BILL ANALYSIS Ó
AB 1185
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CONCURRENCE IN SENATE AMENDMENTS
AB
1185 (Ridley-Thomas)
As Amended August 31, 2015
Majority vote
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|ASSEMBLY: |48-23 |(May 22, 2015) |SENATE: |26-14 |(September 1, |
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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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