BILL ANALYSIS Ó
AB 1185
Page 1
ASSEMBLY THIRD READING
AB
1185 (Ridley-Thomas)
As Amended May 20, 2015
Majority vote
-------------------------------------------------------------------
|Committee |Votes |Ayes |Noes |
| | | | |
| | | | |
|----------------+------+---------------------+---------------------|
|Education |5-2 |O'Donnell, McCarty, |Chávez, Kim |
| | |Santiago, Thurmond, | |
| | |Weber | |
| | | | |
| | | | |
-------------------------------------------------------------------
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,
AB 1185
Page 2
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,
AB 1185
Page 3
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
AB 1185
Page 4
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.
AB 1185
Page 5
(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
AB 1185
Page 6
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
AB 1185
Page 7
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.
AB 1185
Page 8
(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
AB 1185
Page 9
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
AB 1185
Page 10
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
AB 1185
Page 11
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
AB 1185
Page 12
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
AB 1185
Page 13
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
AB 1185
Page 14
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."
AB 1185
Page 15
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