BILL ANALYSIS                                                                                                                                                                                                    Ó



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          ASSEMBLY THIRD READING


          AB  
          1185 (Ridley-Thomas)


          As Amended  May 20, 2015


          Majority vote


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          |Committee       |Votes |Ayes                 |Noes                 |
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          |Education       |5-2   |O'Donnell, McCarty,  |Chávez, Kim          |
          |                |      |Santiago, Thurmond,  |                     |
          |                |      |Weber                |                     |
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          SUMMARY:  Authorizes the Los Angeles Unified School District  
          (LAUSD) to utilize a best value procurement process as a pilot  
          project until December 31, 2020, for construction projects over $1  
          million.  Specifically, this bill:  


          1)Expresses the intent of the Legislature to enable school  
            districts to use cost-effective options for building and  
            modernizing school facilities.  Finds and declares that the  
            Legislature has recognized the merits of best value procurement  
            through its authorization of the method by the University of  
            California (UC).  Through UC's report, best value procurement  
            method has been found to reduce contract delays, change orders,  








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            and claims, thereby producing savings in both contract costs and  
            administration.
          2)Establishes the following definitions:


             a)   "Apprenticeable Occupation" means an occupation for which  
               the Chief of the Division of Apprenticeship Standards (DAS)  
               had approved an apprenticeship program pursuant to Labor Code  
               Section 3075 prior to January 1, 2015.
             b)   "Best value" means a procurement process whereby the  
               selected bidder may be selected on the basis of objective  
               criteria for evaluating the qualifications of bidders with  
               the resulting selection representing the best combination of  
               price and qualifications.


             c)   "Best value contract" means a contract entered into  
               pursuant to this bill.


             d)   "Best value contractor" means a properly licensed person,  
               firm, or corporation that submits a bid for, or is awarded, a  
               best value contract.


             e)   "Best Value Score" means the resulting score when the  
               school district divides the bidder's price by the bidder's  
               qualification score.


             f)   "Demonstrated management competency" means the experience,  
               competency, capability, and capacity of the proposed  
               management staffing to complete projects of similar size,  
               scope, or complexity.


             g)   "Financial condition" means the financial resources needed  
               to perform the contract. The criteria used to evaluate a  
               bidder's financial condition shall include, at a minimum,  








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               capacity to obtain all required payment bonds, and required  
               insurance.


             h)   "Governing board" or "governing board of the school  
               district" means the governing board of the LAUSD.


             i)   "Labor compliance" means the ability to comply with, and  
               past performance with, contract and statutory requirements  
               for the payment of wages and qualifications of the workforce.  
               The criteria used to evaluate a bidder's labor compliance  
               shall include, at a minimum, the bidder's ability to comply  
               with the apprenticeship requirements of the California  
               Apprenticeship Council and the Department of Industrial  
               Relations, its past conformance with such requirements, and  
               its past conformance with requirements to pay prevailing  
               wages on public works projects.


             j)   "Project" has the same meaning as "public project" is  
               defined in Public Contract Code (PCC) Section 22002(c).


             aa)  "Qualifications" means financial condition, relevant  
               experience, demonstrated management competency, labor  
               compliance, the safety record of the bidder, and, to the  
               extent relevant, the preceding qualifications as they pertain  
               to all subcontractors proposed to be used by the bidder for  
               designated portions of the work.


             bb)  "Relevant experience" means the experience, competency,  
               capability, and capacity to complete projects of similar  
               size, scope, or complexity.


             cc)  "Safety record" shall be deemed "acceptable" as determine  
               by the school district.  In its determination, the school  








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               district shall consider, but is not required to find, a  
               contractor's safety record as acceptable if its experience  
               modification rate for the most recent three-year period is an  
               average of 1.00 or less, and its average total recordable  
               injury or illness rate and average lost work rate for the  
               most recent three-year period do not exceed the applicable  
               statistical standards for its business category, or if the  
               bidder is a party to an alternative dispute resolution system  
               as provided for in Labor Code Section 3201.5.


             dd)  "School district" means the LAUSD.


             ee)  "Skilled and trained workforce" means a workforce that  
               meets of the following conditions:


               i)     All workers are either skilled journeypersons or  
                 apprentices registered in an apprenticeship program  
                 approved by the Chief of the DAS; and, 
               ii)    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:


                  (1)       At least 30% by January 1, 2016.
                  (2)       At least 40% by January 1, 2017.


                  (3)       At least 50% by January 1, 2018.


                  (4)       At least 60% by January 1, 2019.








