarding public works contracts, and
provisions governing petroleum refineries.
Registered apprenticeship programs. Registered apprenticeship
programs are recognized by the DAS under the DIR that provide
education and work training in a certain occupational trade
under the guidance of skilled journeypersons. The programs can
be between one to six years depending on the trade, but are
generally around three to four years. The apprentice receives
approximately 144 hours of education per year, which may be
provided by a K-12 adult school or a community college, while
receiving paid, on-the-job training. When completed, the
individual is certified as a skilled journeyperson. There are
over 800 apprenticeable occupations in a variety of industry
sectors, including building and construction trade, auto
mechanics, barbers, cosmetologists, public safety officers, etc.
According to the Legislative Analyst's Office, as of February
2015, there are 53,000 apprentices enrolled in registered
apprenticeship programs; approximately two-thirds of which are
in building and construction trades. The state budget currently
provides $23 million for the education component of
apprenticeship programs. The Governor proposed and the
Legislature approved a $29 million increase in the Fiscal Year
2015-16 budget.
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The author states that requiring the use of registered
apprentices and graduates of registered apprenticeship programs
ensure the quality of a project, especially when the contract is
not awarded based on a public bidding process.
Prequalification. AB 1565 (Fuentes), Chapter 808, Statutes of
2012, requires, until January 1, 2019, school districts over
2,500 average daily attendance using state school facilities
bond funds 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 a
standardized questionnaire provided by the district and submit a
financial statement.
The questionnaire may require contractors to provide detailed
information regarding the company and its financial status,
including whether the company has been in bankruptcy or involved
in a civil lawsuit; licensing information; prior contracting
experience (whether the contractor has completed other public
works projects); whether the contractor has been involved or
been found to have violated any federal, state or local laws;
and whether the contractor has violated any labor and health and
safety laws, including prevailing wage.
The questionnaire is rated and a local agency can exclude bids
from companies that do not meet minimum points. While there is
no guarantee that a company that meets minimum points may not
have financial problems or provide substandard work, this
process reduces the risk when selecting a contractor with the
lowest bid. A contractor that goes bankrupt before completion
of a project or completes a project with faulty construction
will result in increased costs to complete or conduct any
repairs of the project or engage in potential litigation to
recoup funds a contractor had already received.
This bill requires prequalification of lease-leaseback and
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lease-to-own contractors and major subcontractors regardless of
the funding source and clarifies that prequalification applies
for all other projects over $1 million if a school district
intends to seek reimbursement of the project through future
state bond funds. The author states that with state bond funds
exhausted, a school district constructing a school using local
resources may believe that prequalification does not apply to
that project. This bill will close any potential loophole in
the event the district seeks reimbursement for that project at a
future date.
Arguments in support. The State Building and Construction
Trades Council, the sponsor of this bill, states that this bill
addresses problematic 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."
Arguments in opposition. The Air Conditioning Trade
Association, Associated Builders and Contractors - San Diego,
Plumbing-Heating-Cooling Contractors Association of California,
and Western Electrical Contractors Association have an "oppose
unless amended" position. These organizations oppose the
provision allowing an entity to show its commitment to hiring a
skilled and trained workforce through a project labor agreement.
Analysis Prepared by:
Sophia Kwong Kim / ED. / (916) 319-2087 FN:
0001226
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