BILL ANALYSIS Ó SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION Senator Isadore Hall, III Chair 2015 - 2016 Regular Bill No: AB 975 Hearing Date: 6/29/2015 ----------------------------------------------------------------- |Author: |Frazier | |-----------+-----------------------------------------------------| |Version: |5/4/2015 Amended | ----------------------------------------------------------------- ------------------------------------------------------------------ |Urgency: |No |Fiscal: |Yes | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant:|Felipe Lopez | | | | ----------------------------------------------------------------- SUBJECT: Local Agency Public Construction Act: bid criteria DIGEST: This bill prohibits local public agencies and school districts from disqualifying prospective bidders on public works contracts through its uniform system of rating bidders, based solely on whether a prospective bidder has filed a claim against a project owner through the courts, mediation, or arbitration. ANALYSIS: Existing law: 1)Sets, under the Local Agency Public Construction Act (LAPCA), the requirements for competitive bidding on various types of contracts awarded by state and local agencies, including a school district. 2)Authorizes, under the LAPCA, a public entity or school district to require prospective bidders for a construction contract to complete and submit to the governing board a prequalification questionnaire and financial statement, and requires the board to adopt and apply a uniform system of rating bidders on the basis of completed questionnaires and financial statements. This bill prohibits local public agencies and school districts from disqualifying prospective bidders on public works contracts through its uniform system of rating bidders, based solely on AB 975 (Frazier) Page 2 of ? whether a prospective bidder has filed a claim against a project owner through the courts, mediation, or arbitration Background Purpose of the bill. According to the author, "AB 975 is intended to address a troubling trend involving public works construction pre-qualification questionnaires. Specifically, a number of public agencies have begun disqualifying, or significantly penalizing, any contractor who has been involved, or is involved, in any claim with a public agency, whether initiated by the contractor or the public agency. Arguably, these clauses stand in violation of the 14th Amendment as they deem parties guilty, thus denying them the opportunity to bid, regardless of whether or not the parties have actually been found guilty." The Local Agency Public Construction Act (LAPCA). The LAPCA allows, but does not require, public agencies to establish a process to evaluate and pre-qualify prospective bidders on public works projects. An agency may choose to require prospective bidders to submit a standardized questionnaire and a financial statement, which includes the prospective bidder's experience in performing public works. If the agency selects this procedure, it must adopt a uniform rating system to determine the minimum requirements permitted for qualification to bid and the type and size of contracts for which each bidder is eligible to bid. It also must offer an appeals process to allow prospective bidders to dispute their proposed pre-qualification rating. The LAPCA directs the Department of Industrial Relations (DIR) to develop a model questionnaire and guidelines for a uniform rating system that can be used by public agencies. The DIR questionnaire requires 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 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. A rating system assigns points according to a bidder's answers to the questionnaire and enables a local agency to exclude bids from companies that do not meet a minimum number of points. AB 975 (Frazier) Page 3 of ? The LAPCA applies to all cities, counties and special districts, but does not apply to school districts, which have separate code sections pertaining to pre-qualification. Prior/Related Legislation AB 566 (O'Donnell, 2015) requires, until January 1, 2019, school districts to require prospective bidders on public contracts to submit a pre-qualification questionnaire and financial statement, if the expenditure of the project is $1 million or more, regardless of the funding source, and the average daily attendance (ADA) of the school district is more than 2,500. (Pending in Senate Appropriations Committee) AB 1581 (Buchanan, Chapter 408, Statutes of 2014) required, until January 1 2019, school districts entering into lease/leaseback or lease-to-own contracts to required prospective bidders to submit a pre-qualification questionnaire and financial statement, if the project is funded with state bond funds, the expenditure of the project is $1 million or more, and the ADA of the school district is more than 2,500. AB 1565 (Fuentes, Chapter 808, Statutes of 2012,) required, beginning with contracts awarded on or after January 1, 2014 and until January 1, 2019 school districts to require prospective bidders on public contracts to submit a pre-qualification questionnaire and financial statement, if the project is funded with state bond funds, the expenditure of the project is $1 million or more, and the ADA of the school district is more than 2,500. AB 281 (Bermudez, 2003) would have prohibited the bidder pre-qualification form that is required under the LAPCA from disqualifying a bidder solely based on the bidder's financial capacity, provided that the bidder otherwise qualifies for the public works contract. (Never heard in Assembly Local Government Committee) AB 611 (Villaraigosa, Chapter 390, Statutes of 1997) allowed school districts to pre-qualify bidders on a quarterly basis and allowed the pre-qualification to be valid for up to one calendar year. FISCAL EFFECT: Appropriation: No Fiscal AB 975 (Frazier) Page 4 of ? Com.: Yes Local: Yes SUPPORT: Construction Employers Association (Source) Air Conditioning Sheet Metal Association Air-conditioning & Refrigeration Contractors Association Associated Builders and Contractors of California Associated General Contractors California Chapters of the National Electrical Contractors Association California Concrete Contractors Association California Legislative Conference of the Plumbing, Heating and Piping Industry Finishing Contractors Association of Southern California United Contractors OPPOSITION: None received ARGUMENTS IN SUPPORT: According to the Construction Employer's Association, "this bill is intended to address a troubling trend involving public works construction prequalification questionnaires. Specifically, a number of public agencies have begun disqualifying, or significantly penalizing through their pre-qualification process, any contractor who has been involved, or is involved, in any claim with a public agency, whether initiated by the contractor or the public agency." CEA further argues that, "These pre-qualification questions represent a fundamental denial of a contractor's basic due process rights. The automatic disqualification ignores the specific circumstances surrounding a claim, the severity of the claim, the outcome of the claim, whether the contractor prevailed, whether the claim was the result of a subcontractor, architect or engineer or whether the claim was simply erroneous. AB 975 does not preclude public agencies from asking about prior claims, nor does it preclude them from factoring in the disposition of said claims, it simply provides that the existence of a claim cannot be considered a disqualifying factor." AB 975 (Frazier) Page 5 of ? DUAL REFERRAL: Senate Education Committee