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                  (5)       At least 70% by January 1, 2020.


               iii)   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  
                 apprenticable occupation prior to the chief's approval of  
                 an apprenticeship program for that occupation in the county  
                 in which the project is located.
               iv)    "Skilled journeyperson" means a worker who either:   
                 (1) 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 (2) 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. 


          3)Specifies that the bidder may be selected on the basis of the  
            best value to the governing board of the school district.   
            Requires the governing board of the school district to adopt and  
            publish procedures and required guidelines for evaluating the  
            qualifications of the bidders that ensure the best value  
            selections by the school district are conducted in a fair and  
            impartial manner.  Requires the procedures and guidelines to  
            conform to this bill and to be mandatory for the school district  
            when using best value selection.
          4)Specifies that if the governing board of the school district  
            deems it to be for the best interest of the school district, the  
            governing board of the school district, on the refusal or  
            failure of the selected bidder for a project to execute a  
            tendered contract, may award it to the bidder with the second  








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            lowest best value score.  If the second bidder fails or refuses  
            to execute the contract, the governing board of the school  
            district may likewise award it to the third lowest best value  
            score.


          5)Specifies that the governing board of the school district shall  
            let any contract for a project pursuant to this bill to the  
            selected bidder that represents the best value or else reject  
            all bids.


          6)Specifies that if the school district elects to award a project  
            pursuant to this bill, retention proceeds withheld by the  
            district from the selected best value contractor shall not  
            exceed 5% if a performance and payment bond, issued by an  
            admitted surety insurer, is required in the solicitation of  
            bids.


          7)Specifies that in a contract between the selected best value  
            contractor and a subcontractor, and in a contract between a  
            subcontractor and any subcontractor thereunder, the percentage  
            of the retention proceeds withheld shall not exceed the  
            percentage specified in the contract between the district and  
            the selected best value contractor.  If the selected best value  
            contractor provides written notice to a subcontractor that,  
            prior to or at the time the bid is requested, a bond may be  
            required and the subcontractor subsequently is unable or refuses  
            to furnish a bond to the selected best value contractor, then  
            the selected best value contractor may withhold retention  
            proceeds in excess of the percentage specified in the contract  
            between the district and the selected best value contractor from  
            any payment made by the selected best value contractor to the  
            subcontractor.


          8)Provides that all subcontractors that are identified in the  
            proposal shall be afforded protections under the Subletting and  








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            Subcontracting Fair Practices Act.


          9)Requires the governing board of a school district to use the  
            following procedure when awarding best value contracts:


             a)   The governing board of the school district shall prepare a  
               solicitation for bids and give notice pursuant to PCC Section  
               20112.
             b)   The governing board of the school district shall establish  
               a procedure to prequalify bidders.  Specifies that  
               information submitted by the bidder as part of the evaluation  
               process shall not be open to public inspection to the extent  
               that information is exempt from disclosure under the  
               California Public Records Act. 


               i)     Specifies that a best value entity shall not be  
                 prequalified or shortlisted unless the entity provides an  
                 enforceable commitment to the governing board that the  
                 entity and its subcontractors at every tier will use a  
                 skilled and trained workforce to perform all work on the  
                 project or contract that falls within an apprenticeable  
                 occupation in the building and construction trades.
               ii)    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:


                  (1)       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 the governing board of the school district  
                    with evidence, on a monthly basis while the project or  
                    contract is being performed, that the entity and its  
                    subcontractors are complying with the requirements of  
                    this bill.








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                  (2)       If the governing board 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.


                  (3)       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.


             c)   Each solicitation for bids shall do all of the following:
               i)     Invite prequalified bidders to submit sealed bids in  
                 the manner prescribed by this bill.
               ii)    Include a section identifying and describing the  
                 following:


                  (1)       Criteria that the governing board of the school  
                    district will consider in evaluating the qualifications  
                    of the bidders.
                  (2)       The methodology and rating or weighting system  
                    that will be used by the governing board of the school  
                    district in evaluating bids and specifically whether  
                    proposals will be rated according to numeric or  
                    qualitative values.


