BILL ANALYSIS                                                                                                                                                                                                    



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          CONCURRENCE IN SENATE AMENDMENTS


          AB  
          1185 (Ridley-Thomas)


          As Amended  August 31, 2015


          Majority vote


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          Original Committee Reference:  ED.




          SUMMARY:  Authorizes the Los Angeles Unified School District  
          (LAUSD) to utilize a best value procurement process as a pilot  
          project until January 1, 2021, 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, and claims, thereby producing savings  
            in both contract costs and administration.
          2)Establishes the following definitions:








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             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, 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.








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             i)   "Labor compliance" means the ability to comply with, and  
               past conformance 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" if a  
               contractor's 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.










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             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 20% by January 1, 2016.
                  (2)       At least 30% by January 1, 2017.


                  (3)       At least 40% by January 1, 2018.


                  (4)       At least 50% by January 1, 2019.


                  (5)       At least 60% 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:   








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                 (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  
            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  








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            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 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  








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                 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.
                  (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:










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                  (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 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  








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               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 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  
            appropriate policy and fiscal committees of the Legislature an  
            interim and final report completed by an independent third  
            party and paid for by the school district, as follows:
             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.









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               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  
                 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)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.
          13)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.


          14)Finds and declares that a special law is necessary and that a  
            general law cannot be made applicable within the meaning of  
            California Constitution Section 16, Article IV 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.










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          The Senate amendments:


          1)Remove, in the definition of "safety record" the authority of  
            the school district to determine what is "acceptable" and  
            instead specify that "safety record" is deemed "acceptable"  
            based on a contractor's experience modification rate, as  
            specified.   


          2)Modify the definition of "skilled and trained workforce" by  
            reducing, by ten percent at each target date, the percentage  
            of skilled journeyperson employed to perform work on the  
            contract or project who must be graduates of an apprenticeship  
            program.


          3)Strike the requirements for the LAUSD to submit an interim and  
            final report to the Legislative Analyst's Office (LAO) and for  
            the LAO to submit an interim and final report to the  
            Legislature, and instead require the LAUSD to pay for an  
            interim and final report completed by an independent third  
            party and submit the reports to appropriate policy and fiscal  
            committees of the Legislature.  


          FISCAL EFFECT:  According to the Senate Appropriations  
          Committee, unknown, but potentially significant savings at the  
          district level to the extent that a) the district elects to use  
          a best value procurement method, and b) 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.  


          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,  








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          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 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  








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          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 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  








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          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."  


          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:  








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