BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 1185| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 1185 Author: Ridley-Thomas (D) Amended: 8/31/15 in Senate Vote: 21 SENATE EDUCATION COMMITTEE: 6-2, 6/17/15 AYES: Liu, Block, Hancock, Leyva, Monning, Pan NOES: Runner, Vidak NO VOTE RECORDED: Mendoza SENATE APPROPRIATIONS COMMITTEE: 5-2, 8/27/15 AYES: Lara, Beall, Hill, Leyva, Mendoza NOES: Bates, Nielsen ASSEMBLY FLOOR: 48-23, 5/22/15 - See last page for vote SUBJECT: Los Angeles Unified School District: best value procurement: pilot program SOURCE: Author DIGEST: This bill establishes a pilot program to authorize the Los Angeles Unified School District (LAUSD) to use a best value procurement method, before December 31, 2020, for public projects that exceed $1 million, and requires submission of specified reports on the use of this procurement method. ANALYSIS: Existing law: 1)Requires the governing board of a school district, to AB 1185 Page 2 competitively bid, and award to the lowest responsible bidder, any contract for a public project (as defined) involving an expenditure of $15,000 or more. (Public Contract Code § 20111) 2)Authorizes, until January 1, 2017, a pilot program at the University of California (UC) to award construction contracts on a "best value" basis, rather than just to the lowest bid. (Public Contract Code §10506.4) 3)Defines "best value," for purposes of the UC, as a procurement process whereby the lowest responsible bidder may be selected on the basis of objective criteria with the resulting selection representing the best combination of price and qualifications. (Public Contract Code § 10506.5) This bill: 1)Authorizes the governing board of the LAUSD, before December 31, 2020, to use best value procurement for projects over $1 million. 2)Outlines the definitions, policies, and procedures to be followed by the LAUSD consistent with current law provisions applicable to best value contracting by the UC (Public Contract Code, Chapter 2.1, Article 1.5, commencing with § 10506.4) and additionally requires that: a) Specified "skilled and trained workforce" requirements are met. b) Specified proceeds retention and surety bond conditions are met. c) Subcontracting fair practices are followed. d) LAUSD weigh, at minimum and as deemed appropriate, factors such as relevant experience, acceptable safety record and other factors identified in a request for proposal in determining qualification scores for each bid, and specifically assign preference of up to 5% to small businesses, as defined by the LAUSD. 3)Establishes the following additional definitions for purposes AB 1185 Page 3 of the pilot: a) "Best value score" as the resulting score when the bidder's price is divided by the bidder's qualification score. b) "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. c) "Apprenticeable occupation" as an occupation for which the Chief of the Division of Apprenticeship Standards of the Department of Industrial Relations had approved an apprenticeship program before January 1, 2015. d) "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 Department of Industrial Relations and 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. v) At least 70% by January 1, 2020. 4)Provides that, for an apprenticeable 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. 5)Prohibits the prequalification or shortlisting of a best value entity absent an enforceable commitment to use a skilled and AB 1185 Page 4 trained workforce for all work on the project/contract as applicable and provides that this commitment may be established by: a) An agreement between the entity and the school district governing board to comply with these requirements and the provision of monthly evidence demonstrating such compliance during the performance of the project/contract. b) 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. c) 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. 6)Clarifies that the best value procurement method is not intended to change guideline, criterion, procedure, or requirement of the governing board to let a project contract to the lowest responsible bidder other than those specifically provided for in the bill's provisions. 7)Requires a school district that uses the best value procurement method to submit an interim and final report, prepared by an independent third party, on its use, to be delivered to the appropriate policy and fiscal committees of the Legislature, as specified. 8)Sunsets these provisions on January 1, 2021. Comments 1)Need for the bill. According to the author, this bill will empower LAUSD to consider qualifications other than just price. The current lowest bidder process restricts the ability of school districts to evaluate bidders on the basis of prior school construction experience, previous violations of health and safety laws, disqualification or removal from prior school construction jobs, and financial stability. This bill can ensure that the district can consider the bidder's AB 1185 Page 5 experience or knowledge to navigate the school construction process when selecting a contractor, minimizing project delays and cost overruns. 2)Best Value Pilot Program. SB 667 (Migden, Chapter 367, Statutes of 2006) established a pilot program for the University of California (UC). Initially authorized for five years, the bill 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 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. The provisions of this bill are generally based upon the pilot program authorized for the UC, but codify more prescriptive requirements around labor, contractors and subcontractors, and the weighting of certain factors in the evaluation of bids. 3)Skilled workforce provisions. 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 AB 1185 Page 6 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, Chapter 795, Statutes of 2013). In addition, these provisions were a component of SB 566 (O'Donnell), which was heard and passed by the Senate Education Committee on June 10, 2015, by a vote of 6-2. FISCAL EFFECT: Appropriation: No Fiscal Com.:NoLocal: No According to the Senate Appropriations Committee, there are unknown, but potentially significant savings at the district level to the extent that (1) the district elects to use a best value procurement method, and (2) that the method realizes savings that would surpass potential increases in costs from not choosing the lowest bidder. This bill is permissive, and would also allow LAUSD to continue to choose the lowest responsible bidder. SUPPORT: (Verified8/28/15) None received OPPOSITION: (Verified8/28/15) None received ASSEMBLY FLOOR: 48-23, 5/22/15 AYES: Bloom, Bonilla, Bonta, Brown, Burke, Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd, Eggman, Frazier, Eduardo Garcia, Gatto, Gomez, Gonzalez, Gordon, Gray, Roger Hernández, Holden, Irwin, Jones-Sawyer, Levine, Lopez, Low, McCarty, Medina, Mullin, Nazarian, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting, Wilk, Williams, Wood, Atkins NOES: Achadjian, Travis Allen, Baker, Bigelow, Chang, Chávez, Dahle, Beth Gaines, Gallagher, Grove, Hadley, Harper, Jones, Kim, Lackey, Maienschein, Mathis, Mayes, Melendez, Obernolte, Patterson, Steinorth, Wagner AB 1185 Page 7 NO VOTE RECORDED: Alejo, Brough, Cristina Garcia, Gipson, Linder, O'Donnell, Olsen, Waldron, Weber Prepared by:Kathleen Chavira / ED. / (916) 651-4105 8/30/15 19:06:25 **** END ****