                  (3)       The relative importance or weight assigned to  
                    the criteria for evaluating the qualifications of  
                    bidders identified in the request for bids.


             d)   Final evaluation of the bidders shall be done in a manner  
               that prevents the identity of the bidders and the cost or  








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               price information from being revealed in evaluating the  
               qualifications of the bidders prior to completion of  
               qualification scoring.
          10)Requires the selection of the best value contractor to be made  
            as follows:
             a)   The school district shall evaluate the qualifications of  
               the bidders based solely upon the criteria set forth in the  
               solicitation documents, and shall assign a qualification  
               score to each bid.
             b)   Qualification scores shall be determined by using only the  
               criteria and selection procedures specifically identified in  
               the request for proposals.  The following minimum factors,  
               however, shall be weighed as deemed appropriate by the school  
               districts:


               i)     Relevant experience.
               ii)    Safety record.


               iii)   Other factors identified in the request for proposal.


             c)   To determine the best value contractor, the governing  
               board of the school district shall divide each bidder's price  
               by its qualifications score.  A preference of up to 5% shall  
               be applied to the price of a bid submitted by a small  
               business, as defined by the school district, before dividing  
               the bidder's price by its qualification score.  The lowest  
               resulting cost per quality point will represent the best  
               value bid.  The award of the contract shall be made to the  
               bidder whose bid is determined, by the school district in  
               writing, to be the best value to the school district. 
             d)   The governing board of the school district shall issue a  
               written decision of its contract award or else reject all  
               bids.


             e)   Upon issuance of a contract award, the governing board of  








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               the school district shall publicly announce its award  
               identifying the project, the project price, and the best  
               value contractor, to which the award is made, as well as the  
               prices, qualification scores, and resulting costs per  
               qualification point for all responsive bidders.  The contract  
               file shall include documentation sufficient to support the  
               decision to award.


          11)Requires a school district that uses the best value procurement  
            method pursuant to this bill to  submit to the Legislative  
            Analyst the following reports completed by an independent third  
            party:
             a)   An interim report on or before July 1, 2018.
             b)   A final report on or before January 1, 2020.


             c)   A report shall include, but is not limited to, the  
               following information:


               i)     A description of the projects awarded using the best  
                 value procedures.
               ii)    The contract award amounts.


               iii)   The best value contractors awarded the projects.


               iv)    A description of any written protests concerning any  
                 aspect of the solicitation, bid, or award of the best value  
                 contracts, including the resolution of the protests.


               v)     A description of the prequalification process.


               vi)    The criteria used to evaluate the bids, including the  
                 weighting of the criteria and an assessment of the  








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                 effectiveness of the methodology.


               vii)   If a project awarded under this article has been  
                 completed, an assessment of the project performance, to  
                 include a summary of any delays or cost increases.


          12)Requires the Legislative Analyst to submit an interim report to  
            the appropriate policy and fiscal committees of the Legislature  
            on the use of the best value procurement method by school  
            districts on or before January 1, 2019, and a final report on or  
            before July 1, 2020. The report may include the information  
            provided from the school district reports pursuant to this bill  
            and any pertinent information that the Legislative Analyst deems  
            instructive in evaluating whether the best value procurement  
            method should be continued, expanded, or prohibited.
          13)Specifies that the best value procurement method is not  
            intended to change any guideline, criterion, procedure, or  
            requirement of the governing board of the school district to let  
            a contract for a project to the lowest responsible bidder or  
            else reject all bids.


          14)Sunsets on January 1, 2021, and as of that date is repealed,  
            unless a later enacted statute, that is enacted before January  
            1, 2021, deletes or extends that date.


          15)Finds and declares that a special law is necessary and that a  
            general law cannot be made applicable within the meaning of  
            Section 16 of Article IV of the California Constitution because  
            of the need to establish a pilot project for the LAUSD to  
            determine the potential benefits and consequences of using best  
            value procurement to facilitate infrastructure improvements and  
            ease fiscal impacts.


          FISCAL EFFECT:  None.  This bill is keyed non-fiscal by the  








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          Legislative Counsel.


          COMMENTS:  Background.  Under current law, K-12 school districts  
          are required to competitively bid any public works contract over  
          $15,000 and award the contract to the lowest responsible bidder.   
          Under the traditional method for school facility construction, a  
          school district would first hire an architect to design a school  
          facility and then issue a bid for the construction phase, awarding  
          the contract to the lowest bidder.  This process is commonly  
          called "design-bid-build".


          UC Best Value Pilot Program.  This bill is based on SB 667  
          (Migden), Chapter 367, Statutes of 2006, which established a best  
          value pilot program for the UC.  Initially authorized for five  
          years, SB 667 allowed the UC San Francisco to award contracts  
          based on the best value for the university.  Under this process,  
          UC prequalifies bidders, then evaluates the bid based on answers  
          to a separate best value questionnaire and assigns a qualification  
          score.  UC then divides each bidder's price by its qualification  
          score.  The lowest resulting cost per quality point represents the  
          best value bid.


          In a report to the Legislature in January 2010, the UC reported  
          that 23 contracts totaling $158.3 million were issued under the  
          best value pilot program.  Of the 23 contracts, 12 contracts were  
          low bid contracts.  According to the report, the "University  
          Representatives for all these projects [four completed and two  
          almost completed projects] have been unanimous in their praise of  
          this process that has already demonstrated numerous advantages  
          such as decreased bid protests and communication problems,  
          decreased the need for multiple inspections and re-work, decreased  
          disputes, change order requests, claims and litigation and  
          increased incentives for contractors to perform their work safety  
          and to adhere to high labor and quality standards."  UC concludes  
          that the best value pilot program fosters better quality work,  
          less labor and safety problems, better qualified  








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          persons/contractors, better on-time completion, and better  
          on-budget performance.  In 2011, SB 835 (Wolk), Chapter 636,  
          Statutes of 2011, expanded the authority to all UC campuses and  
          extended the sunset from January 1, 2012, to January 1, 2017.       



          What does this bill do?  This bill establishes a best value  
          procurement process as a pilot project for LAUSD, in addition to  
                   awarding contracts through the traditional design-bid-build  
          process.  "Best value" is defined as a procurement process whereby  
          the selected bidder may be selected on the basis of objective  
          criteria for evaluating the qualifications of bidders with the  
          resulting selection representing the best combination of price and  
          qualifications.  The authority applies to projects over $1 million  
          and will enable LAUSD to consider other factors, in addition to  
          cost, in awarding construction contracts.   


          Guidelines.  This bill requires LAUSD to adopt procedures and  
          required guidelines for evaluating the qualifications of bidders  
          to ensure that the process is fair and impartial.  A  
          prequalification process based on a questionnaire and a rating  
          scale is required, although LAUSD already uses a prequalification  
          process.  The solicitation for bids will invite prequalified  
          bidders to submit sealed bids.  The solicitation for bids must  
          also include information on how the school district will be  
          evaluating the qualification of bidders, including the criteria  
          that will be used, the methodology and the rating or weighting  
          system that will be used, and the weight that will be assigned to  
          the criteria for evaluation.


          Qualification score.  Similar to UC's best value pilot program,  
          this bill requires the LAUSD to evaluate the qualification of the  
          bidders solely upon the criteria specified in the solicitation  
          documents and assign a qualification score to each bid.  A  
          bidder's price is divided by the qualification score received by  
          the bidder.  The bidder with the lowest cost per quality point  








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          represents the best value bid.  The factors required to be used by  
          this bill are slightly different than the factors used in the UC  
          pilot program.  The factors used by the UC included the bidder's  
          financial condition, relevant experience, demonstrated management  
          competency, labor compliance, and safety record.  This bill  
          specifies the use of relevant experience, safety record, and other  
          factors identified in the request for proposal in determining the  
          qualification score.  Relevant experience and safety record are  
          factors commonly used in the questionnaire for prequalification.   
          According to the sponsor, the LAUSD, whereas the prequalification  
          questionnaire may determine minimum qualifications, the  
          information solicited through the best value procurement method  
          will enable a school district to evaluate a bidder's qualification  
          and background based on more specific needs of a project.     


          Prior legislation.  This bill was introduced last session as AB  
          1971 (Bocanegra) of 2014.  The author held AB 1971 on the Senate  
          floor.  This bill modifies AB 1971 by deleting the specified  
          weight that must be given to relevant expertise, skilled and  
          trained workforce and acceptable safety record.  This bill,  
          instead, makes the use of a "skilled and trained" workforce as a  
          requirement for participation rather than a factor in determining  
          best value, and leaves the weight of the factors unspecified.   
          "Skilled and trained workforce" is defined as a workforce where  
          all of the workers working on the project are either skilled  
          journeypersons or apprentices registered in an apprenticeship  
          program approved by the Chief of DAS under the Division of  
          Industrial Relations.  


          Arguments in support.  The author states, "With billions of  
          dollars in state and local funds being spent on school  
          construction projects throughout the state it is imperative that  
          school districts have the necessary tools to reduce risk and  
          maximize efficiencies.  The best value procurement process would  
          create transparent and objective criteria that will result in the  
          selection of a quality contractor and a good history at a  
          competitive price."  








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          Arguments in opposition. The Associated Builders and Contractors  
          of California (ABC California) states that this bill "will make it  
          even more difficult for non-union contractors to participate in  
          the best value pilot program proposed for the Los Angeles Unified  
          School District (LAUSD)."  ABC California further states, "The  
          'skilled workforce' requirement is proposed by building trade  
          unions as a new way to block local, non-union, minority and  
          women-owned construction employers and their employees from  
          participation in the LAUSD best value contracting process." 




          Analysis Prepared by:                                               
                          Sophia Kwong Kim / ED. / (916) 319-2087  FN:  
          0000482